Sitting of 11 June 1951

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  SHEFFIELD EXTENSION BILL
  As amended, considered; to be read the Third time.
BRIGHTON EXTENSION BILL [Lords]
  BRISTOL CORPORATION BILL [Lords]
    LONDON COUNTY COUNCIL (CRYSTAL PALACE) BILL [Lords]
    Read a Second time, and committed.
    MINISTRY OF AGRICULTURE AND FISHERIES PROVISIONAL ORDERS (SUFFOLK) BILL
    Read a Second time, and committed.
ORAL ANSWERS TO QUESTIONS
  COAL AND COKE SUPPLIES

    Retail Prices
    Mr. Ralph Morleyasked the Minister of Fuel and Power if he will consider taking steps to institute a uniform retail price for coal throughout the country.
    The Minister of Fuel and Power (Mr. Philip Noel-Baker): I regret that, for reasons which I have previously explained, it is not practicable to do what my hon. Friend suggests, and that to attempt to do so would probably cause more hardships and anomalies than it would relieve.
    Mr. Morley: Is my right hon. Friend aware that a ton of coal in Southampton costs from £1 to 30s. more than it does in the Midlands and in the North of England? Is that justifiable under a system of national ownership? Can he even things out a bit more?
    Mr. Noel-Baker: I have considered this very carefully, but it so happens that most
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    of the coalfields are in parts of the country where the climate is very hard and people need more coal for domestic consumption. If the prices were uniform the cost to those people would have to rise steeply and would create considerable hardship.

    Summer Stocks
    Captain Duncanasked the Minister of Fuel and Power what arrangements he has made for the summer stocking up of anthracite.
    Mr. P. Noel-Baker: Arrangements have been made to enable programmed consumers, that is to say, industrial firms, hospitals, and so on, to build up the stocks they need during the summer months. The arrangements are designed to ensure that they get not only the quantities, but also the grades, of anthracite they need.
    Captain Duncan: Does that programme include horticulturalists, to whom this is of very great importance?
    Mr. Noel-Baker: Yes, Sir. I believe it does.
    Commander Galbraith: Is the right hon. Gentleman aware that some domestic users also require anthracite, which is absolutely unobtainable in some parts of Scotland? What does he propose to do about it?
    Mr. Noel-Baker: Anthracite is in very short supply, largely owing to the lamentable situation in which the anthracite field was left when the Coal Board took over. The Board are spending a great deal of money in re-organising that field and hope to reopen a pit very soon.
    Commander Galbraith: Can the right hon. Gentleman explain how it was that until the Coal Board took over we could always get anthracite?
    Mr. Noel-Baker: One of the reasons is that full employment has greatly increased the demand for anthracite.
    Captain Duncan: Are any arrangements being made about summer prices for anthracite?
    Mr. Noel-Baker: Perhaps the hon. and gallant Member will put question down.

    Boiler Fuel, Orpington
    Sir Waldron Smithersasked the Minister of Fuel and Power if he is aware that there is a serious shortage of boiler fuel in the Orpington area; and, in view of the fact that a high proportion of the houses are fitted with independent hot water boilers, if he will take immediate steps to remedy the position.
    Mr. P. Noel-Baker: More boiler fuel was received in the Orpington area in the 12 months which ended on 30th April last than in the corresponding period a year ago, and my inquiries do not show that any special difficulty has occurred. But, as I have said, the general demand for boiler fuel is increasing fast. The National Coal Board are doing everything they can to increase supplies of anthracite and phurnacite, and I am now considering how the distribution of coke can be improved.
    Sir W. Smithers: Will the right hon. Gentleman give an assurance that, in spite of the disastrous effect of nationalisation, the Orpington area will at least get its fair share of what is available?
    Mr. Noel-Baker: Yes, Sir, Orpington has always had and will continue to have a fair share.
    Sir W. Smithers: That is not true.
    Mr. Noel-Baker: The allocation is made by the House Coal Scheme, which is run by the coal merchants.
    Mr. Emrys Hughes: Will my right hon. Friend arrange for a mobile van to go to Orpington for a fortnight to recruit miners?

    Quality
    Mr. Nabarroasked the Minister of Fuel and Power (1) to what extent the reclassification of household coal will provide safeguards that uniformity of quality is achieved and maintained, within each of the eight groups, in each of the 60 zones provided for in new price structure of the National Coal Board;
    (2) the maximum permitted percentage of dirt and deleterious matter in the eight groups specified in the arrangements for reclassification of household coal; and what redress can be obtained by the household consumer in the event of such maxima being exceeded.
    Mr. Peter Robertsasked the Minister of Fuel and Power what steps he is taking to ensure that the information published in the fuel offices and merchants' offices of the quality of the domestic coal to be supplied by the Coal Board under the new selling scheme will be sufficiently clear in analysis to allow easy check by analysis of the quality of coal delivered.
    Mr. P. Noel-Baker: The National Coal Board and the distributive coal trade are agreed that the analysis of coal by calorific value and ash content would not provide a satisfactory basis for the price structure of household coal. The Board have an organisation at their pits to ensure that the coal which is classified as belonging to any given group is of the proper quality. The merchants, of course, examine the coal which they receive to see that it is up to standard. If the quality of a particular coal deteriorates, either because of changes in the seam, or for some other reason, that coal will be re-classified in a lower and cheaper group.
    Mr. Nabarro: Does the right hon. Gentleman's reply about re-classification mean that there will not be abated even one jot the principal complaint of the domestic consumer, which is dirty and slaty coal? Why cannot the consumer sue the Coal Board in those circumstances?
    Mr. Roberts: We must get this point quite clear. Is it not correct that in the statement orginally made, I understand not in this House, it was said that these qualities of coal were to be subject to analysis? What rights has either a merchant or a subsequent purchaser if the coal delivered by the Coal Board is below the standard set out in the fuel offices?
    Mr. Noel-Baker: As I tried to explain in my answer, analysis by calorific value does not give what is required because some fuels of very high calorific value are difficult to light or have other characteristics which are irritating to the housewife. The price structure must be based on the characteristics that will suit the consumer.
    Colonel Clarke: Even if calorific value may be difficult for the housewife to understand, why cannot there be an ash test, as all housewives understand the pro-proportion of ash in the coal? That is a very simple test.
    Mr. Noel-Baker: If there is a very high ash content it will tend to put the coal in a lower category, other things being equal. Under this scheme the householder will pay less for that coal than previously.
    Sir Herbert Williams: The Minister says that the ash content does not matter and that the calorific value does not matter. Will he tell us what does matter in classifying coal?
    Mr. Noel-Baker: Yes. I have said that both those things are factors, but there are also other factors. [HON. MEMBERS: "What are they?"] Intensity of radiation—in other words, the heat that the coal gives out in domestic use—the ease with which it is lighted, the way in which it keeps burning, and other things to which the housewife attaches importance.
    Mr. Sydney Silverman: Will my right hon. Friend bear in mind that it is the common experience of most Members of the House and of the public that since he made his investigation a few months ago the general position has vastly improved?
    Mr. Noel-Baker: I am glad to say that the coal distributive trade are in agreement with that view.
    Mr. Geoffrey Lloyd: Will the right hon. Gentleman say whether, as a redress for dissatisfaction about the quality of the coal the customer has the right to sue the Coal Board, as he had in the old days to sue the colliery?
    Mr. Noel-Baker: I should like notice of that question, but the right hon. Gentleman knows perfectly well what the procedure is, and in the opinion of the merchants it is the most suitable.
    Mr. P. Roberts: In view of the most unsatisfactory nature of the reply, I shall endeavour to raise this matter on the Adjournment.

    Opencast Coal (Transport)
    Mr. Nabarroasked the Minister of Fuel and Power the reasons for the recent decision to distribute by road transport practically the whole of the coal output of opencast workings; the additional cost involved by such road transport distribution upon the estimated output of 11,000,000 tons of coal from opencast sites in the current year; and whether
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    the additional cost is provided for in the re-classification plan of the National Coal Board.
    Mr. P. Noel-Baker: No such decision has been made. In the Midlands, the National Coal Board have found it desirable to switch a small part of the opencast output from rail to road, but I have no reason to think that this will make any appreciable difference to the overall cost of opencast coal.
    Mr. Summersasked the Minister of Fuel and Power if he will give figures for 1950 such as will show the distances which opencast coal had to be carried from the workings to the consumer and the proportions of the categories given in each case.
    Mr. P. Noel-Baker: I regret that the figures for which the hon. Member has asked are not available, and I am afraid that they could not be compiled without a disproportionate amount of work.
    Mr. Summers: Are we to understand from that answer that the figures within the Minister's office cannot indicate the distances which opencast coal was being carried to consumers during last year?
    Mr. Noel-Baker: I do not want to give the hon. Member a misleading answer. To get the information he requires would mean analysing and then summarising all the despatches of coal from opencast sites last year. As this work is highly decentralised it would mean a lot of additional labour for—I think—a not very useful purpose.
    Mr. P. Roberts: Were such calculations not done before the general decision was taken to put the whole of opencast coal haulage on the road?
    Mr. Noel-Baker: If the hon. Member had listened to my last answer he would know that no such decision has been made.
    Mr. Nabarro: If the Minister is unable to provide these figures can he tell the House how he can produce a profit and loss account for opencast mining?
    Mr. Noel-Baker: Because we add up the profits and losses on the different sites.
    Mr. Summers: In view of the Minister's answer, how is he able to establish a price for opencast coal if he is not able to calculate the cost of delivery?
    Mr. Noel-Baker: I can calculate the cost of delivery, but what I cannot calculate without a great deal of work is the average length of haul of coal transported by road.
    Mr. Summersasked the Minister of Fuel and Power what proportion of the coal produced from opencast working in 1950 was delivered by road.
    Mr. P. Noel-Baker: About 30 per cent.
    Colonel Gomme-Duncan: What is the effect of all this extra load on the already chaotic road transport since nationalisation?
    Mr. Noel-Baker: I do not understand what the hon. and gallant Member means.
    Colonel Gomme-Duncan: In view of the fact that the figure of 30 per cent. is presumably an addition to the load which nationalised road transport has to carry, what is the effect on that already chaotic road transport?
    Mr. Noel-Baker: About 3½ million tons of coal are carried by road. Opencast coal has always been carried by road since opencast working began in 1941.
    Mr. Summers: By how much is that 30 per cent. to go up this year as a result of the announcements that have appeared in the Press about further deliveries by road from opencast sites?
    Mr. Noel-Baker: In the West Midlands, of which I was speaking just now, the addition will be about 10,000 tons per week.

    Smokeless Coals (Exports)
    Mr. Geoffrey Wilsonasked the Minister of Fuel and Power what was the total quantity of South Wales smokeless coals exported during the year 1950, or other recent period of 12 months as may be convenient; and what percentage such exports formed of the total production during such period.
    Mr. P. Noel-Baker: A total of 1.2 million tons of anthracite and graded Welsh dry steam coal were exported in 1950. This was about 20 per cent. of the total output.
    Mr. Wilson: Is the Minister aware that the growing home demand for such fuel is in excess of the supply and that the demand is coming from persons using
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    appliances especially designed for the consumption of this type of fuel? What is he doing to increase supplies or, alternatively, to discourage the Coal Utilization Council from encouraging people to go in for these appliances?
    Mr. Noel-Baker: The new appliances will burn a variety of fuels the supply of which the Coal Board is endeavouring to increase. They will also burn low-grade coal, and do so very efficiently with great satisfaction to the consumer.

    Voluntary Shifts (Output)
    Mr. Jannerasked the Minister of Fuel and Power what recent figures he has to show how much extra coal has been mined as a result of the voluntary shift working of miners on Saturdays; how many pits worked this extra shift; and how many extra hours were involved.
    Mr. P. Noel-Baker: During the first 22 weeks of this year, 6.3 million tons of coal have been produced by Saturday shifts. The average number of mines which worked was 707. The Saturday shift is about an hour shorter than the normal week-day shift.
    Mr. Janner: Is my right hon. Friend aware that Leicestershire has played a very important part in the production of this extra coal? Will he express his recognition of this magnificent national effort on the part of the miners?
    Mr. Noel-Baker: Yes, Sir, I have done it many times. It was a magnificent effort. I think that, worked out in man hours, it would probably be something well over 20 million extra man hours this year.

    Coke (Storage Space)
    Mr. Sutcliffeasked the Minister of Fuel and Power what steps he is taking to provide storage accommodation, where possible, for coke, in readiness for the winter, in districts where it has to be fetched from gas works in neighbouring towns.
    Mr. P. Noel-Baker: I have no reason to think that the merchants are without the stocking space which they require; but if the hon. Member has any special case in mind, I will cause inquiries to be made.
    Mr. Sutcliffe: Would the right hon. Gentleman ask local authorities and not merchants especially to provide storage accommodation for coke where the gas works is some distance away, to avoid the sorry spectacle we had last year in my constituency and elsewhere of old women of 80 years of age trudging a mile and a half each way to fetch their fuel?
    Mr. Noel-Baker: I have not heard that the difficulty was due to lack of stocking space. If there was any such shortage I am sure that the merchants would have informed me, when I would have helped them immediately.

  INDUSTRIAL COAL CONSUMERS' COUNCIL
  Colonel Gomme-Duncanasked the Minister of Fuel and Power of how many persons the Industrial Coal Consumers' Council consists; whether they receive payment for their services and at what rates; and what in a full year is the total cost to the public.
  Mr. P. Noel-Baker: The Industrial Coal Consumers' Council at present consists of 20 members. No member receives any payment for his services. In a full year, the total cost is about £700.

  ELECTRICITY SUPPLIES

    Power Cuts
    Brigadier Clarkeasked the Minister of Fuel and Power how far he anticipates that electricity cuts can be progressively eliminated from 1952.
    Mr. P. Noel-Baker: I hope that the rapid increase in generating plant, and other measures to deal with the problem of peak hour demand, will bring about a progressive improvement in the next few years.
    Brigadier Clarke: Meantime, has the Minister given any thought to paying compensation to the various firms who have lost money, since nationalisation, because of cuts?
    Miss Irene Wardasked the Minister of Fuel and Power what representations have been received from the various committees serving the Northern Region on electricity matters regarding the power cuts.
    Mr. P. Noel-Baker: I have regular meetings with the chairmen of the area electricity consumers' consultative councils, and in January I had a special conference with the chairmen and deputy-chairmen of the councils, the chairmen and deputy-chairmen of the area boards, the members of the British Electricity Authority, and their divisional controllers. At all these meetings, representations were made to me about power cuts, and measures for dealing with them were discussed.
    The North-Eastern Area Consultative Council make representations to their area board, who are responsible for deciding on the incidence of the cuts that are required, and on the measures to mitigate the loss they cause.
    Miss Ward: Would the right hon. Gentleman publish the results of that inquiry and what decisions were taken, other than the announcement by the right hon. Gentleman that all these power cuts are due to full employment, because presumably that would not be registered at this business meeting?
    Mr. Noel-Baker: The last statement just made by the hon. Lady is true, but many of the other things which were decided at that meeting have been published and action was taken in many ways.
    Miss Ward: The right hon. Gentleman misunderstood my question—quite naturally.

    New Power Stations, North-East Division
    Miss Wardasked the Minister of Fuel and Power on what date the new power stations to serve the North-East coast are scheduled to come into operation.
    Mr. P. Noel-Baker: The present maximum output capacity of the power stations in the North-Eastern Division is 600 megawatts. The British Electricity Authority plan to increase this by 195 megawatts before the end of 1952, mainly by additions to the North Tees station, In 1953 a further addition of 60 megawatts is planned, and by the end of 1954 the two new stations at Stella on Tyne should have 180 megawatts in operation. Thus the capacity of the Division should

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    be increased by 62 per cent. during the next three and a half years. The two Stella stations will have a further 360 megawatts installed, but it is not yet possible to say how soon.
    Miss Ward: Is the right hon. Gentleman aware that last week the power cuts put the North Shields fish quay into chaos with a resulting loss of good food and finance? Is he also aware that one of his officials said last week that the difficulties had been overcome, and can he say why we have to wait so long for these new power stations to come into operation?
    Mr. Noel-Baker: Because it takes considerable time to complete a power station. I think this expansion of 62 per cent., which I have described, over the next three-and-a-half years is remarkably rapid—I think the most rapid of any region in the country.
    Sir H. Williams: The right hon. Gentleman is always referring to megawatts. Can he tell us the difference between megawatts and kilowatts?
    Mr. Noel-Baker: A megawatt is a thousand kilowatts.
    Mr. S. Silverman: Is my right hon. Friend aware that whatever the difficulties caused to the North-East by the delays in the building of these power stations, most people, I suppose, living in the North-East would prefer to have more work to do than there is power supplied than the position of the old days when nobody needed the power at all?
    Mr. Noel-Baker: I think that is one of the major causes of the difficulty in the North-East. Before the war there was such a large amount of unemployment that the demand was very much less.
    Miss Ward: But there was no chaos on the fish quay.

  PHENOL SUPPLIES
  Mr. Watkinsonasked the Minister of Fuel and Power if he will make a statement on future supplies of phenol to industry.
  Mr. P. Noel-Baker: Natural phenol is a product of coal tar, which is a by-product of the carbonisation of coal. The
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  increase of carbonisation in recent years has given a greater output of natural phenol, but the demand has risen even more; much of it must, therefore, now be met by an expansion in the manufacture of synthetic phenol. I understand that the chemical industry is greatly increasing its synthetic phenol plant, which should soon suffice to meet all the demands. In the meantime, exports of phenol have been stopped, except for small quantities required by hospitals abroad.
  Mr. Watkinson: Is the Minister aware that phenol is an essential component in many articles vital to the re-armament industry, and that the increasing demand is an important problem which is causing great concern? Can he do something about the immediate problem?
  Mr. Noel-Baker: It is the re-armament demand which has caused such a sharp increase, but, as I have said, every step is being taken to accelerate the production of plant for increasing supply.

  CORPORATE BODIES (OFFENCES)
  Sir Hugh Lucas-Toothasked the Attorney-General whether he will appoint a committee to consider the question of the responsibility of directors and other principal officers of corporate bodies for offences committed by such bodies and to make recommendations regarding the procedure to be followed by the courts in relation to the prosecution of such bodies and persons in this connection.
  The Attorney-General (Sir Frank Soskice): No, Sir. I am not aware that the existing law on this subject operates unfairly or causes any special difficulty in practice. However, I shall be very pleased to consider any particular point that the hon. Baronet has in mind.
  Sir H. Lucas-Tooth: Is the right hon. and learned Gentleman aware that this matter is dealt with in a different way in four different Bills now before Parliament, and does not he think that that is some reason for putting order into the matter?
  The Attorney-General: No, Sir, the appropriate provision in each Bill depends on the nature of the Bill, and these Bills differ.

  DEFENDANTS (DETENTION IN CUSTODY)
  Lieut.-Colonel Liptonasked the Attorney-General what provision at present exists or is proposed, to enable magistrates to detain a defendant in custody from the time the hearing of the case is concluded until a sentence is imposed in the magistrates' courts.
  The Attorney-General: Under Section 16 of the Summary Jurisdiction Act, 1848, as confirmed and extended by Section 25 of the Criminal Justice Act, 1948, a court of summary jurisdiction has power to remand a person after conviction for the purpose of enabling inquiries to be made or of determining the most suitable method of dealing with the case.
  Lieut.-Colonel Lipton: Is the Attorney-General aware that widespread indignation has, not unnaturally, been caused by the application of this provision in a case affecting three tulips in South Shields? When will the result of the official inquiry, which it has been announced is taking place into the matter, be made known?
  The Attorney-General: I am informed that my noble and learned Friend the Lord Chancellor has not yet quite completed his inquiries, but hopes shortly to make a statement.
  Mr. Blyton: Is the Attorney-General aware that in the case known as the three tulips case a woman was kept in prison for 24 hours after the case had been tried, and was not remanded for any inquiries to be made, and that the magistrate declared that he was doing what he did do as an example? Was not it the duty of the magistrate to try the case on its merits and allow bail? Further, is my right hon. and learned Friend aware that there is widespread indignation in the town of South Shields, and would he make representations to the Lord Chancellor to remove these magistrates from the bench in the interests of justice in the town?
  The Attorney-General: I am very well aware of the circumstances of the case to which my hon. Friend refers, and these circumstances are now being inquired into.
  Sir H. Williams: Is not it a fact that a decision was given in the High Court a little while ago that it was improper to
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  use a remand without bail as a form of punishment, before a decision was announced?
  The Attorney-General: There was a decision to that general effect.
  Sir H. Williams: Then why have not these magistrates been told about it?
  Lieut.-Colonel Lipton: Will the Attorney-General be able to make a statement in the House at the same time as his noble Friend is making a statement in another place about the result of this inquiry, so that this House may be informed as soon as anyone else?
  The Attorney-General: I think it would be better to see the statement which my noble and learned Friend makes.

  MAGISTRATES (GORE PETTY SESSIONS)
  Mr. Eric Fletcherasked the Attorney-General if he has considered Mr. Iwi's letter of 6th June, a copy of which has been sent to him, describing the circumstances in which the Lord Chancellor secured Mrs. Iwi's undertaking not to sit on the magistrates' bench; and whether he has any further statement to make.
  The Attorney-General: My noble and learned Friend has considered the letter from Mr. Iwi of 6th June. He has no further statement to make except to say that he is responsible for the satisfactory administration of justice, and if controversy between magistrates reaches such a point as to threaten the satisfactory administration of justice he is bound to intervene. He is always most reluctant to remove a magistrate from the bench as this would imply that the magistrate in question had been guilty of some discreditable conduct; but if it were necessary to secure the proper administration of justice he would not hesitate to do so. In the present case, the Lord Chancellor believed that time might heal the differences which had arisen between Mrs. Iwi and the other justices and he therefore pressed for an undertaking which would not make it necessary for him to use his power of removal.
  Mr. Fletcher: May we take it from that answer that, while the Lord Chancellor reserves the full right in his own discretion

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  to remove a magistrate at any time, this particular episode involves no reflection on Mrs. Iwi?
  The Attorney-General: This episode involves no reflection at all on Mrs. Iwi.
  Mr. Hopkin Morris: In a case of this sort where it is necessary to exercise serious powers, would it not be desirable for the Lord Chancellor to make a statement of the reasons why he so acted?
  The Attorney-General: That is a matter for my noble and learned Friend.
  Lieut.-Colonel Lipton: Is my right hon. and learned Friend aware that the correspondence in this case provides evidence that the threat or pressure applied to get Mrs. Iwi to give an undertaking not to sit for 12 months was the compelling factor which made her give the undertaking?
  The Attorney-General: If Mrs. Iwi had not been prepared to give the undertaking, my noble and learned Friend would have had to consider whether he ought to remove her from the list of magistrates.

  FOOD SUPPLIES

    Cream Sales
    Lieut.-Colonel Liptonasked the Minister of Food for how long the sale of cream will be permitted.
    Brigadier Raynerasked the Minister of Food on what date approximately he expects to put milk back on the ration this summer.
    The Parliamentary Secretary to the Ministry of Food (Mr. Frederick Willey): I would refer the hon. and gallant Members to the reply my right hon. Friend gave to the hon. and gallant Member for Wembley, North (Wing Commander Bullus), on Monday, 4th June.
    Lieut.-Colonel Lipton: Can my hon. Friend give an assurance that the sale of cream has not prejudiced either the manufacture of cheese or milk powder for infants and that it has not increased the possibility of milk rationing later because of the depleted milk supply?
    Mr. Willey: We endeavour to hold a balance in these matters, and it is because
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    we are holding such a balance that we now regrettably have to discontinue the manufacture of cream.
    Commander Noble: As the sale of cream has not been allowed for some years, can the Minister say on what the present price is based?
    Mr. Willey: The cost of production.
    Mr. Somerville Hastings: What unforeseen circumstances induced this decision?
    Mr. Willey: The decision was taken in an endeavour to meet the needs or requirements of the people who wanted to consume cream and the farming community who wanted to produce cream.
    Mr. Turton: Is the hon. Gentleman aware that the instructions about the sale of cream did not reach some caterers until the announcement of the cancellation of the concession? Does he appreciate that these sudden changes of policy destroy confidence in his administration?
    Mr. Willey: No, I am not so aware, and it is not my responsibility.

    Farm Workers' Rations
    Brigadier Raynerasked the Minister of Food what views on the differential rationing of farm workers have been expressed by the Trades Union Congress Committee which advise him on such questions.
    Mr. F. Willey: Responsibility for decisions in such matters rests entirely with my right hon. Friend. We do, however, seek the advice of the Trades Union Congress, who have supported the allowances we have given to farm workers to offset the lack of canteens. Trades Union Congress have advised, however, against the principle of trying to discriminate between the needs of different kinds of workers for the purpose of differential rationing.
    Brigadier Rayner: Can the Parliamentary Secretary say what the urban gentlemen of the T.U.C. Committee really know about the conditions of farm workers? Does he realise that the chaps on my farm are working from 7 a.m. to 7 p.m.—sometimes a good deal longer—that the same thing happens on other farms and that this is one-third longer than the miners work, but without pithead meals or 12–hour canteens? To add insult to injury—
    Mr. Speaker: Is this a question, or is the hon. and gallant Gentleman giving information about the employees on his farm?

    Canned Meat Exports
    Mr. Keenanasked the Minister of Food if, because of the continued small-ness of the meat ration, he will consider taking steps to stop the exports of canned meats.
    Mr. F. Willey: I would refer my hon. Friend to my right hon. Friend's reply to the hon. Member for Orpington (Sir W. Smithers) on 8th May.
    Mr. Keenan: May I inform my hon. Friend that I have read what has been said on previous occasions, and ask him whether he is aware that a firm in Manchester are exporting tins of braised beef, one of which I hold in my hand, for sale in Canada for 29 cents, which is the equivalent of 2s. 7½d.? Will he see that we get a supply of this commodity on the home market, because housewives would welcome it?
    Mr. Willey: As my right hon. Friend and I have explained repeatedly, these exports represent a negligible quantity compared with the meat on the ration. I am not sure that I followed my hon. Friend's argument, but I hope that I am right in assuming that he is not advocating the removal of price control on the sale of manufactured meat products in this country.
    Captain Crookshank: Is the hon. Gentleman aware that, even if we accept his statement that the quantities are negligible, the impression caused in the places where this meat is sold is deplorable? People find it hard to believe the truth of the situation, which is that we are short of meat in this country.
    Mr. Willey: I am not responsible for that impression, if that impression be there.
    Mr. Paton: Can my hon. Friend say whether any counter-balancing advantages are obtained from this export—even if it is of an insignificant quantity?
    Mr. Willey: Yes. There are considerable counter-balancing advantages. The exports which have been referred to are exports to Canada.
    Mr. Paton: Will my hon. Friend state the advantages?

    Eggs
    Mr. Boyd-Carpenterasked the Minister of Food when he proposes to allow the sale of eggs off the ration.
    Mr. F. Willey: On the basis of the supplies coming forward in the early weeks of the year, it was hoped that supplies in the spring would have been sufficient for my right hon. Friend to allow the free sale of eggs as he was able to do last year. The Ministry made preparations for free sales, and, to assist the trade and the public, my right hon. Friend, in reply to Questions, stated that it was again our intention to free eggs from the ration. But our hopes and intentions have not been realised. Unfortunately, both here and in our overseas supplying countries, we have had the worst season for weather for over 20 years. Consequently, we have not had much in the way of a spring flush, and, very reluctantly, we have had to postpone the operation of our decision to allow retailers to sell to unregistered customers, As things now look, the chilly and damp weather having persisted so long, it does not seem possible that we can completely free sales this season.
    But supplies will tend to fluctuate, and in some areas will probably prove more than adequate for the prescribed allocations. Indeed, in the past two weeks, the supply generally has been greater than last year. This, however, is too late, and is not likely to be of a sufficiently sustained period to permit general off-ration sales. But I would point out that there is nothing in the existing order to prevent grocers letting their registered customers have any additional supplies which they have to spare, and I know that this happens in a large number of cases.
    Mr. Boyd-Carpenter: In view both of the failure to reach last year's position and of the miscalculation by the Ministry which is disclosed in that answer, will the Government reconsider the decision announced a few weeks' ago, by the Minister of Agriculture, not to seek to increase egg supplies in this country?
    Mr. Willey: I was asked what we proposed to do to allow the sale of eggs off the ration. I have explained why, in present circumstances, we are not in a position to allow the sale of eggs off the ration.
    Sir H. Williams: Was the strike of the hens official or unofficial?
    Captain Duncanasked the Minister of Food how many cases of home eggs he bought in the spring which were oiled, packed and stored; what was the cost of this operation; and what was the loss on the value of the eggs by converting them from fresh into preserved eggs.
    Mr. F. Willey: A total of 366,752 cases of home-produced eggs were oil-processed and cold stored for my Department this spring. The approximate average cost of oiling the eggs, packing them and placing them in cold store was 3s. 3¾d. per case. The Department's selling price for oiled and stored eggs is 15s. per case lower than the selling price ruling at the time for fresh eggs of equal quality and size.
    Captain Duncan: What, therefore, has been the loss on this transaction? Would I be exaggerating if I put the loss on the whole transaction at over £500,000?
    Mr. Willey: The hon. and gallant Gentleman would be under-estimating if he put it at £250,000.
    Mr. Vane: Can the hon. Gentleman tell us what is the advantage of spending 3s. 3d. on each case in order to lower the value by 15s.?
    Mr. Willey: These oil processed eggs sell at lower prices than fresh eggs. The decision to oil dip them was taken at a time when, from all the expert advice given to us, it appeared that we would be able to carry over these eggs until the autumn, but, as I have previously explained, we have had the worst weather for 20 years.
    Colonel Gomme-Duncan: Is not this a most astonishing state of affairs? If the hon. Gentleman says that my hon. and gallant Friend the Member for Angus, South (Captain Duncan) was under-estimating when he quoted a certain figure, will he tell us, so that the public may know, what is the actual one, because it may be positively alarming?
    Mr. Willey: The figure is contained in the answer which I have given.
    Mr. Nugent: Bearing in mind that oil dipped eggs deteriorate very rapidly in warm weather, will the hon. Gentleman tell us why he decided to release these
    1656
    eggs in warm weather, instead of in the winter-time, when it is cooler?
    Mr. Willey: We released these eggs, as my right hon. Friend explained, because of the need for more eggs at this time, because of the shortage of meat, but we have no evidence of any deterioration of the eggs that have been released.
    Captain Duncanasked the Minister of Food how many of the eggs stored by his Department in the spring have been released to the public; and what the loss is in prematurely releasing them.
    Mr. F. Willey: The intention is to release to the public all the cases of home-produced eggs which were oil processed in the spring, and the release is proceeding. It is not possible yet to determine the financial results of their early release, because the prices at which the eggs would have been sold next autumn and winter have not been fixed.
    Captain Duncan: Is this not another example of stupid and extravagant State trading, and would it not be very much better to leave these things to people in the trade who understand them?
    Mr. Willey: I can contradict that at once. These officials of the Egg Division are highly respected in the trade, and have considerable experience.
    Mr. Nugent: As the eggs were released to make up the expected shortage next winter, how does the Minister expect to make up the deficiency that will arise from using them now?
    Mr. Willey: We are doing all we can to get more eggs for the autumn, but it is a fact that we shall be so many eggs shorter than we otherwise would have been but for the fact that there has been no flush. What we have done is to take a decision to make these eggs available to the people when we believe they would most require them.
    Mr. Nabarro: Would not the business of the House be facilitated if the hon. Gentleman would denationalise the egg trade now?

    Argentine Apples
    Mr. Dodds-Parkerasked the Minister of Food what representations he has received from Australia and New Zealand on the admission of Argentine

    1657
    apples under the new trade agreement; and what action he proposes to take to prevent this trade being damaged.
    Mr. F. Willey: No such representations have been received. Judging from the keen demand for dessert apples, these supplies have been very welcome to the housewife, and I cannot imagine that the trade has damaged anybody.
    Mr. Dodds-Parker: Will not the Minister wait a little while until he realises, and until the Australian and New Zealand apple and pear growers realise, that the market will be flooded with a lot of Argentine apples just before the Australian and New Zealand fruit comes into the market? Will he say why he has done this to the Dominions, which have never held us to ransom?
    Mr. Willey: I think I can assure the House that there is no possibility of that happening.
    Colonel Gomme-Duncan: Is not this a typical case of foreign fruit being allowed into this country while British fruit rots?
    Mr. Julian Amery: Does not the Parliamentary Secretary's reply mean that the Government are trying to extricate themselves from the muddle they made over meat at the expense of Dominion producers, who are producing other goods?
    Mr. Willey: Present prices indicate that there is a very good market for apples in this country.

    Bakers (Delivery Charges)
    Mr. Wakefieldasked the Minister of Food if he will now remove the restriction on bakers making a delivery charge.
    Mr. Vosperasked the Minister of Food if his investigation into the retail deliveries of bread are now complete; and what action he proposes to take to ensure maintenance of deliveries in rural areas.
    Mr. F. Willey: My right hon. Friend has completed his inquiries and has decided to remove the general ban on delivery charges. Details will be announced shortly.

    Bread Subsidy
    Mr. Wakefieldasked the Minister of Food whether, for the present flat rate bread subsidy, he will consider substituting
    1658
    a graduated subsidy based on output, that is, the higher the output, the less the subsidy.
    Mr. F. Willey: We have already considered this proposal, and have decided that the payment of a graduated subsidy based on output would not be equitable to all sections of the trade. A baker's profits depend on the nature of his business and the size of the area which he serves. There is no necessary relationship between profits and volume of output.
    Mr. Wakefield: Is the Minister aware that the big plant bakers get far more in the way of subsidies than they actually need, whereas the small bakers who use, perhaps, only one or two sacks of flour a day are going out of business because they cannot get enough?
    Mr. Willey: The hon. Gentleman's proposal is not unattractive, but, having made a careful costings inquiry, it does not seem that the costings facts would support his contention.
    Mr. Fernyhough: Can my hon. Friend say whether this is a Tory method of reducing the cost of living?

    Flour Confectionery Prices
    Mr. Wakefieldasked the Minister of Food whether, in view of the increase in the price of the basic ingredients used by the bakery trade, he will abolish price control on flour confectionery.
    Mr. Reader Harrisasked the Minister of Food if he will now reconsider the ceiling prices of flour confectionery, in view of the increases in the cost of ingredients.
    Mr. F. Willey: My right hon. Friend has reviewed the present maximum prices in the light of the increased costs of production and has decided to allow certain increases. Details will be announced shortly.
    Mr. Wakefield: Would the Minister consider the tastes of schoolboys in deciding how these increases should be allotted?

    Statutory Instruments Nos. 606 and 607
    Mr. Boyd-Carpenterasked the Minister of Food if he has now had an opportunity to consider the circumstances

    1659
    of the delay in the publication of Statutory Instruments, 1951, Nos. 606 and 607; and whether he will make a statement.
    Mr. F. Willey: As my right hon. Friend promised, he has made very thorough inquiries into this question. As he has already told the hon. Member, he is satisfied that in this particular case the interval of four days between laying and publication was not unreasonable.
    Mr. Boyd-Carpenter: Is the hon. Gentleman aware that his right hon. Friend says in a letter to me that the interval was longer than usual, and can I have the Parliamentary Secretary's assurance that it is the policy of his Department to publish after a shorter interval of time than was the fact in this case?
    Mr. Willey: Yes, Sir, it is our endeavour to make this interval as short as possible, but we have to exercise discretion in the various cases regarding the pressure we bring to bear on His Majesty's Stationery Office.

  FISH PRICES
  Mr. Arthur Lewisasked the Minister of Food (1) on what date S.R. & O. No. 2610 was withdrawn; and whether he will now introduce a new order similar to that mentioned;
  (2) if he is aware that, on 8th May, small plaice were being sold for 2s. 6d. per lb. retail in Grimsby when the same fish was sold wholesale in Grimsby Market for 6s. 10d. a stone; that cod was being sold for 1s. per lb. retail in Hull when the wholesale cost in Hull Market was only 3½d. per lb., and that this cod was sold in Manchester and other big cities for 1s. 6d. to 1s. 9d. per lb.; and whether, in view of these high charges, he will now introduce price control on fish.
  Mr. F. Willey: I would refer my hon. Friend to my right hon. Friend's reply to the Member for Orkney and Shetland (Mr. Grimond) on 4th June.
  Mr. Lewis: My hon. Friend will recollect that on Question No. 32 he said that he often consulted the T.U.C. As the
  1660
  T.U.C. have recommended the re-introduction of price control on fish and rabbits, will he now put these controls back?
  Mr. Willey: In my earlier reply I explained that the responsibility was that of my right hon. Friend. In exercising that responsibility he pays due regard to the advice tendered by the T.U.C.
  Mr. Edward Evans: Does my hon. Friend agree that, in view of the greatly increased cost of operating fishing vessels and the increased charge which would have to be made on the transport levy if price controls were re-introduced, the prices at the ports would probably be higher than they are now? In view of that, would he refer this matter to the White Fish Authority which has been set up so that their advice may be taken?
  Mr. Willey: As my right hon. Friend has already announced, he is in close touch with the White Fish Authority. All these matters are being carefully considered.
  Air Commodore Harvey: If the hon. Gentleman is doing any consulting, will he consult the men who catch the fish, because they will give him a different story?
  Mr. Donnelly: Will my hon. Friend bear in mind that the effect of re-introducing price controls at this stage might be most disadvantageous to the housewife as well as to the fisherman? Would he recognise that just as the Labour movement has set its face against cheap coal at the expense of the miner, it should turn its face against cheap fish at the expense of the fisherman?
  Brigadier Clarke: Does the Parliamentary Secretary agree that the present high cost of fish is largely due to the failure of his Department to produce meat or other suitable alternative dishes?
  Mr. Willey: If the hon. and gallant Member looks at the reply to which I drew the attention of my hon. Friend, he will realise that the prices of substantial quantities of fish are at or about control level.
  Mr. Keenan: Is not my hon. Friend aware that the real difficulty is that there are too many middle-men and that they get the advantage? Does he not realise

  1661
  that those who bring in the fish do not get the advantage, but that the middleman is putting up the price? Is he aware that in Liverpool and in other places the price of fish is three or four times the price which is obtained by the man who catches it?

  ATOMIC ENERGY (COMMUNIST ACTIVITIES)
  Mr. Braineasked the Prime Minister whether, in the public interest, he will cause to be published a full report on the damage done to the security of this country by Communist agents such as Fuchs and Nunn May.
  The Prime Minister (Mr. Attlee): No, Sir. It would be wrong to make public the full extent of our knowledge in these cases, and, therefore, I do not consider that it would be in the public interest to publish such a report on this matter. I have no doubt that the public is already aware that Communist agents, such as Fuchs and Nunn May, have done very grievous damage to this country.
  Mr. Braine: Is the Prime Minister aware that the United States and Canadian Governments have already published very full reports on this subject? Can he tell the House how it is that the North American people can be told of the damage done by, in some cases, people of British nationality, but that the British public are kept ill-informed? Does not the right hon. Gentleman realise that one cannot fail to draw the conclusion that the Government have something to conceal?
  The Prime Minister: The hon. Member now seems to be more concerned in a party interest than in a public interest. He is no doubt aware that these scientists were taken on, not under this Government, but under another Government.
  Mr. Gammans: Can the Prime Minister assure the House that there are no other people in possession of this secret information who are likely to do the same as these two people did?
  The Prime Minister: How on earth can anybody know that? No one can be absolutely certain at any time that someone may not have information which he might possibly give away. All we can say is that the utmost care is taken with regard to every individual employed.
  Mr. Eden: Will the right hon. Gentleman bear in mind that the Canadian Government published some documents of very considerable interest and information, and also of warning, which I think would be useful? Would he consider doing something on those lines?
  The Prime Minister: I will certainly consider that, but the right hon. Gentleman will realise that to state exactly what our atomic knowledge was, what the atomic knowledge of these particular individuals was, and what we imagined—because we cannot know—was the atomic knowledge in the possession of Soviet Russia, would be a very difficult thing, and might result in our giving away information which we do not wish to give away.
  Mr. John Arbuthnotasked the Prime Minister whether he will consult with the United States authorities with a view to arranging for the publication in this country, as a White Paper or otherwise, of the official report on "Soviet Atomic Espionage," issued by the United States Joint Committee on Atomic Energy.
  Mr. Reader Harrisasked the Prime Minister if he will arrange for a copy of the United States Government's report entitled "Soviet Atomic Espionage" to be placed in the Library of the House.
  The Prime Minister: The document entitled "Soviet Atomic Espionage" was not published by, or on the authority of, the United States Administration, but was prepared by the staff of the Joint Congressional Committee on Atomic Energy at the request of their chairman. I do not think that its publication by His Majesty's Government, whether as a White Paper or otherwise, would be appropriate. I will, however, arrange for a copy to be placed in the Library of the House. I wish to make it clear that I do not necessarily accept all the statements made in this document.
  Mr. Harris: Is the Prime Minister aware that this document contains criticisms of our security arrangements, and that, quite apart from any party consideration, the House would like to know just how far they are correct, and, if they are incorrect, to have a categorical denial?
  The Prime Minister: That would not be effected by publishing a White Paper. Quite the contrary.

  HUNGARY (INTERNMENTS)
  Mr. Hamilton Kerrasked the Secretary of State for Foreign Affairs whether, in view of the Human Rights clause in the Peace Treaty he will make representations to the Hungarian Government concerning the recent purges in that country.
  The Minister of State (Mr. Younger): I would refer the hon. Member to the reply given on 6th June to my hon. Friend the Member for Islington, East (Mr. E. Fletcher), to which I have nothing to add.
  Mr. Kerr: Is the Minister aware that the British United Press, the "New York Herald Tribune" and the "Observer" have published full stories of atrocities in Hungary, and can he say how it is that his Department have no information on the subject?
  Mr. Younger: I do not think that that was what I was asked. I was asked about making representations. This matter of the breaches of the clauses of the peace treaty in the satellite countries has been under discussion not only with this Government, but with other members of the United Nations for a long time. We have co-operated fully, and, as I said in my answer, we are still co-operating.
  Mr. Peter Thorneycroft: Is not the Minister aware that what is going on, according to widespread Press reports, is the mass eviction of families from their homes in something of the manner used by the Germans against the Jews? We want a rather more forthright statement from the Government about their attitude and intention in this matter.
  Mr. Younger: I was not asked on this occasion what was our knowledge about these purges. I gave an answer on that matter the other day, and at that time we did not know they were so widespread as the hon. Member's remarks suggest. Today, I was only asked about representations, and I think that that still remains true.
  Mr. E. Fletcher: Are we to assume from what my right hon. Friend has now said that since then he has received further information confirming the fact that there have been widespread atrocities.
  Mr. Younger: No, Sir, that must not be presumed. I was not asked that question again today, and, consequently, I have not checked that particular aspect since I gave that answer last week. The answer I gave last week was quite correct.
  Mr. Kerr: Has the Government made representations at the United Nations?
  Mr. Younger: That has been very fully under discussion, but I do not think that it was considered by any of the Governments that further representations would do any good.

  STATE AND DIPLOMATIC IMMUNITY
  Brigadier Raynerasked the Secretary of State for Foreign Affairs whether the preliminary report of the Inter-Departmental Committee on State and Diplomatic Immunity has been completed; and if he will publish it.
  Mr. Younger: I would refer the hon. and gallant Member to the reply given on 4th June to my hon. Friend the Member for Islington, East (Mr. E. Fletcher).
  Brigadier Rayner: The Minister's reply is most unsatisfactory. Does he realise that I asked a Question about this matter nearly 18 months ago, and that, meantime, the country is very full of dubious foreigners? Will he say when this Committee will come to a conclusion, and publish it?
  Mr. Younger: The hon. and gallant Member must be aware that when an expert committee is appointed and is under the direction of able and conscientious people, all we can do is to ask that their report should be made available as quickly as possible. The Government cannot insist that a very complicated report should be published before the experts think they have all the answers ready.

  PERSIAN OIL NATIONALISA TION ACT (PUBLICATION)
  Major Guy Lloydasked the Secretary of State for Foreign Affairs if he will circulate in the OFFICIAL REPORT an English version of the Persian Oil Nationalisation Act.
  Mr. Younger: Yes, Sir. The text of the Persian Oil Nationalisation Act of 1st May, 1951, is already available as Annex C to the submission of His Majesty's Government's case against Persia to the International Court of Justice at The Hague, dated 26th May, copies of which are in the Library of the House. For the convenience of hon. Members, however, I am circulating the text of this Act in the OFFICIAL REPORT.
  Following is the text:
  Translation:
  By the grace of Almighty God
  We
  Pahlavi Shahinshah of Persia
  hereby command, by virtue of article 27 of the Supplementary Constitutional Law that:
  Article 1. The Bill concerning the procedure for enforcement of the Law concerning the nationalisation of the oil industry throughout the country which was approved by the Senate and the Majlis on 9th Urdibihisht (30th April) and is hereto attached may be enforced.
  Article 2. The Council of Ministers are charged with the enforcement of this Law.
  The text of the Bill concerning procedure for enforcement of the Law relating to the nationalisation of oil, as approved by the two Houses of Parliament after amendments by the Majlis.
  Article 1. With a view to arranging the enforcement of the Law of 24 and 29 Isfand 1329 (15th and 20th March, 1951) concerning the nationalisation of the oil industry throughout Persia, a mixed Board composed of five Senators and five Deputies elected by each of the two Houses and of the Minister of Finance or his Deputy shall be formed.
  Article 2. The Government is bound to dispossess at once the former Anglo-Iranian Oil Company under the supervision of the mixed Board. If the Company refuses to hand over at once on the grounds of existing claims on the Government, the Government can, by mutual agreement, deposit in the Bank Milli Iran or in any other bank up to 25 per cent. of current revenue from the oil after deduction of exploitation expenses in order to meet the probable claims of the Company.
  Article 3. The Government is bound to examine the rightful claims of the Government as well as the rightful claims of the Company under the supervision of the mixed Board and to submit its suggestions to the two Houses of Parliament in order that the same may be implemented after approval by the two Houses.
  Article 4. Whereas, with effect from 29th Isfand 1329 (20th March, 1951), when nationalisation of the oil industry was sanctioned also by the Senate, the entire revenue derived from oil and its products is indisputably due to the Persian nation, the Government is bound to audit the Company's accounts under the supervision of the mixed Board
  1666
  which must also closely supervise exploitation as from the date of the implementation of this law until the appointment of an executive body.
  Article 5. The mixed Board must draw up, as soon as possible, the statute of the National Oil Company in which provision is to be made for the setting up of an executive body and a supervisory body of experts, and must submit the same to the two Houses for approval.
  Article 6. For the gradual replacement of foreign experts by Persian experts the mixed Board is bound to draw up regulations for sending, after competitive examinations a number of students each year to foreign countries to undertake study in the various branches of required knowledge and gain experience in oil industries, the said regulations to be carried out by the Ministry of Education, after the approval of the Council of Ministers. The expenses connected with the study of such students shall be met out of oil revenues.
  Article 7. All purchasers of products derived from the wells taken back from the former Anglo-Iranian Oil Company can, in future, buy annually the same quantity of oil they used to buy annually from the Company from the beginning of the Christian year 1948 up to 29th Isfand 1329 (20th March 1951) at a reasonable international price. For any surplus quantity they shall have priority in the event of equal terms of purchase being offered.
  Article 8. All proposals formulated by the mixed Board for the approval of the Majlis and submission to the Majlis must be sent to the Oil Committee.
  Article 9. The mixed Board must finish its work within three months as from the date of approval of this law and must submit the report of its activities to the Majlis in accordance with article 8. In the event of requiring an extension it must apply giving valid reasons for such extension. Whilst, however, the extension is before the two Houses for approval, the mixed Board can continue its functions.

  INTERNATIONAL AUTHORITY FOR THE RUHR
  Mr. Niall Macphersonasked the Secretary of State for Foreign Affairs what representations he has received from the Governments of the signatories of the European Coal and Steel Community Plan in regard to the future of the International Ruhr Authority; and whether he will make a statement.
  Mr. Younger: When the Schuman Treaty was signed, the French Foreign Minister suggested that discussions should take place about the conflict of jurisdictions between the Schuman Treaty organisations, on the one hand, and existing international controls over the German coal and steel industries, including the International Authority for the Ruhr, on

  1667
  the other. He further publicly expressed the French Government's view that the functions of the International Authority for the Ruhr should cease in so far as the Schuman High Authority will be in a position to exercise them.
  There were a number of points in the Treaty which in His Majesty's Government's view required to be cleared up before a final decision on these questions could be taken, and His Majesty's Government therefore agreed to take part in exploratory discussions. Accordingly, a meeting of representatives of the United States, French and United Kingdom Governments took place in Paris on 21st May. His Majesty's Government are now considering their policy towards the future of the Allied controls in question in the light of the useful information obtained at these talks. I hope that a final decision will be reached very shortly and that as a result of this decision discussions with the other interested Powers can be resumed.
  Mr. Macpherson: Can the right hon. Gentleman give the House an assurance that British interests will be sufficiently covered in the talks that are taking place, or are to take place, or was the opportunity of safeguarding those interests irretrievably lost when we declined to take part in the negotiations leading up to the formation of the plan?
  Mr. Younger: I do not think that the latter suggestion is the case at all. We consider that we are still in a perfectly satisfactory position to safeguard British interests in this matter.

  JAPAN (PEACE TREATY)
  Mr. Ellis Smithasked the Secretary of State for Foreign Affairs if he will make a statement on the consultations that have taken place between the Prime Minister, himself and Mr. Dulles; and what are the results of the working parties reports.
  Mr. Younger: Mr. Dulles left for Paris on Saturday, but will return on Wednesday, and the discussions will then be resumed. Meanwhile, they are continuing at the official level. My hon. Friend will doubtless not expect me to make a statement at the present moment, but my
  1668
  right hon. Friend will consider doing so in the near future.
  Mr. Ellis Smithasked the Secretary of State for Foreign Affairs if the need to safeguard international standards, the position of the pottery, cotton and other industries were included in the conversations with Mr. Dulles about the proposed Japanese peace treaty; and what action is it intended to take.
  Mr. Younger: Yes, Sir; the matter has been included in the discussions. As, however, the conversations with Mr. Dulles are not yet terminated, I am not in a position to make a statement.
  Mr. Smith: Is it the policy of the representatives of His Majesty's Government to insist that safeguards should be inserted in the Japanese peace treaty to prevent the terrible menace which confronted the pottery, cotton and silk industries in this country before the war?
  Mr. Younger: I am very well aware of the interest felt in this matter, but I think my hon. Friend will agree that I ought to leave this until the present phase of discussions has been concluded.
  Lieut.-Commander Gurney Braithwaite: Would it not be to the advantage of the House if an opportunity were given to the House to express an opinion on the possible repercussions on our trade of such a treaty?
  Mr. Younger: I think the hon. and gallant Member is suggesting a debate and it is not for me to comment on that.
  Mr. S. Silverman: Would my right hon. Friend bear in mind that it is not so much a question of a debate that hon. Members have in mind but that we should like an assurance from the Government not to enter into any binding commitment which might adversely affect any of the industries without giving the House an opportunity of expressing an opinion?

  FOREIGN SERVICE (MISSING OFFICIALS)
  The following Questions stood upon the Order Paper:
  58. Mr. SOMERSET DE CHAIR,—To ask the Secretary of State for Foreign Affairs if he will make a statement on the disappearance from this country of two

  1669
  members of the Foreign Service and their dismissal from it as from 1st June.
  59. Miss WARD,—To ask the Secretary of State for Foreign Affairs whether he will make a statement on the disappearance of Mr. D. D. Maclean and Mr. G. F. de Burgess.
  61. Mr. BELL,—To ask the Secretary of State for Foreign Affairs whether he will make a statement about the absence from duty since 25th May of two senior officials of his Department, Mr. Maclean and Mr. Burgess.
  62. Mr. NIGEL FISHER,—To ask the Secretary of State for Foreign Affairs whether he has any information as to the present whereabouts of Mr. D. D. Maclean and Mr. G. F. de Burgess; and if he will make a statement.
  66. Lieut.-Commander R. H. THOMPSON,—To ask the Secretary of State for Foreign Affairs if he will make a statement on the two members of the Foreign Service who have been suspended on account of absence without leave.
  68. Mr. J.LANGFORD-HOLT,—To ask the Secretary of State for Foreign Affairs what action he has taken following the disappearance of Mr. Maclean and Mr. Burgess, two officials of the Foreign Office; and whether he will make a statement.
  The Secretary of State for Foreign Affairs (Mr. Herbert Morrison): With your permission, Sir, and that of the House, I wish to make a statement in reply to Questions Nos. 58, 59, 61, 62, 66 and 68.
  I have little to add to the Foreign Office statement issued on 7th June. The absence abroad of Mr. Maclean and Mr. Burgess was established on Tuesday, 29th May. Mr. Maclean had asked for and been granted permission to be absent from duty, for private reasons, on Saturday morning, 26th May. Mr. Burgess was on leave pending a decision as to his future. The matter was at once placed in the hands of the appropriate authorities who are receiving full collaboration from my Department in their enquiries.
  On the same day—namely, 29th May, it was found out that they had left Southampton ostensibly on a week-end cruise on the night of 25th May. They disembarked at St. Malo on 26th May,
  1670
  but no further confirmed information of their whereabouts has so far been received.
  Mr. Maclean, as has already been stated, suffered from a breakdown in Cairo a year ago due to overstrain. When he recovered he was appointed to the Foreign Office as Head of the American Department. Mr. Burgess had recently been recalled from H.M. Embassy at Washington owing to his general unsuit-ability in the position he held, and the question of his further employment in the Foreign Service was under consideration.
  With reference to the Question of the hon. Member for Bucks, South (Mr. Bell), I should like to state that Mr. Burgess is not a senior official. He is not a member of the Senior Branch of the Foreign Service, but he held the temporary and local rank of Second Secretary in His Majesty's Embassy, Washington, for a trial period. Neither Mr. Maclean nor Mr. Burgess has been dismissed. They have been suspended from duty with effect from 1st June pending the results of the inquiries which are being made. The question of their dismissal will depend on the result of these inquiries.
  I should inform the House that the security aspects of this case are under investigation and it is not in the public interest to disclose them.
  Mr. Eden: There are just two questions I should like to ask about this. First of all, in view of the very wide anxiety outside this country about this unhappy event—
  Sir H. Williams: And inside.
  Mr. Eden: Of course, there is anxiety inside as well, but it is the outside anxiety I want to put in my question. In view of that outside anxiety, would the Foreign Secretary be good enough to keep the House informed of any developments about which he hears in course of time? Secondly, there is one point which arises from his answer. He refers to Mr. Maclean's breakdown and then he remarks that when he recovered he was, appointed head of the American Department. The right hon. Gentleman knows-that is perhaps the heaviest and most onerous post in the Foreign Office at the present time. Were his advisers absolutely satisfied that when they made their decision Mr. Maclean really had recovered?
  Mr. Morrison: There was medical evidence that he had recovered. I would not quite accept the description of the American Department in the way the right hon. Gentleman gives it. That is not out of disrespect for the importance of American matters, but the fact is that many matters concerning negotiations with the United States are dealt with in other Departments, for example, the Japanese treaty is dealt with in the Far Eastern Department, and there are other things to that effect. The report on his work is that he was an exceedingly able official.
  Mr. de Chair: Would the right hon. Gentleman say whether there has been any systematic check on the loyalty and the affiliations of members of the Foreign Service like Mr. Burgess, who joined the Service during the war when we were fighting as allies of Soviet Russia? Has he considered that aspect of the matter?
  Mr. Morrison: Yes, Sir. Security checks are made on members of the Foreign Service on their appointment and, if it proves necessary, from time to time. I did not answer the first question of the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) as to whether I could make any further statement to the House. I will certainly consider that, provided always, of course, that the security aspect is not thereby prejudiced.
  Mr. Bell: Can the right hon. Gentleman say how long each of these Gentlemen had been employed in the Foreign Service?
  Mr. Morrison: I could not say exactly—certainly a number of years.
  Mr. Fisher: Would the right hon. Gentleman explain why there was an apparent delay in seeking the co-operation of French and perhaps other authorities who might have been able to help us in the matter of these officials had they been informed earlier? Could he also inform the House whether these officials possessed knowledge potentially valuable to Russia, not only as it applies to present policy but possible future Government intentions?
  Mr. Morrison: The first point was a matter for the discretion of the security services, of course. I do not think that there was any undue delay there—
  Lord John Hope: Six days.
  Mr. Morrison: —and on the second point, I have no evidence that they have taken documents with them.
  Mr. Emrys Hughes: Is my right hon. Friend aware that we are now spending £3 million a year on security and the Secret Service? Is he satisfied that we are getting value for money?
  Mr. Morrison: I think so. If my hon. Friend would like to propose we should spend more, no doubt that would be considered by my right hon. Friend the Prime Minister. The reference made by the noble Lord opposite to six days is wrong. I think that in the context of this question it should have been one day.
  Miss Ward: Could the right hon. Gentleman tell us how this information came to be made public, having regard to the need for keeping it as secret as possible until the right hon. Gentleman was in a position to deal with the facts of the case, which is most important to this country?
  Mr. Morrison: I have a lot of sympathy with the purport of the hon. Lady's question, but when inquiries were instituted on the Continent it was possible that they would leak. As a matter of fact, we did not at first issue our own announcement, for I did not particularly want to do that for the reason given by the hon. Lady, but we had to do so. One national morning newspaper had some information and had already published a story about it.
  Mr. George Wigg: Would the Foreign Secretary institute inquiries into the suggestion made in a Sunday newspaper that there is widespread sexual perversion in the Foreign Office, and if his inquiries prove these allegations to be unfounded will he consult with the Law Officers of the Crown with a view to instituting proceedings for criminal libel against the editor and the writer of the article?
  Mr. Morrison: I should not like to answer on the spur of the moment the question about legal implications. I can only say that perhaps I have not been long enough at the Foreign Office to express an opinion. I should think that any such implication was unfair and irresponsible. In any case, the writer of the political stuff in the Sunday paper

  1673
  referred to is not a gentleman to whom any of us need pay too much attention.
  Mr. Duncan Sandys: Can the right hon. Gentleman say whether, when the last security check-up of officials took place, the Foreign Office were satisfied that Mr. Burgess had no Communist associations?
  Mr. Morrison: I did not imply that there is a regular and systematic week-by-week check-up of all Foreign Office officials and I should not like it to have to come to that. Indeed, I do not think that the Department deserves such a check-up.
  Mr. Paton: Is my right hon. Friend in possession of even a shred of real evidence which would connect the disappearance of these men with Soviet Russia?
  Sir H. Williams: Why have they gone, then?
  Mr. Morrison: I think we should all be wise not to prejudge anything one way or the other.
  Brigadier Head: May I ask a question further to that regarding the check-up? The questioner said that when Mr. Burgess went to the Foreign Office we were allies with Russia and the question asked was whether subsequent events had caused another check-up to be made. May I ask the Foreign Secretary, further, whether it was not a fact that Mr. Burgess made little or no secret of his extremely Left-wing political views? Is it not curious that no check-up was made subsequently regarding them?
  Mr. Morrison: I am not aware of that, but if the implication in the question is that we have one test of suitability for the Foreign Office according to whom we are in alliance with or who we are at war with at the time, then with great respect I am bound to say that these are not considerations which would conclusively influence my mind.
  Mr. Chetwynd: Does my right hon. Friend discount the theory that the absence of these two gentlemen is connected with their private lives and has nothing at all to do with their Foreign Office connections?
  Sir Jocelyn Lucas: Is the right hon. Gentleman aware that the Sunday newspaper mentioned, the "Sunday Dispatch,"
  1674
  says quite openly that Mr. Burgess had admitted his Communist tendencies and hated America? In that case, why was he sent to the United States?
  Mr. Morrison: If that was by the same writer as that one to whom my hon. Friend referred, with great respect I would not take any notice.
  Mr. Godfrey Nicholson: Can the right hon. Gentleman say, or will he make inquiries to discover, whether the conduct of Mr. Maclean in Egypt was at all times consistent with the high level required of Foreign Office officials, because there are rumours, to say the least—and to put the matter as carefully as possible—that he was of a highly erratic nature?
  Lieut.-Colonel Lipton: Does my right hon. Friend's original answer mean that these two gentlemen have not yet done anything to justify their immediate dismissal and that it is possible that they may provide some explanation which will mean that that course will not be necessary?
  Mr. Morrison: If I may say what I have said before, I would impress upon the House that it would be premature to come to a conclusion either one way or the other about it. That is the only position one can adopt at this stage.
  Mr. Eden: May I be allowed to say, as Mr. Maclean was serving under me at the time in Egypt, that in all the reports I received the work he did there was very good indeed.
  Lord John Hope: May I ask a question about the delay in sending information to the French authorities? Am I not right in saying that there was a delay of six days after the Foreign Office knew of the disappearance of these men before the French were informed?
  Mr. Morrison: No, Sir.
  Mr. Hastings: How long was Mr. Maclean away from duty as a result of his breakdown, and was it quite clear on his return that he had fully recovered?
  Mr. Morrison: I could not say exactly how long he was away from duty, but there was medical evidence that he had recovered.
  Colonel Gomme-Duncan: May I ask whether, in the case of officials of the Foreign Office, as in the case of serving officers in the Service Departments, before they go abroad they have to obtain permission and state to which country they are going? Did these officials obtain that permission?
  Mr. Morrison: I do not know, but I think it can be taken that if that question arose they must have had such consent, otherwise we should have heard about it.
  Sir W. Smithers: May I ask the Foreign Secetary—
  Mr. Morrison: If the question of the hon. and gallant Member for Perth and East Perthshire (Colonel Gomme-Duncan) concerned the countries to which they have now gone, that is another matter. I thought that what he meant was the countries to which they were formerly appointed. As to whose consent they have got to go wherever they are, I have no idea.
  Sir W. Smithers: Would the right hon. Gentleman give an assurance that the security measures of the Government are effective and, in order to restore confidence, would he ask the Secretary of State for War publicly to repudiate the statement he once made, "Like all Socialists I believe that the Socialist society evolves into the Communist society"?
  Mr. Speaker: I could not hear a word of the hon. Gentleman's question, but I think most of it was out of order.
  Sir W. Smithers: I asked the Foreign Secretary, Sir, whether he was aware that we are doubtful at all levels of the sincerity of His Majesty's Ministers?

  LONDON DOCKS (SHIPS' CLERKS' STRIKE)
  Mr. Peter Thorneycroft(by Private Notice) asked the Minister of Labour whether he has any further statement to make about the strike of tally clerks at London Docks.
  The Minister of Labour (Mr. Robens): The position is practically unchanged since I made my statement on Thursday last. Some 61 ships are fully manned as against 98 idle and three undermanned. I am, however, having important discussions this afternoon and I hope the House will not press me further at this stage.
  Mr. Thorneycroft: What is the position about the food ships in the Port of London, many of which must have been idle for some considerable period? While we wish the right hon. Gentleman all success with his discussions, could we have an undertaking that the Government will watch this matter and, if the discussions do not bear fruit, that he will do something about the unloading of these ships?
  Mr. Robens: The food situation is not of immediate concern, and I can assure the House that I am watching the matter very carefully from day to day.
  Mr. Eden: Nobody wants to press the right hon. Gentleman if he is to have discussions this afternoon but, at the same time, could he give us any indication of what effect, if any, this strike is having upon the trade of the country, because the number of ships now laid up is very large indeed by any standard.
  Mr. Robens: Certainly, the number of ships which are laid up is quite high. In fact, 98 are idle, and that must represent a considerable loss to the country as a whole.
  Mr. A. Lewis: Will the Minister give an assurance that if these men make an immediate return to work he will call a conference under the auspices of his Department with the representatives of the men, with the clerical section of the union, for the purpose of discussing the question of the recruitment of clerical workers?
  Mr. Robens: I have already indicated that I am to have discussions this afternoon and I would rather leave the matter there.

ORDERS OF THE DAY
  TELEGRAPH BILL
  Considered in Committee; reported, without Amendment, read the Third time, and passed.

FINANCE BILL
Considered in Committee. [Progress, 7th June.]
[Major MILNER in the Chair]

Clause 24.—(RATES OF PROFITS TAX, ETC.)
3.51 p.m.
Mr. Selwyn Lloyd: I beg to move, in page 16, line 25, to leave out "forty," and to insert "forty-five."
The effect of the Amendment will be to increase the rebate for undistributed profits from 40 per cent. to 45 per cent. and if it is accepted it will leave the tax on distributed profits at 50 per cent. but will reduce the tax on undistributed profits to 5 per cent. I wish to put the case for this Amendment at some length because it is at least one of the most important Amendments that we shall have to consider.
Some of my colleagues, when speaking on earlier Amendments, have been accused of delivering lectures. I shall try to avoid that charge, but I wish to deal with some of the arguments which the Chancellor put forward in his Budget speech when recommending the method of dealing with Profits Tax which he has incorporated in this Clause. I think it is also of importance to this discussion that the Committee should remember that we approach it with Income Tax at 9s. 6d. in the £ and with the initial allowances withdrawn as from next year, and I think that those are two very relevant considerations bearing upon the question of the amount of Profits Tax.
The Chancellor, in his Budget speech, put forward five propositions to defend his action in this Clause. He said:
"There are some who disapprove of profits in principle. I do not share their view. In an economy three-quarters of which is run by private enterprise, it is foolish to ignore the function of profit as an incentive."
Then he made certain qualifications.
His second proposition was:
"There is no doubt that the level of company profits has recently been increasing
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rapidly. After a period of relative stability in 1948 and 1949, they are estimated to have increased in 1950 by nearly 14 per cent.—as against a rise in money incomes generally of nearly 7 per cent."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 854.]
Then his third proposition was that the dividends had gone up as well as profits; and he quoted some figures published in the "Financial Times" showing that ordinary dividends increased by 2 per cent. in the first half of 1950 compared with the corresponding period of the previous year, that in the second half of 1950 they increased to 6.7 per cent., while in the first two months of 1951 the increase was 10 per cent., and that in March the increase had been more than 14 per cent.
After outlining that situation, he put forward his fourth proposition and rejected the statutory control of dividends. He gave some very good practical reasons against adopting that solution, but then he went on finally to say that he had decided to increase the rate of Profits Tax on distributed profits from 30 per cent. to 50 per cent., and he said:
"Since firms will be liable to the high tax on profits earned now, in so far as they are to be distributed later, we can, I think, safely assume that from now onwards more will be set aside for tax reserve and less paid out in ordinary dividends."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 856.]
He went on to assume that the net increase in corporate savings from that would be £30 million in the current year.
I wish just to examine those five propositions one by one, because I think they go to the root of this problem of whether we should accept this Clause as it stands or whether this Amendment should be accepted.
With regard to the Chancellor's approval of profits, we welcome his words. That is one of the few gleams of hope in his Budget speech, and we are prepared almost to be effusive with a repentant sinner like this coming down to acknowlege previous errors; and I think he does deserve a measure of congratulation not only for standing up to the right hon. Member for Ebbw Vale (Mr. Bevan) but also for stating quite plainly that he does not see anything vicious in profits. In fact, that view is not restricted to the Chancellor alone. I think it is endorsed by some of the more sensible of his colleagues. I was very struck by a speech made by the hon. Member for Bolton, East (Mr. Booth), who, dealing with the

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standard rate of Income Tax and talking about increases in taxation, said:
"What is the alternative? I have not heard one offered. After all, we do not complain about profits. Profits are earned by good management, and there will be profits in the nationalised industries when there has been time to sort things out."—[OFFICIAL REPORT, 6th June, 1951; Vol. 488, c. 1132–3.]
He may be rather optimistic with regard to that second statement—[An HON. MEMBER: "There are such profits now."] I think that the hon. Gentleman was referring to profits earned by good management and not profits earned just by a monopoly putting up the prices.
Therefore, on that first point, as I say, we acknowledge the Chancellor's words with a certain degree of pleasure, and we hope that he will convert on this topic certainly some of the hon. Members who are at present sitting behind him. Of course, one must feel some sympathy with the Socialist Party, for they have spent their lives denouncing the rich, and now it has been admitted that not much more can be got out of them; then they abused the bosses, but for a long time now we have seen a trade unionist sitting alongside the boss—even if he is not actually the boss, as in the case of the dockers. So now they have to denounce profits, but—and this is the burden of my speech—there is no one who has a greater interest in the profitability of industry than the workers themselves. Therefore, one is thankful for this glimpse of common sense on the part of the Chancellor.
The next point that the Chancellor made was his rejection of the statutory limitation of dividends. I think political necessity dictated the moderation or rather the brevity of his argument, but any argument that applies against the statutory limitation of all wages seems to me to apply against the statutory limitation of dividends.
As to the Chancellor's point about the increase in Profits Tax on dividends, I want to deal with that for a moment or two. He was not, in my submission, quite frank with the Committee on that occasion. He did not tell the whole truth. It is true that there has been a certain increase in dividends, but what are the facts about those increases? I refer first to Table 9 of the right hon.
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Gentleman's own White Paper, Cmd. Paper 8203, on National Income and Expenditure. That Table 9 showed that trading profits between 1947 and 1950 rose from £1,527 million to £1,692 million; dividends, rose from £824 million to £827 million; and even if, giving the Government's supporters the present of a point, we include the interest on the stock of nationalised industries, the figure has increased from £853 million only to £918 million. I am missing out the intermediate figures for 1948 and 1949 and comparing 1947 with 1950. Trading profits were up by 10 per cent.; dividends and interest of companies were up by one-half of 1 per cent. and, including interest on capital in nationalised industries, there was an increase of about 7½ per cent.
4.0 p.m.
Contrasting those figures with figures in Table 11 of the White Paper, for wages and salaries we see that in 1947 the figure for wages was £3,671 million, and in 1950 £4,611 million. Salaries in 1947 were £1,981 million, and in 1950 £2,522 million. Thus, between 1947 and 1950 wages and salaries increased by over 25 per cent. I make no complaint about that, but in seeking to present the facts about these other percentage increases, that is a relevant factor. Also we must remember that Government supporters are constantly pointing out to us the benefit of the indirect transfer payments which they say are also really indirectly increasing wages. Therefore, if that is taken into account, the increase is more than 25 per cent.
It may be said that there are two other relevant considerations to these percentage increases. I apologise for going into this, but, after all, these were the percentages on which the Chancellor founded his case. On wages, it may be said that more people are employed. In the Economic Survey, the figure for mid-1948 was £21½ million, and at the end of 1950 it was 22.1 million—an increase of about 2½ per cent. On profits and dividends another relevant consideration is the increase in the amount of capital employed, because the profits have been earned and the dividends have been paid on a great deal more capital, on more savings, on money that has been ploughed back.
It is difficult to get at the whole of the figures, because so far there are no satisfactory statistics on the point, but an analysis did appear in the "Financial

1681
Times" of 624 companies whose accounts were published in the first three months of 1951. That analysis showed that their earnings were up by 11½ per cent.; the issued ordinary capital and capital revenue reserves were up by 9½ per cent.; dividends had gone up by 11 per cent., so that those percentages had kept more or less in line with one another. For the companies whose accounts were published in April, the ordinary capital plus capital revenue reserves had gone up by 12½ per cent., and dividends had gone up by 8½ per cent. In the first set of figures the ratio of dividends to capital employed was about the same, and in the second set the ratio of dividends to capital employed was considerably lower.
I submit that, unless that fact is disclosed when talking about increases in dividends, one is not giving the whole picture, because it has to be remembered that one of the matters for which the Chancellor takes credit is the fact that in the last four years corporate savings have amounted to something like £2,000 million—money ploughed back.
Well, is it the Chancellor's suggestion that that capital is to have no return? That is a matter upon which it is very easy to misrepresent, particularly if talking to a popular audience. For instance, take Dunlop Rubber: in 1949, £700,000 were paid in dividends; in 1950, £1,200,000 were paid in dividends—an increase of 70 per cent. It might be said: "What a monstrous thing. What a dreadful increase in dividends."
But unless there is disclosed the fact that the public subscribed nearly £10 million in the interim by way of extra capital, one does not get at the full figures, and that takes no account of the money actually ploughed back by the company itself. I dispute that there has been any great disproportionate rise in dividends. I think that the ratio of dividend to capital has remained fairly constant. If account is also taken of the fact that we have a cantering inflation, I think we must realise how much misrepresentation and exaggeration there has been of this problem.
It seems to me that this very substantial increased tax by the Chancellor on undistributed profits is a very poor reward for those who responded to appeals for restraint in dividend payments, because on the whole those appeals
1682
were very scrupulously honoured, as has been repeatedly stated by those in authority. The vast majority of companies obeyed the Chancellor's request, and the result is that they will now be very much worse off.
I do not want to be unduly controversial in moving this Amendment, but that does seem to me to be typical of Socialism. If a person denies himself and withdraws his purchasing power from the market, if he conserves his reserves and responds to appeals for restraint, then, whether he be an individual or a corporation, in the long run he is worse off. That has applied to savers and former shareholders in nationalised undertakings who exercised a policy of restraint in spending, and it has now happened to people who responded to appeals for dividend restraint. In the long run they will all be worse off.
I submit that in his approach to this matter the Chancellor fell below the standard of moderation and of resistance to irresponsibility which he showed in other parts of his Budget speech. That the Chancellor was guilty of that omission is also shown by the fact that he never would speak about the actual cash amounts involved; he always spoke in terms of percentages. The actual inflationary effect of these increased dividends is, in my submission, very small. A 1 per cent. increase in wages and salaries means 72 million, whereas a 1 per cent. increase in dividends means £8 million. That, again, is a matter which should be disclosed to the public when talking about the inflationary effect of dividend increases. I submit that the facts and figures I have put before the Committee show the Chancellor's statements about the increases in profits and dividends in their true perspective.
Now we come to the consequences of his action in increasing the undistributed Profits Tax, which leads to the necessity for this Amendment. On 10th April the Chancellor said:
"we can … safely assume that … more will be set aside for tax reserve and less paid out in ordinary dividends."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 856.]
Is that fair? Why is it that in present circumstances it is right that shareholders should get less? The Government have had to increase their own rates. They have increased by 20 per cent. the interest on Saving Certificates in order to get new

1683
savers. I read the other day that Lord Piercy, the Chairman of the Industrial and Commercial Finance Corporation, Ltd., a Government nominee—[HON. MEMBERS: "No."]—well, he is indirectly a Government nominee; he is a nominee of the Bank of England, and the Bank of England is nationalised. He revealed a week or two ago that his institution is now making a higher charge.
The latest adjustment in interest rates is that the Agricultural Mortgage Corporation, Ltd—which again is a Government-sponsored institution, I believe—has increased its interest rate from 4 per cent. to 4¼ per cent. The Government are therefore conceding that, in present circumstances, the person who contributes, the capital saver, is entitled to rather more return instead of rather less return upon his capital.
Why is it reasonable, therefore, that the Chancellor should expect less to be paid out by way of ordinary dividend? If he wants savings, if he wants people to deny themselves and to withdraw their purchasing power, why is he not prepared to increase their rewards, or at all events to keep pace, in a rough and ready manner with rising costs? I fail to see why it is not just and reasonable for any person whose mind is not clouded by party prejudice to concede that the company which, for example, has not increased its dividends for five years in response to appeals for restraint, should not now increase its dividends, at all events to keep roughly level with the depreciation in the value of money. It is significant that many companies have not gone as far as that. It therefore seems to me to be quite unrealistic for the Chancellor to expect companies to reduce their dividends at the present time.
There are very many small shareholders, and it will be a grave hardship to those people living on small fixed incomes if there is any reduction of ordinary dividends at the present time. If ordinary dividends are not reduced as a result of this step, it means that the extra taxation will have to be paid out of corporate reserves. There is no disputing that fact. The tax has been put up by 30 per cent. and if ordinary dividends are not to be decreased, it means that there must be an extra tax bill for companies to pay.
The Chancellor of the Exchequer (Mr. Gaitskell): The hon. and learned Gentleman is presuming that there is no change in Profits Tax. If profits are increased, his proposition does not apply.
Mr. Lloyd: I was coming to the question of increase in profits. I am dealing with the tax bill. It must go up. If the same dividends are to be paid as before, there will be a higher sum to be paid out in Profits Tax by companies who have distributed these dividends. I think that is a self-evident proposition.
One has only to look at the right hon. Gentleman's own figures. The current view is that over the past two or three or more years British industry has been very prosperous—is bulging with money, has no cause for worry, and can easily afford these increased rates of taxation. If he will look at Table 26 of the Economic Survey for 1951—the figures were given by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler) very early on Friday morning—that table shows the position of corporate savings. It shows that undistributed profits went up by £211 million between 1950 and 1951.
The 1951 figures are a forecast and according to that forecast undistributed profits have increased by £211 million from £569 million to £780 million. The provision for stock appreciation—that is to say, the money needed to continue to finance business—has gone up from £270 million to an estimate of £700 million—an increase in 1950 in corporate reserves of approximately £300 million and in 1951 of £80 million. There is an adjustment to be made in the 1951 figures because £100 million of that £700 million is depreciation for public corporations.
If we make that adjustment and give the Government a present by making no corresponding adjustment in the 1950 figures, it means that for 1950 corporate savings were up by £300 million and in 1951 were up by £180 million. The figures for 1938, given in the same table, show that the corporate savings were up by £171 million in that year and the figure for 1951 is £180 million compared with £171 million for 1938. That, in my submission, taking into account the decrease in the purchasing power of the £, shows that the situation for 1951 is not going to be anything like as satisfactory as for 1938.

1685
There is another way of looking at this matter of whether industry is really bulging with money. It is shown by the figures quoted by my hon. Friend the Member for Chippenham (Mr. Eccles) early in the morning of 8th June. He was dealing with the withdrawal of the initial allowances. He stated:
"According to the Chancellor, over the whole of industry £170 million will be taken away, in the sense that they will have to borrow that money or find it from their own cash resources. Their cash is going to be seriously depleted, and this may have very serious consequences. I have seen a sample of a large number of industrial firms showing the relation between their cash resources and their turnover in 1938 and 1949. In 1938 they had 13 per cent. of their annual turnover in cash. From pre-war experience that may well be considered as none too high. Nobody would have said that industry in 1938 had too much cash. In 1945, for which I have no figures, I know that the cash ratio was much higher. The figure for 1949 is 7½ per cent. It has dropped already to nearly half of what it was before the war. This is one of the most serious figures in industry today."—[OFFICIAL REPORT, 8th June, 1951; Vol. 488, c. 1564–5.]
I think that most people will believe that that process has gone on, and on the ratio of cash to turnover for the past year the figure would be lower than the 7½ per cent. to which my hon. Friend referred.
4.15 p.m.
I submit that reference to the table in the Economic Survey and the figures about cash resources show this heavy taxation as being a constant strain upon the resources of industry. Whatever the apparent prosperity and whatever the misleading opinion which may be formed by people who see reports of large increases in profits, in fact industry is being weakened, and its resources are being weakened as time goes on and are being drained away in excessive taxation.
That point is enormously aggravated when one realises that profits are assessed on a basis which is not that of true profit. I do not want to enter on that argument because reference has been made to it already, and it is a matter which could be debated on its own. These figures of profits are all the more misleading because they do not represent true profits at all and the taxes levied on profits are not taxes on true profits. I do not propose to elaborate on that point because I think even the Government must have appreciated it by now.
One of the most disappointing features of the Budget is that Sir Stafford Cripps'
1686
recognition of that fact in giving an initial allowance to meet that point, has now been obliterated by the withdrawal of the initial allowances without any alteration in the methods of assessment of profits. It is because we on this side of the Committee appreciate the necessity for the re-armament programme that we are putting forward this very moderate and reasonable Amendment. The 20 per cent. increase in the tax on distributed profits is not dealt with in the Amendment. We are seeking to preserve the position of company reserves to see that they will have in their possession sufficient resources to enable them to modernise and equip industry so that it can face its task in the future.
I believe that many Members of the benches opposite who have attempted to follow my argument, if they could approach this matter without party politics entering into it, would agree that a good case has been made out. The Government desire to raise £60 million by their alteration in the rate of Profits Tax. Acceptance of this Amendment would reduce the increase from £60 million to about £31 million. Our submission, in seeking to strengthen the position of company reserves, is that it would be false economy and bad planning and expensive in the long run not to accept the Amendment.
The people who are most concerned in this matter are the people who work in industry. All sorts of difficulties are going to face them in the future. The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) referred to one of them in connection with Japanese and German competition, and when the re-armament programme slackens off in the United States there will be a tremendous impact of American competition in our export countries.
If we are to retain full employment and preserve our competitive capacity, it is essential that reserves should be available to British industry to modernise itself. The Minister of Labour said that there was two h.p. behind each worker in this country compared with six h.p. in the U.S.A. These are very serious figures considering the extent of American productive capacity to be expected in the future. This is a matter of the greatest importance to British industry. It is for all these reasons that I have moved the Amendment.
Mr. Spearman: Like my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), who has made such an admirable speech, I realise the necessity for high taxation today, partly because of the necessity for re-arming on a great scale, which we on these benches do not consider to be any fault of this Government and partly, of course, because of the Government's extravagant expenditure in the past, which we think has been quite unnecessary. Quite clearly, high taxation must hurt, and there can be no levying of high taxes without a great deal of hurting, but I should have thought that any tax to be reckoned good must pass two tests.
First of all, it should be fair as between those who have to pay it. This Profits Tax is most unfair in that respect. I should like to give an example to show what I mean. If we take company A, which has a capital of £500,000 in ordinary and £500,000 in debenture shares, it makes £100,000 profit, and the amount available, after paying Profits Tax, is £67,500 for reserves, for distribution and for Income Tax and Profits Tax on distributed profits.
Let us then take company B, which makes the same profit and has the same capital, except that £500,000 is in preference rather than in debenture shares. In that case the amount available for distribution or reserve is not £67,000 but £55,000. No blame attaches to company B in that it wished to raise the funds by preference shares rather than debenture stock, and no one should blame the shareholder for investing in company B rather than in company A, but why should one set of shareholders suffer from that tax so much more than the other?
The second test which any good tax should pass is that the dislocation of production should not be out of all proportion to the amount that is raised by it. I should like to quote the "Economist" of 14th April, which said:
"Income and Profits Tax together, the State now absorbs up to two-thirds of his return. On such terms little new money is likely to be put into the expansion of businesses whose future is at all uncertain. It spells the end of innovation and industrial expansion."
The difficult thing about it is that this is going to hit the smaller companies, who have to make their way far more than the
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great companies, who have accumulated reserves and who are able to borrow because of their reputation. It is essential to an increase in production—in fact, to the prosperity of this country—that there should be continual new blood and that the rising, enterprising small concerns should become big. They are going to be tremendously handicapped by this tax.
All the great companies, on which the wealth of this country is dependent, started small. It is only State concerns which start at the top, and the experience we have had in Africa does not encourage that method of financing industry. What has been done in this country has been done well, namely, to let the small companies fight their way up to the top. This tax will upset the progress of industry out of all proportion to the relatively small amount of money which it will raise.
My hon. and learned Friend the Member for Wirral made a very formidable attack on this tax, but I think that on the whole it is hardly as formidable as that made by the Minister of Town and Country Planning some years ago. It may well be that the Financial Secretary to the Treasury will tell me that this particular Minister has not much influence on the Treasury Bench today, but there was a time when he must have had a certain influence with his present colleagues. Perhaps I may be permitted to quote what he said in a book which was revised in 1935:
"Again, a special tax upon business profits, such as the post-war British corporation profits tax, now repealed, was a bad tax from the present point of view. For it discriminated against a particular class of property-owners, namely, the ordinary shareholders in joint stock companies, as compared with all other classes, including debenture holders and the holders of gilt-edged securities. It was, therefore, in effect, a tax on risk-bearing, and tended to divert the flow of capital from risky to comparatively safe investments. But in view of the need that risks should be taken and the reluctance of many investors to take them, this was a harmful diversion."
If the Chancellor of the Exchequer is perhaps no longer influenced by the thoughts of the Minister of Town and Country Planning on economic matters, he may be influenced by the T.U.C., and I should like to quote very briefly from their last memorandum, in which they said:
"Other things being equal, a high and progressive rate of taxation will reduce the willingness and ability of individuals and corporations to invest at risk …"

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Then at the end of the paragraph, they concluded with these words:
"We consider, however, that the Government can and should undertake to provide risk capital where necessary."
If the Chancellor of the Exchequer is guided by those views, he should make it plain to the country that it is the Government's intention to provide this capital. I suggest that there are many peopl—
The Chairman: The hon. Member for Scarborough and Whitby (Mr. Spearman) is really dealing with the general case and not the particular rates of tax which are the subject of this Amendment, and to some extent the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) did the same thing. I have no objection to a full debate taking place on this Amendment, but it must not be repeated on the Question "That the Clause stand part of the Bill." Hon. Gentlemen ought to make their choice so that we have not the same debate repeated. My own view is that this particular debate should be limited to the Amendment before the Committee.
Mr. Spearman: With respect, what I was trying to do was to show that this tax was discouraging people from taking risks, and I was quoting the T.U.C. to support that view.
The Chairman: I fully appreciate that, but surely that is a general argument and not an argument directed to this particular Amendment.
Mr. Spearman: If that is your Ruling, Major Milner, may I try to make my points on the Question "That the Clause stand part of the Bill"?
Mr. Watkinson: Following the general considerations on this Amendment on undistributed profits which have been put forward by my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), I should like for a moment to draw the Chancellor's attention to one part of manufacturing industry which will be particularly hard hit by the general increase in the level of taxation and which would therefore derive a great deal of benefit if the Chancellor could see his way to make this concession. I need not labour this point at great length, because the Chancellor or the Financial Secretary has had a letter from me, and they will
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know the particular case to which I am referring.
This case—and there are many other industrial enterprises all over the country in the same position, as I know from my personal experience—concerns engineering undertakings, which had to expand very rapidly during the last war to meet the necessary commitments which were laid upon them. If they had a small nominal capital, as many small companies have—and as my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) has said, it is the relatively small concerns which are reallly the industrial foundation of this country—very often they had bad E.P.T. standards. Though they achieved enormous profits on paper during the war, they were of no value whatever to them, and they were taken from them, so that they ended the war in a weak liquid position as far as their assets were concerned.
4.30 p.m.
They then went into the doldrums for a year or so after the war. Now they are being asked again to accept a greater burden, and to step up their productivity to meet the new re-armament programme. I submit to the Chancellor that that type of firm finds itself in a most difficult position. It nearly always has a very large overdraft at the bank. The bank is often reluctant to increase the overdraft. That firm now finds it has to try to double its output. I know many firms which, since 1946–47, have doubled their output. The Chancellor knows even better than I do the strain that is placed upon those firms by the need to carry larger stocks and to buy new plant which, after next year, will not benefit by the 40 per cent. deduction.
The concession for which we ask is very small relative to the total burden of taxation, and might prove to be a useful investment for increased productivity. Naturally there could be no immediate effect of such a concession, but there would be an effect in the years to come. After all, the main burden of the rearmament programme will not be felt until 1954 or 1955, and I always have in mind the parallel job that we in industry have to do, which is to maintain our general trading position all over the world.
That means that we should be constantly putting money to reserve, and trying, as we do in my own small company,

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to finance ourselves as far as we can as we go along. Each year we should be able to afford to put so many thousands of pounds into new plant, or into reserves for new plant when we can buy it. Under the new level of taxation, well over 70 per cent. of earnings will, I think, be taken in taxation. With that kind of burden laid upon industry, it will be very hard for the smaller companies to finance themselves without greater recourse to the banks or to other forms of borrowing, and so to modernise themselves as they go along.
A great deal of the industrial greatness of this country has been built up on this kind of firm. It is not, therefore, unreasonable to press this Amendment and to ask the Government, as they found it impossible to make any concession in regard to the 40 per cent. grant for new plant, at least to grant the concession for which we are now asking, which will be an investment for greater productivity in industry in the years to come. Particularly will this be so from the point of view of the smaller firms which are trying to make themselves efficient in order to play a greater part in building up the nation's productivity and getting the country out of its difficulties. I hope that the Chancellor will give very serious consideration to the Amendment which was proposed by my hon. and learned Friend.
Sir Herbert Williams: I realise the difficulty that hon. Members have in discussing this Amendment because we are tempted to go outside the scope of the discussion, as was my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman). It is a little difficult to consider the effect of the Amendment without considering the basic rate of Income Tax and the effect on the whole issue of the 50 per cent. Profits Tax on distributed profits. I shall do my best to keep in order.
The whole conception of putting a tax on undistributed profits over and above Income Tax is stupid beyond all measure. My only objection to the Amendment is that it says, "forty-five" instead of "fifty." How is any business to carry on unless out of the profits which are not distributed there is available as much money as possible to buy new plant and pave the way for the development and
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rehabilitation which are necessary to British industry if it is to be prosperous and to continue to provide employment for the people? I am satisfied that if the present rate of taxation continues for another four or five years, great masses of firms that we now look upon as prosperous will just have to shut their doors because they will not have the cash with which to carry on.
That is the real issue. If the Chancellor of the Exchequer would spend a little more time studying company balances and less time studying the mysterious new principles of political economy, which frankly I do not understand, he would come to the same conclusion. It seems that we are going back to the principles of Ricardo, which I think were that a lot of gold and no goods makes for prosperity. That is what we have been doing for the past few years—and I expect that if I say anything more about Ricardo, Major Milner, I shall be ruled out of order. I thought I would say it while I had the chance.
The real problem for many companies is to find the ready money with which to pay their bills. There is a limit to which companies can go to the bank for overdraft facilities. The banks are usually considerate and reasonable. As their stock of notes is reinforced in a roundabout way by the printing presses of the Treasury we may, on an inflationary basis, go on for a certain time, until the whole show blows up.
I do not think that many hon. Members on the Government side of the Committee appreciate what happens. I have often talked on this matter to friends of mine and people who have voted for me. Some of them, who happen to be workmen, did not even understand that companies pay Income Tax. I was quite amazed to find this out in discussing the matter with a man the other day. As a matter of fact, 10 per cent. is piled on top of the 9s. 6d. in the £. There is the 10 per cent. Profits Tax on undistributed profits and from what is left we pay 9s. 6d. in the pound. It gets up to 11s. 3d., or something like that.
On much of the money that should be put on one side for the purpose of developing the business, a process which is every bit in the interests of the workers as it is of the shareholders, this appalling toll of taxation is levied. I see the hon.

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Member for Stoke-on-Trent, South (Mr. Ellis Smith). He and his fellow trade unionists are the main beneficiaries from industry. What businesses put to reserve is what he and other trade unionists depend upon. We have only to put the tax upon undistributed profits sufficiently high and there will be no more work for members of the A.E.U., because there will be no money with which to buy their products. That is what is going to face them and the whole country in a few years' time.
What amazes me is the moderation of this Amendment. It ought to have gone much further. Taxation on sums put to reserve is completely destructive of the whole basis on which industry has been built up in this country and in every other country. People may say: "After all, the Government will supply the capital that industry needs." I am very suspicious of any capital that the Government provide for any kind of business. They usually lose most of it. I have much more faith in what people provide out of their own pockets, because they watch it with much greater care. Let us be realists in this matter. I hope that the Chancellor will give the most serious consideration to this aspect of this Clause. I believe that, if we go on in this way, we shall in a measurable period of time have a major calamity in British industry.
Sir Wavell Wakefield: I am on the executive committee of the National Union of Manufacturers and the other day I attended a meeting at which the gravest possible concern was expressed at the very high taxation which is now imposed upon industry. That union is composed mainly of small and medium-sized firms, and the members at that meeting said that they literally did not know how they would be able to carry on, for the reasons which have already been given by my hon. Friend the Member for Croydon, East (Sir H. Williams), and my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd).
I beg the Chancellor to give most serious consideration to the Amendment. With rising prices, it is essential to have more money in a business, and the Amendment will help to strengthen company reserves and enable the small and medium firms particularly to have greater cash reserves than they would
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otherwise have. The Chancellor of the Exchequer and other Members of the Cabinet have repeatedly asked for increased production. Increased production means more working capital, and if the Cabinet want increased production they must take steps to help the small and medium firms which have not the great resources of the big companies to enable them to achieve increased production.
The fall in the value of the pound and the rise in the prices of raw materials mean that more money has to be found, and these circumstances make it particularly difficult for the small and medium firms. At the meeting to which I referred, the very gravest concern was expressed by the small and medium manufacturers about how they would carry on if prices continued to rise and taxation continued to increase. A great part of the country's industry is the responsibility of these small and medium firms, and it would be a grave calamity if there were a collapse, for unemployment would be caused and the armaments programme and the export drive would be seriously jeopardised. I urge the Chancellor to give earnest consideration to this very reasonable Amendment.
Mr. Godfrey Nicholson: I congratulate the Chancellor on the tremendous support he has had from his own benches in resisting the Amendment. It looks as if the Government supporters are either exceedingly bored with the whole debate and do not recognise its importance or that those who are here believe that there is nothing to be said against the argument of my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd).
One cannot always be expected to agree with the theory that lies behind the economic views of one's opponents, but it is right that one should recognise that in most cases there is a measure of logic behind the views of the Government, although we may not accept the bases on which the logic is founded. In this case, I am trying to find the logical basis for the imposition of this tax.
In an intervention the Chancellor implied that the reason for the tax was that all companies were making excessive profits and that they could, therefore, all be treated in a wholesale fashion. Nothing is clearer to people who know anything

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about business—I do not know if the three right hon. and hon. Members representing the Treasury in the Committee know the first thing about business and I am beginning to doubt whether their advisers do either—than that companies vary in their results, needs and structure. The fundamental fault behind the tax is that it treates all companies in a wholesale way as if their structure, needs, and results were identical.
4.45 p.m.
In this case the error seems to arise from the belief that all reserves are immediately applied in an inflationary fashion to capital investment which it is desirable in the national interest to limit. We cannot treat the question in such a wholesale way. If allowed to increase their reserves, certain companies might wish to employ them in a way which the Treasury might conceive to be harmful to the national interest. Others would employ their reserve in financing their day-to-day trade. At a time of rising prices, it is clear that every business thinking of buying and selling in a field where the rise in the cost of living is operative needs more day-to-day capital. I know that from my own business.
What is the result of preventing businesses from accumulating that capital by placing money to reserve? For the sake of argument, I am assuming that the companies to which I am referring are not those which are making astronomically increased profits. If the Chancellor looks into the matter, he will find a host of small and medium-sized businesses which are not making increased profits, or at any rate not largely increased profits. They are often the very ones which are called upon to accumulate more reserves in order to finance their day-to-day business. Very often their commodities are subject to Purchase Tax or to an increase in Excise Duty or something of that sort, and the result is that they have to accumulate the extra working capital by raising their prices.
I said that I could not understand the logic behind the Government's attitude towards Purchase Tax. I certainly cannot understand how the Government can in one breath deplore the rise in the cost of living and say that they are taking steps to restrain it and in another breath introduce measures of taxation which
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must inevitably force companies to put up the prices of their products. If ever there was a tax—here I may be going outside your Ruling, Major Milner—which was calculated to raise the cost of living, it is Purchase Tax. Although that argument applies to the whole tax, it applies particularly to the part of it which we are considering in this exceedingly restricted debate. I hope that we shall have not merely the Chancellor's professional view about this. I hope the Chancellor will reinforce himself with the views of the hon. Members behind him. Many of his hon. Friends who are garrulous, if not eloquent, are wrapped in a sphinx-like silence. Can it be that their emotions are overwhelmed by loyalty to the Chancellor and that they have nothing to say?
Mr. Messer: We are copying what the Tories did years ago.
Mr. Nicholson: If the hon. Gentleman were copying what the Tories did, he would be following a very good precedent, but he is not doing that.
Mr. Mitchison: I am waiting for the hon. Member to come to the one object and effect of the Amendment, which is to lower the Profits Tax on undistributed profits.
Mr. Nicholson: I am sure that the whole Committee is grateful for the hon. and learned Member having so kindly resolved what he conceived to be the dilemma of his colleagues. I assure him that we have grasped the purpose of this Amendment, and if we have not put it in words of one syllable for him to attempt to understand, it is because we paid him the compliment of assuming that he and his colleagues understood it perfectly well from the start. I hope that we shall have the views of hon. Members opposite, and I shall be much interested to hear what the Chancellor of the Exchequer has to say.
The Economic Secretary to the Treasury (Mr. John Edwards): It may be for the convenience of the Committee if I now reply to the Amendment. The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) devoted almost all his time to discussing the Clause, and it was not until the last two or three minutes that he spoke directly to the point in question, which is the relatively narrow

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proposal that the relief for undistributed profits should be 45 instead of 40 per cent. or, the other way round, that the tax on undistributed profits should be reduced from 10 per cent. to 5 per cent. It is to this narrow point that I shall address my remarks.
First, although hon. Gentlemen opposite have dismissed the point, it is important to start by recording that this Amendment would cost net, after allowing for the Income Tax point—in a full year £33 million. When one considers the other proposals already made by the Opposition which would lose us revenue, this is a point that must not be overlooked.
Mr. Maudling: Would the hon. Member allow me to interrupt? Is it not true that the so-called loss of revenue is merely a transfer of company savings to Government savings?
Mr. Edwards: That was argued by my right hon. Friend either in the Budget debate or on the Second Reading debate. As far as we are concerned, nobody on this side of the Committee will even begin to contest the view that undistributed profits are a very important form of corporate savings. However, no one has sought to demonstrate that if this reduction were carried out, the amounts involved would be put to reserve. They might be in a number of cases, but in the form which this Amendment takes it by no means follows that this would result.
Mr. I. J. Pitman: How could it possibly not result in an increase on profit balance?
Mr. Edwards: If a company saves on its tax, what it then does is a matter for it to decide. It does not follow automatically, as hon. Gentlemen opposite assume, that moneys saved in this connection will be put to reserve. The Committee will recollect that when the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) last year introduced a new Clause, he devoted a good deal of his remarks to this point and claimed that the new Clause was so designed as to cover the point I am now making.
Mr. Pitman: The point is that if it is not distributed—otherwise it would come
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under the distributed higher rate—it must go to reserve. There is no alternative.
Mr. Edwards: The hon. Gentleman is missing the point. This Amendment is concerned to reduce the tax from 10 per cent. to 5 per cent. —
Mr. Pitman: On undistributed profits.
Mr. Edwards: Yes, and to that extent there is an element there which the directors have then to take into account. I agree that in most cases they would put it to reserve, but they do not have to do so.
Mr. Oliver Lyttelton: I think that the Economic Secretary is on an extremely misleading point, if I may say so. Undistributed profits may not technically be placed to reserve, but they must increase the capital liabilities of the company. What really matters is whether they are to be spent in ways which are desirable or not. Whether they are technically carried to the credit of profit and loss or whether they are placed to an earmarked reserve is quite beside the point.
Mr. Edwards: That is another point. All I was claiming was that this was a factor which would affect the decision of the company on what it was to do about its profits.
Mr. Pitman: Would the hon. Member permit me to interrupt again? We are talking about a profit balance and, if it is a profit balance, it is inevitably reserve if it is not distributed. There are only two things one can do with a profit balance: one can either distribute it or retain it. If it is retained it is inevitably a reserve. One cannot get away from that.
Mr. Edwards: Very well, but that does not mean that the amount which is placed to reserve is fixed and immutable and cannot be taken into account by the directors.
Mr. Pitman: I think I can help the hon. Member.
Mr. Edwards: All right.
Mr. Pitman: I think the hon. Gentleman is confusing the issue of cash with the issue of profit and loss account, which is quite separate. If a company has cash, it can spend it. If it has a

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balance on profit and loss account it can either distribute it or put it to reserve. There is no alternative.
Mr. Edwards: I am grateful to the hon. Gentleman, but I still think this is a factor which any board of directors would have to take into account. May I now go on to the next point I want to make? I said earlier that undistributed profits were an extremely important form of corporate savings, so important that we felt it necessary to increase the rate of tax on distributed profits as a deterrent. The gap is now much wider between the tax on distributed and the tax on undistributed profits, and to that extent we may say that the inducement for companies not to distribute profits is so much the greater.
As the debate went on, it interested me to see that the Opposition have entirely changed the argument from that advanced in June, 1950, when a new Clause to the Finance Bill was moved by the right hon. Member for Warwick and Leamington. Then, as hon. Members will recollect, the whole burden of the case of the right hon. Gentleman was that it was necessary to enlarge the gap between the tax on distributed and the tax on undistributed profits. This afternoon we have heard from most hon. Members opposite speeches which seemed to try to combine the view, on the one hand, that the tax on undistributed profits should be lower with, the view, on the other hand, that the tax on distributed profits should be lower.
The hon. Gentleman who opened this debate seemed to be arguing something that, in terms of the speech of his own leader last year, was quite inconsistent and contradictory. Because, if it is said that we must provide the maximum of inducement and the maximum of encouragement for people to put as much as possible to reserve, not to distribute their profits, then clearly the gap between the rates of tax on undistributed and distributed profits is extremely important. The right hon. Member for Aldershot laughs but, if he will look up the speech made by his right hon. Friend, he will find that throughout that speech he was saying, "Please do not misunderstand us. All we are trying to do in this new Clause is to widen the gap between the rate of
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tax on distributed and the rate of tax on undistributed profits."
Mr. Selwyn Lloyd: Is not that exactly what my Amendment does? It widens the gap from 40 to 45 per cent.
Mr. Edwards: That is perfectly true, but one would not have supposed so from listening to the hon. and learned Gentleman, because he spent 90 per cent. of his time this afternoon saying that the rate of Profits Tax was too high and only in the last two minutes did he say, "Therefore, I want this Amendment which will reduce the rate of tax on undistributed profits." All I am saying is that last year the argument was—widen the gap. This year, I expect we shall see when hon. Members talk on the question that the Clause stand part that they will not only be arguing that the tax on undistributed profits should be lower but also that the tax on distributed profits should be lower as well, if what they have said already is anything to go on.
5.0 p.m.
Mr. Selwyn Lloyd: It is quite clear that I did not make myself plain to the hon. Gentleman; that, obviously, was my fault. What my whole argument sought to prove was this. I left out of account the 50 per cent. I assumed for the moment that that was to be the rate of tax on distributed profits, and I sought to prove that because dividends would not be reduced that extra tax must come out of corporate savings. That is why I sought to diminish the burden on corporate savings which would be the result of the acceptance of the Amendment.
Mr. Edwards: If that is what the hon. and learned Member was saying, I did not understand it. I am glad, however, to know that he is supporting the proposal that the tax on distributed profits should be 50 per cent.
Mr. Selwyn Lloyd: I did not say anything of the sort. I said I was accepting that it would remain at 50 per cent.
Mr. Edwards: Whatever may be said against the maintenance of the 10 per cent. tax on undistributed profits, no one, I think, can say that the effect of it is to reduce the volume of savings. It merely alters where the savings are; it does not reduce them. Moreover, I do not see how any hon. Member can argue that in present circumstances the maintenance of

1701
this 10 per cent. tax would result in a lower level of investment than would be the case if the tax were reduced to 5 per cent.
Anyone who knows anything about present circumstances would confirm the view that the difficulty at present is to get the plant, the equipment and the buildings and that, generally speaking, although there may be isolated examples to the contrary, it is not lack of financial resources, but lack of physical resources, including manpower, that is holding up an enlarged investment programme. After all, the argument has been advanced by hon. Members opposite that we cannot have the development, the re-equipment and so on, that we need unless the Amendment is carried. I assert that there is no reason whatever to suppose that the continuation of this tax at the level of 10 per cent. would mean any less investment being undertaken this year than would be the case if the Amendment which has been moved by the Opposition were carried.
Further, we have to consider what this means in terms of its effect. Although it is in a sense extremely limited, there can be no denying that this proposal, if carried, would mean a small redistribution of wealth in favour of one section of the community. It is limited, I know, but it would have consequences as a whole which would be much greater than the proposal itself. The consequences would be out of all proportion to the amount involved. It would—I speak seriously on the point—be highly provocative.
Mr. Selwyn Lloyd: To whom?
Mr. Edwards: I will explain. I am not concerned to argue that it is directly inflationary, but I am concerned to argue that it is indirectly inflationary. If by inflation we mean an expansion of money to spend relative to things to buy, we have to consider, first, what would be the effect, should the Amendment be passed, on all other sections of the community in their attitude to claims for higher money incomes. In my view, it would be provocative of action on the part of other people—wage earners, salary earners and the like—to get more money.
Secondly, it would be indirectly inflationary in another sense, namely, that it would, I believe, have an effect on morale and on output, for we have to remember
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that anything that reduces output is just as inflationary as anything that increases purchasing power. I believe that if the Amendment were carried, we should find that throughout the country people would say, "At this particular time in our economic affairs the Opposition come along and say, not that we should maintain the rate, but that we should actually reduce the rate of tax from profits." I believe that the social consequences of that would have economic results which would be very bad for the whole of the country.
Hon. Members opposite must not take a narrow and limited view on this matter. Anything that, in present circumstances, went out to the country as a move on the part of the Opposition, or on the part of the Government if the Amendment were accepted, to redistribute wealth in a particular way at this moment against the community generally and in favour of a relatively small section—I know it is a very narrow point—would have social consequences out of proportion to the act itself.
Mr. Selwyn Lloyd: The hon. Gentleman says that the effect of my proposal would lead to the tax on profits being reduced, but it leaves an increase of over £30 million in the tax on profits in the present Bill.
Mr. Edwards: That is not the point. I thought that the hon. and learned Member was talking about the tax on undistributed profits. This would be a reduction in the tax on undistributed profits. [HON. MEMBERS: "No."] But that is the point of the Amendment.
Mr. Pitman: The Amendment is a proposal to resist the intention to increase it so that it does not go up; it is not a reduction.
Mr. Edwards: The Opposition are seeking to reduce the existing tax of 10 per cent. to 5 per cent. This is not a new tax; it is already in existence. All I am saying is that although the amount involved may be small—say, only £33 million over the whole economy—it would be regarded, I believe, as provocative. Therefore, on revenue grounds, we cannot possibly afford to give up the £33 million involved.
I do not believe it is necessary in our present economic circumstances to stimulate corporate saving in the way that that

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is proposed, and finally, I re-assert that it would be highly provocative and would be likely to have serious economic and social consequences. For those reasons, I ask the Committee to reject the Amendment.
Mr. David Eccles: The reason we put forward the Amendment is that the Profits Tax has become partly a capital tax. Owing to the rise in price the capital of companies is not being maintained. Their profits are calculated upon the old basis of the costs of replacing their assets being the same, when they come to replace them, as when they bought them. It follows that a very large part of the present profits of companies are not true profits at all, as my hon. Friend has said. The tax falling upon that part of their profits is actually falling upon capital. That is why we have singled out, as a means of mitigating this, the part of the tax which falls on undistributed profits.
Before going on to answer the Government's case, I concede the point which was disputed between the Economic Secretary and some of my hon. Friends. I think the hon. Gentleman is perfectly right that any alteration in one or other of the rates of Profits Tax may cause some difference in decisions about dividends, but I do not think that that in any way changes the main basis of our argument.
The Government have talked very much about the investment programme, and I dare say by and large they are right that if the Amendment were carried not much more investment would be done in the present financial year than if it were not carried. Although as they themselves have said that the result of the whole of the Clause would be to check investment and to add £30 million to corporate savings, they are on very thin ground when they single out the undistributed Profits Tax and tell us that if it is cut in half it will not be contributing anything towards the figure of £30 million saved. But even granting the Government that, the big difference between this year and last June, when we were discussing the tax, is precisely the need for working capital which has grown so important in the interim. That change is clearly reflected in the Government's own White Papers.
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Businesses which had, say, £1 million worth of raw materials a year ago and have been steadily manufacturing those materials, and yet at the end of the period—today—want to retain the same volume in their storehouses, have for this purpose to find an enormously increased sum in cash. It is precisely because we do not think it is in the interests of any section of industry, whether it be the shareholders, the workers, the managers or, indeed, anyone, that British industry should run short of working capital, that we believe this to be a really genuine and sound proposal.
If it happened to be provocative in its effect upon the wage earners and made them demand higher wages, that would be a tremendous failure on the part of the Government and ourselves. It would show that we had not explained the simple facts of carrying on business through a period of rising prices. We ought to be ashamed of ourselves if in our own factories we cannot make so simple a process clear to our workpeople as the increase in working capital that has to be tied up when raw materials, plant and work in progress are all going up.
As my hon. Friend said, the effect is especially serious for small companies whose borrowing powers—although they may have had a very fine record in the past—are not adequate to the needs of the company. There will be many cases where businesses will draw in their horns for fear of being short of cash and for fear that the bank, under general directions and a policy of credit control with which I agree, will be very sticky in giving credit.
These things can only be found out after they have happened and the damage has been done. That is why in our submission it is far better that industry itself should be able to finance its working capital to the greatest possible extent. In my opinion many of those companies which have raised their dividends in the last three months ought to have reduced them. As a matter of fact, so great has been the rise in costs of replacements that, had they set aside from their profits adequate reserves against these costs of replacement this action would have caused them to reduce their dividends. The fact that they did not do so, or that they maintained their dividends, is merely part of the general ignorance of the system under

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which we all live. It is true that a company's credit suffers if they do not maintain their dividends. They may some time in the future want to borrow more money, and therefore the general practice of a prudent board of directors is to maintain their dividends if they possibly can.
That is true, and it is also true that British business would suffer if dividends were reduced all round. So in many cases companies have accepted what they know to be wrong, namely, that the profits their accountants have told them they have made are true profits. They know very well they are not true profits. There is really only one end to taxing unreal profits. If the process goes on we shall bleed British industry of its working capital. It requires the united effort of those on the management side of industry and those who advise the workers in industry to comprehend and inculcate what is happening to liquid capital in this country today. It is a matter which should be taken out of politics because it is going to affect our standard of life for a very long time.
5.15 p.m.
Another reason why the proposal in the Amendment would be of the greatest advantage and why we should try to strengthen the reserves of business is that the terms of trade have gone against us and they will not recover, at least not for some time. We shall have to export more manufactured goods to get food and raw materials than we have done before. We are not going to be able to do that without lowering the quantity of goods available for our people at home unless company reserves are maintained and put into increasing the efficiency of plant and equipment. A very serious situation will arise unless our productivity is kept up. It is high time we ended the process of bleeding industry which, after all, pays for our bread and butter and all our system of social security. Therefore, I cannot believe that it is right to push the taxation of company profits as far as this.
If I might give the Committee an example, a company which distributes half its profits, if the Clause is accepted without amendment, will find that out of every £100 profit it makes it can retain only £10 10s., that is, only 10½ per cent. of its total profits. That is all that it can retain if for one reason or another
1706
it decides to distribute half. That is not enough to finance the rising cost of its stocks and replacements. The Chancellor will say that it ought not to distribute half its profits and I agree, but there is a limit beyond which one cannot go in retaining undistributed profits, for when that limit is passed the company's credit suffers.
The Economic Secretary to the Treasury was saying that this Amendment would be provocative. The Clause will take £60 million more out of profits this year than last year through this tax. If the Amendment is carried, that £60 million, roughly speaking, will be cut in half. Is it not an absurd thing to say that the amount of money which will placate wage earners and prevent them from asking for more wages can be fixed at £60 million, but that they will all ask for more wages if the amount is reduced to £30 million? There is no question of reducing Profits Tax as a whole under the Amendment. I hope that the Government will think about this again, because every year we put off strengthening company reserves means that there is coming a surgical operation of more and more severity.
Sir Arnold Gridley: I must say that on one of the most important Clauses in the Finance Bill, and after a very serious speech had been made by the opener of the debate on this side of the Committee, we really are entitled to arguments of greater substance from the representative of the Treasury Bench who purported to make a reply to some of the points which we made. I was astounded to hear him say that undistributed profits were not necessarily reserves. Bless my soul, at the end of the year when we decide how much—
Mr. J. Edwards: I did not say anything even remotely like that.
Sir A. Gridley: I think that if the Economic Secretary takes the trouble to read HANSARD tomorrow, he will not dispute that I am being accurate in what I now say. What happens when the balance of profits which are not to be distributed during the year are dealt with is that they are carried forward and, whether part of them is carried to a revenue reserve fund or merely left in the carry-forward, they are reserves precisely the same. If the

1707
hon. Member will look at balance sheets produced under the new form required by the 1948 Companies Act, he will see that capital reserves and revenue reserves have to be set out separately, and the carry-forward is included under revenue reserves. These are just the simple facts.
There was another argument which really shocked me. It was that one could not get machine tools, or buildings or this and that at present—they are all in such short supply—and therefore, the argument runs, "You do not need the money and you may just as well let us have it." I sometimes wonder whether today we have statesmen who merely look at the position as it faces us at the moment and never look forward. I should have thought that this is an artificial period through which we are passing, both so far as trade is concerned and the demand upon our productive resources due to re-armament.
The problem of the future is causing the greatest concern in the United States among all men who think and look ahead. My latest information, which is only 48 hours old, in communications I have received from America, is that the industrialists are getting extremely worried about what is happening there. They can foresee that as soon as re-armament comes to an end, there is bound to be, in American trade, a very severe slump. I have not heard the contrary view expressed by any well-informed American industrialist. We must anticipate that if that happens in America we shall inevitably feel the full disastrous effect of that here.
We all want to maintain full employment, but one of the gravest risks of bringing about very serious unemployment in this country is to run down company reserves, a matter which the Treasury ought most seriously to consider. Their policy now may be responsible for unemployment in the not-too-distant future. The way to do what we can to avoid that risk is to make sure that our companies are so financially sound and have been able to accumulate such adequate reserves that they are in a position to weather the storm, carry on and keep their people employed as far as practicable at a time of slump, which sooner or later we may be called upon to face.
Mr. Albu: If such a situation arises, will there not be such a fall
1708
in prices that company reserves will then be adequate?
Sir A. Gridley: I wonder if the hon. Member experienced what happened in this country when the last big American slump took place in America in 1929. If he remembers that experience, it will answer his own question.
My point is that anything that can be done to strengthen the financial reserves of our companies to face dirty weather is absolutely vital. That is the case whether the companies be large or small, and I agree with all that has been said about the vast number of small undertakings in this country upon which our industry and employment so largely depend.
What the Chancellor is doing by the increased Profits Tax with which this Clause is concerned, only a part of which we are trying to reduce, is to weaken the economic and financial structure of our industry. If the right hon. Gentleman is to show real statesmanship, he ought to examine this matter more carefully and see to what extent he can meet the case that has been made.
Mr. Lyttelton: I agree that this Amendment deals with a fairly narrow point to which I shall confine my few remarks and keep my more general arguments until we debate the Motion, "That the Clause stand part of the Bill." The Economic Secretary is very popular in the House. He is very assiduous and very courteous. I hope that he will not take it amiss if I say to him that today he was very assiduous and courteous but he could not make any semblance of a case. I have seldom heard thinner or more contentious arguments being advanced from the Treasury Bench. I will run through them.
The first point with which I shall deal is that about which my hon. Friend the Member for Stockton, South (Sir A. Gridley) spoke. We have heard a great deal about the purpose of this Profits Tax being to prevent undesirable capital investment. The Economic Secretary gets up and says that that has nothing to do with the question, and that financial resources are not concerned. He next said that, of course, the effects of any increased dividends or company profits are out of all proportion to the figures involved. It is using a well-known dialectical trick to say "I cannot possibly explain the ratio of 10 to one which exists between the rise in wages and the rise in

1709
profits, but I put that on one side by saying that the facts are affected out of all proportion to the figures."
The Economic Secretary said that such dividends would be provocative. I hope that he will forgive me if I say that I have never heard a more shocking argument. If we are to try to govern the country to the best advantage, we must be prepared to face doing what may be provocative or not for some reason to some people if it ought to be done. As my hon. Friend the Member for Chippenham (Mr. Eccles) said, to say that it is provocative to take £15 million but not provocative to take £30 million is hardly an argument to be expected from the Treasury Bench. The Economic Secretary was floundering about in a subject with which he was only faintly familiar and about which he was not very well informed.
I turn to what the Economic Secretary had to say about the gap between distributed and undistributed profits. All my right hon. Friend's arguments last year were intended to show that if the gap was widened between distributed and undistributed profits that would be a desirable result. That is perfectly true, but to continue that argument, whatever the rates of taxation are, is to reduce it to nonsense. The gap can be widened by increasing undistributed profits to 20 per cent. and distributed profits to 80 per cent. but those are the arguments of the debating society in a public school and are quite unworthy of a Committee of the whole House.
What the Economic Secretary says is that if he is to ride the taxpayers' horse, the hind legs of which have foundered, we will widen the gap between his forelegs and hind legs by breaking the forelegs. That argument, at the beginning of Ascot week, shocks me very much. If it were not for the fact that we shall have an opportunity of getting further replies from the Chancellor on the Motion "That the Clause stand part of the Bill," I should have to develop my argument still further.
With regard to the matter of depreciation, which I shall also develop on the Motion "That the Clause stand part of the Bill," I will give now just a personal instance. When I came to look at the profits of my own company, after making a careful study, I added to the
1710
figure for depreciation of about £850,000 which we normally write off against our plant and buildings, a further £900,000 this year. Fortunately, we had a large enough business and large enough profits to do so. What I am saying is that out of what we made £900,000 was not true profit.
5.30 p.m.
That is a long established and mature business. The worst feature of this tax is that it hits the developing business, because the mature business has been in existence for say 30 or 40 years and has enjoyed more sensible financial management and has had the opportunity of writing down its plant; and of accumulating, not only paper reserves but perhaps cash reserves, although they have been run down recently.
The people most hit by this rise in the Profits Tax are the people whom it is most desirable should accumulate undistributed profits, people who are running a developing business and one perhaps started since the war. Unless we are to get not only the maintenance of plant and equipment in a modern state but also expanding industrial production from new processes and new sources of production, the economic problem of this country will be insoluble. I must say that on a matter of this importance the case advanced from the Treasury Bench is altogether too thin to commend any acceptance from this side of the Committee whatsoever.
The Chairman: The Amendment proposed, in Clause 24, page 16—
Several Hon. Members Several Hon. Members rose—
The Chairman: I thought it had been agreed to end the discussion on this Amendment, so that points which I understand are of more importance might be better discussed on the Motion, "That the Clause stand part of the Bill." It will then be open to hon. Members to speak on that Question.
Lieut.-Commander Gurney Braithwaite: Can we have some assurance that the Closure will not be applied?
The Chairman: The moving of the Closure has nothing to do with me.
Mr. Pickthorn: With respect, Major Milner, such very strongly worded

1711
advice from the Chair to hon. Gentlemen not to rise does come very near to making the Closure the business of the Chair, and it is very difficult for hon. Members who feel it their duty to their constituents to say something to accept that advice without any assurance that the Treasury Bench will not move the Closure at the next stage before they have spoken.
The Chairman: Then of course it would be a question as to whether the Closure was accepted. The question of Closure does not arise here at the moment. I am appealing to the Committee to come to a decision on a comparatively minor point.
Mr. Summers: May I submit, with great respect—
Lieut.-Commander Braithwaite: You were good enough, Major Milner, to advise the Committee that the debate on this particular Amendment might now come to an end. You went on to say that the arguments would be better deployed on the Motion, "That the Clause stand part of the Bill." I am sure it would affect the decision of hon. Members who are trying to catch your eye now if they had some assurance that they will not be gagged.
The Chairman: All I, can say is that hon. Members must leave it to me, having regard to the circumstances, to ensure that there is a reasonable debate on the Motion "That the Clause stand part of the Bill." I am not under any obligation to accept the Closure from any quarter of the Committee, and therefore I hope that the Committee will be good enough to leave it on that basis.
Mr. Summers: May I submit to you, Major Milner, that arguments in favour of this particular Amendment are, in my submission, by no means exhausted, and are, moreover, more relevent to the issue now before the Committee than they would be to the Motion "That the Clause stand part of the Bill"?
Mr. S. N. Evans: Some of us have been sitting here hoping to take part in this debate, but because the debate on this Amendment did appear to be very narrow and it was thought that arguments would be better deployed on the Motion "That the Clause stand part
1712
of the Bill," we have kept silent. However, the debate has taken rather a wide turn, and if it is continued I would ask whether we shall be able to debate it on as wide a basis as it has been so far.
Mr. Summers: I wish to add my emphatic protest against the speech of the Economic Secretary to which we have just listened in respect of one point, not, I think, referred to by subsequent speakers. He used the phrase, "redistribution of wealth" in connection with the effect of the Amendment which has been moved. I wish to protest that such a prejudicial idea should be injected into what ought to be a perfectly businesslike proposition.
It is most unfortunate that we should have from the Treasury Bench the argument that one could affect the resources of industry either for good or for ill without affecting those who work in industry and without affecting the consumers who depend on the products of industry. If there is, as I hope to show, a genuine need for further capital in industry, and an Amendment is carried which will have the effect of adding to it, to say that by so doing we shall injure the interests of the workers in industry is nothing but malicious party propaganda.
The Chancellor has told us that, at any rate so far, there is no evidence of a shortage of working capital in industry. I wish to show how, in my submission, the lack of such evidence in the past can be reconciled with the perfectly genuine case put forward from these benches that the time has come to ensure that the depletion of working capital in industry is not allowed to go on. I am prepared to admit that there is considerable evidence, such as over-subscription of new issues and the Chancellor's own need to cut down capital investment, which might, taken at first sight, lend colour to his argument that there is really no need to worry under this heading.
I would put forward an aspect to refute that argument. First, there is the cumulative effect of a variety of changes brought about in this Finance Bill, no one of which might be fully effective, but which taken together must have a really marked effect. We have the sixpence on the Income Tax which affects the situation to the tune of £114 million. We have the situation of

1713
untrue profits being taxed, the measure of which it is very difficult to assess, but which I am prepared to submit is not less than £1,000 million. We have the increased price of new plant, for which there are no adequate reserves, and the increased value of stocks which have to be financed out of current resources.
In addition, we have the effects of the initial allowance amounting to some £170 million which adds further to the situation. There is this point in that connection which has, so far as I know, never yet been referred to. While this initial allowance, it is quite true, is a tax-free loan, yet is is to enable the company to put plant down and produce goods thereafter and have some productive plant with which to meet the interest burden when it comes, in contrast to the raising of new capital the interest on which must be provided before the benefits of the new plant are available. Finally, we have the effect of the new Profits Tax on the situation.
Taking all those together, I calculate that, just at the time when finance for new stocks and for the replacement of plant, amounting to some £1,400 million is needed, capital is to be depleted by stopping initial allowances, and by more Income Tax and Profits Tax to the tune of some £350 million. So we have an adverse position, taking the two together, of something like £1,750 million.
Coming back to the point I was making about the Chancellor's claim that the trouble is not yet evident and therefore there is no need to worry, I submit that if the Government of the day concern themselves solely with what has already happened and do not attempt to foresee what will happen in the future, it is small wonder that our financial situation is a worry to so many of us. Anybody can analyse the past after a little study, but it takes a statesman to foresee with accuracy what lies ahead.
The truth of the situation is partially obscured, because the very fact that we have inflation goes some of the way to meet the situation in regard to working capital. Profits are automatically swollen by the effect of inflation, which is what caused the trouble in the first instance. Therefore, we have the paradox that the disease creates in small measure a remedy for the trouble. But that will stop as soon as the inflation stops. We also have
1714
the situation that, whereas the private investor is largely being replaced by institutions, it is the institutions, particularly the insurance companies, which are at present benefiting largely, compared with others, from the effects of inflation. There we have an artificial gain from an inflated situation to this position of working capital, and this obscures the truth.
Then we have the reason given by the Economic Secretary that manpower and materials are very short. That, again, tends to conceal the need for further working capital in industry, but the very fact that they cannot spend it is no excuse, as the Economic Secretary suggested, for taking it away from them. If they do not need it immediately, because they cannot spend it and because of manpower and material shortages, they will need it some day. It would be much better left in the undistributed reserves of companies until the day when it is really needed.
The effects of a number of these provisions affecting company reserves are not felt immediately. That tends to obscure the situation, which I find it difficult to believe is not really known to the Chancellor and is not really accepted by him. It just happens not to suit his book at present to acknowledge it. I beg the Committee to accept the view that one cannot damage British industry without damaging the people who work in it. I do not know how far this depletion of British capital will go, but it would be a great tragedy if the only source from which adequate funds—
The Chairman: The hon. Member has been talking about the general question. The point of the Amendment is very limited indeed, and he should keep his argument to that limited point.
Mr. Summers: I was coming to the end of my remarks, but I submit that this Amendment, which is designed to increase the reserves of British industry, must be considered in the light of the comparable impacts on British capital of other things which have happened. I do not propose to pursue the matter any further. I have dealt with each point very rapidly. I only hope that in considering this Amendment, which will have the effect in some small measure of encouraging the maintenance of reserves, and so of modern and up-to-date plant, we shall not reach the stage before something is done when the only

1715
source from which adequate funds can come is the British Treasury. However unpopular and ineffective nationalisation may be, I hope that we shall not find a crippled industry obliged to accept that doctrine because they cannot get finance in any other way.
The Chairman The Chairman rose—
Mr. Godfrey Nicholson: Is it not right that we should ask for some more authoritative reply from the Treasury Bench? We have not had a single speech from
the other side of the Committee except that of the Economic Secretary, who, in purporting to reply to the debate, read a brief prepared long before. We have had no cogent argument against this Amendment, and I submit that the Committee is entitled to one.
The Chairman: The hon. Gentleman knows very well from his experience that that is not a matter for the Chair.
Question put, "That 'forty' stand part of the Clause."
The Committee divided: Ayes, 292; Noes, 285.

Division No. 105.]

AYES

[5.45 p.m.

Acland, Sir Richard

Davies, Harold (Leek)

Hubbard, T.

Adams, Richard

Davies, Stephen (Merthyr)

Hudson, James (Ealing, N.)

Albu, A. H.

de Freitas, Geoffrey

Hughes, Emrys (S. Ayrshire)

Allen, Arthur (Bosworth)

Deer, G.

Hughes, Hector (Aberdeen, N.)

Allen, Scholefield (Crewe)

Delargy, H. J.

Hughes, Moelwyn (Islington, N.)

Anderson, Alexander (Motherwell)

Dodds, N. N.

Hynd, H. (Accrington)

Anderson, Frank (Whitehaven)

Donnelly, D.

Hynd, J. B. (Attercliffe)

Attlee, Rt. Hon. C. R.

Driberg, T. E. N.

Irvine, A. J. (Edge Hill)

Awbery, S. S.

Dugdale, Rt. Hon. John (W. Bromwich)

Irving, W. J. (Wood Green)

Ayles, W. H.

Dye, S.

Isaacs, Rt. Hon. G. A.

Bacon, Miss Alice

Ede, Rt. Hon. J. C.

Janner, B.

Baird, J.

Edelman, M.

Jay, D. P. T.

Balfour, A.

Edwards, John (Brighouse)

Jeger, George (Goole)

Barnes, Rt. Hon. A. J

Edwards, Rt. Hon. Ness (Caerphilly)

Jeger, Dr. Santo (St. Pancras, S.)

Bartley, P.

Edwards, W. J. (Stepney)

Jenkins, R. H.

Ballenger, Rt. Hon. F. J

Evans, Albert (Islington, S. W.)

Johnson, James (Rugby)

Benn, Wedgwood

Evans, Edward (Lowestoft)

Johnston, Douglas (Paisley)

Benson, G.

Evans, Stanley (Wednesbury)

Jones, David (Hartlepool)

Beswick, F.

Ewart, R.

Jones, Frederick Elwyn (West Ham, S.)

Bing, G. H. C

Fernyhough, E.

Jones, Jack (Rotherham)

Blenkinsop, A.

Field, Capt. W. J

Jones, William Elwyn (Conway)

Blyton, W. R.

Finch, H. J.

Keenan, W.

Boardman, H.

Fletcher, Eric (Islington, E.)

Kenyan, C.

Booth, A.

Follick, M.

Key, Rt. Hon. C. W.

Bottomley, A. G.

Foot, M. M.

King, Dr. H. M.

Bowden, H. W.

Forman, J. C.

Kinghorn, Sqn, Ldr. E.

Bowles, F. G. (Nuneaton)

Fraser, Thomas (Hamilton)

Kinley, J.

Braddock, Mrs. Elizabeth

Freeman, John (Watford)

Lang, Gordon

Brook, Dryden (Halifax)

Freeman, Peter (Newport)

Lee, Frederick (Newton)

Brooks, T. J. (Normanton)

Gaitskell, Rt. Hon. H. T. N.

Lee, Miss Jennie (Cannock)

Broughton, Dr. A. D. D.

Ganley, Mrs. C. S.

Lever, Harold (Cheetham)

Brown, Rt. Hon. George (Belper)

Gibson, C. W.

Lever, Leslie (Ardwick)

Brown, Thomas (Ince)

Gilzean, A.

Lewis, Arthur (West Ham, N.)

Burke, W. A.

Glanville, James (Consett)

Lewis, John (Bolton, W.)

Burton, Miss E.

Gooch, E. G.

Lindgren, G. S.

Butler, Herbert (Hackney, S.)

Gordon-Walker, Rt. Hon. P. C.

Lipton, Lt.-Col. M.

Callaghan, L. J.

Greenwood, Anthony (Rossendale)

Logan, D. G.

Carmichael, J.

Greenwood, Rt. Hon. Arthur (Wakefield)

Longden, Fred (Small Heath)

Castle, Mrs. B. A.

Grenfell, D. R.

McAllister, G.

Champion, A. J.

Grey, C. F.

MacColl, J. E.

Chetwynd, G. R.

Griffiths, David (Rother Valley)

McGhee, H. G.

Clunie, J.

Griffiths, Rt. Hon. James (Llanelly)

McGovern, J.

Cocks, F. S.

Griffiths, William (Exchange)

McInnes, J.

Coldrick, W.

Gunter, R. J.

Mack, J. D.

Collick, P.

Hale, Joseph (Rochdale)

McKay, John (Watlsend)

Collindridge, F.

Hall, John (Gateshead, W.)

Mackay, R. W. G. (Reading, N.)

Cook, T. F.

Hall, Rt. Hon. Glenvil (Colne Valley)

McLeavy, F.

Cooper, Geoffrey (Middlesbrough, W.)

Hamilton, W. W.

MacMillan, Malcolm (Western Isles)

Cooper, John (Deptford)

Hardman, D. R.

McNeil, Rt. Hon. H.

Corbet, Mrs. Freda (Peckham)

Hargreaves, A.

MacPherson, Malcolm (Stirling)

Cove, W. G.

Hastings, S.

Mainwaring, W. H.

Craddock, George (Bradford, S.)

Hayman, F. H.

Mallalieu, E. L. (Brigg)

Crawley, A.

Henderson, Rt. Hon. A. (Rowley Regis)

Mallalieu, J. P. W. (Huddersfield E.)

Crosland, C. A. R.

Harbison, Miss M.

Mann, Mrs. Jean

Crossman, R. H. S.

Hewitson, Capt. M.

Manuel, A. C.

Cullen, Mrs. A

Hobson, C. R.

Marquand, Rt. Hon. H. A.

Daines, P.

Holman, P.

Mathers, Rt. Hon. G.

Dalton, Rt. Hon. H.

Holmes, Horace (Hemsworth)

Mellish, R. J.

Darting, George (Hillsborough)

Houghton, D.

Messer, F.

Davies, A. Edward (Stoke, N.)

Hoy, J.

Middleton, Mrs. L.

Mikardo, Ian

Reid, Thomas (Swindon)

Thurtle, Ernest

Mitchison, G. R

Reid, William (Camlachie)

Timmons, J.

Moeran, E. W.

Rhodes, H.

Tomney, F.

Monslow, W.

Robens, Rt. Hon. A.

Turner-Samuels, M.

Moody, A. S.

Roberts, Goronwy (Caernarvonshire)

Ungoed-Thomas, Sir Lynn

Morgan, Dr. H. B.

Robertson, J. J. (Berwick)

Usborne, H.

Morley, R.

Robinson, Kenneth (St. Pancras, N.)

Vernon, W. F.

Morris, Percy (Swansea, W.)

Rogers, George (Kensington, N.)

Viant, S. P.

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

Ross, William (Kilmarnock)

Wallace, H. W.

Mort, D. L.

Royle, C.

Webb, Rt. Hon. M. (Bradford, C.)

Moyle, A.

Shawcross, Rt. Hon. Sir Hartley

Weitzman, D.

Mulley, F. W.

Shinwell, Rt. Hon. E.

Wells, Percy (Faversham)

Murray, J. D.

Shurmer, P. L. E.

Wells, William (Walsall)

Nally, W.

Silverman, Julius (Erdington)

West, D. G.

Neal, Harold (Bolsover)

Silvarman, Sydney (Nelson)

Wheatley, Rt. Hon. John (Edmb'gh, E.)

Noel-Baker, Rt. Hon. P. J.

Simmons, C. J.

White, Mrs. Eirene (E. Flint)

Oldfield, W. H.

Slater, J.

While, Henry (Derbyshire, N. E.)

Oliver, G. H.

Smith, Ellis (Stoke, S.)

Whiteley, Rt. Hon. W.

Orbach, M.

Smith, Norman (Nottingham, S.)

Wigg, G.

Padley, W. E.

Snow, J. W.

Wilcock, Group Capt. C. A. B.

Paget, R. T.

Sorensen, R. W.

Willey, Frederick (Sunderland)

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Soskice, Rt. Hon. Sir Frank

Willey, Octavius (Cleveland)

Paling, Will T. (Dewsbury)

Sparks, J. A.

Williams, David (Neath)

Pannell, T. C.

Steele, T.

Williams, Rev. Llywelyn (Abertillery)

Pargiter, G. A.

Stewart, Michael (Fulham, E.)

Williams, Ronald (Wigan)

Paton, J.

Stokes, Rt. Hon. R. R.

Williams, Rt. Hon. Thomas (Don V'lly)

Pearson, A.

Strachey, Rt. Hon. J.

Williams, W. T. (Hammersmith, S.)

Peart, T. F.

Strauss, Rt. (Hon. George (Vauxhall)

Wilson, Rt. Hon. Harold (Huyton)

Poole, C.

Stross, Dr. Barnett

Winterbottom, Ian (Nottingham, C.)

Popplewell, E.

Summerskill, Rt. Hon. Edith

Winterbottom, Richard (Brightside)

Porter, G.

Sylvester, G. O.

Wise, F. J.

Price, Philips (Gloucestershire, W.)

Taylor, Bernard (Mansfield)

Woodburn, Rt. Hon. A.

Proctor, W. T.

Taylor, Robert (Morpeth)

Woods, Rev. G. S.

Pryde, D. J.

Thomas, David (Aberdare)

Wyatt, W. L.

Pursey, Cmdr. H.

Thomas, George (Cardiff)

Yates, V. F.

Rankin, J.

Thomas, Iorwerth (Rhondda, W.)

Younger, Hon. K.

Rees, Mrs. D.

Thomas, Ivor Owen (Wrekin)

Reeves, J.

Thorneycroft, Harry (Clayton)

TELLERS FOR THE AYES:

Mr. Hannan and Mr. Wilkins

NOES

Aitken, W. T.

Channon, H.

Galbraith, Cmdr. T. D. (Pollok)

Alport, G. J. M.

Clarke, Col. Ralph (East Grinstead)

Galbraith, T. G. D. (Hillhead)

Amery, Julian (Preston, N.)

Clarke, Brig. Terence (Portsmouth, W.)

Gammans, L. D.

Amory, Heathcoat (Tiverton)

Clyde, J. L.

Garner-Evans, E. H. (Denbigh)

Arbuthnot, John

Colegate, A.

Gates, Maj. E. E

Ashton, H. (Chelmsford)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Glyn, Sir Ralph

Assheton, Rt. Hon. R. (Blackburn, W.)

Cooper-Key, E. M.

Gomme-Duncan, Col. A

Astor, Hon. M. L.

Corbett, Lt.-Col. Uvedale (Ludlow)

Gridley, Sir Arnold

Baker, P. A. D.

Craddock, Beresford (Speltherne)

Grimond, J.

Baldock, Lt.-Cmdr. J. M.

Cranborne, Viscount

Grimston, Hon. John (St Albans)

Baldwin, A. E.

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

Grimston, Robert (Westbury)

Banks, Col. C.

Crosthwaite-Eyre, Col. O. E.

Harden, J. R. E.

Baxter, A. B.

Crowder, Capt. John (Finchley)

Hare, Hon. J. H. (Woodbridge)

Beamish, Major Tufton

Crowder, Petre (Ruislip—Northwood)

Harris, Frederic (Croydon, N.)

Bell, R. M.

Cundiff, F. W.

Harris, Reader (Heston)

Bennett, Sir Peter (Edgbaston)

Cuthbert, W. N.

Harvey, Air Cdre. A. V. (Macclesfield)

Bennett, Dr. Reginald (Gosport)

Davidson, Viscountess

Harvey, Ian (Harrow, E.)

Bennett, William (Woodside)

Davies, Rt. Hn. Clement (M'ntg'mery)

Harvie-Watt, Sir G. S

Bevints, J. R. (Liverpool, Toxteth)

Davies, Nigel (Epping)

Hay, John

Birch, Nigel

de Chair, Somerset

Head, Brig. A. H.

Bishop, F. P.

De la Bère, R.

Headlam, Lieut.-Col. Rt. Hon. Sir C.

Black, C. W.

Deedes, W. F.

Heald, Lionel

Boles, Lt.-Col. D. C. (Wells)

Digby, S. W.

Heath, Edward

Boothby, R.

Dodds-Parker, A. C.

Henderson, John (Cathcart)

Bossom, A. C.

Donner, P. W.

Hicks-Beach, Maj. W. W.

Bowen, E. R. (Cardigan)

Douglas-Hamilton, Lord Malcolm

Higgs, J. M. C.

Boyd-Carpenter, J. A.

Drayson, G. B.

Hill, Mrs. E. (Wythenshawe)

Boyle, Sir Edward

Drewe, C.

Hill, Dr. Charles (Luton)

Bracken, Rt. Hon. B.

Dugdale, Maj. Sir Thomas (Richmond)

Hinchingbrooke, Viscount

Braine, B. R.

Duncan, Capt. J. A. L.

Hirst, Geoffrey

Braithwaite, Sir Albert (Harrow, W.)

Dunglass, Lord

Hollis, M. C.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Duthie, W. S.

Holmes, Sir Stanley (Harwich)

Bromley-Davenport, Lt.-Col. W.

Eccles, D. M.

Hope, Lord John

Brooke, Henry (Hampstead)

Eden, Rt. Hon. A.

Hopkinson, Henry

Browne, Jack (Govan)

Elliot, Rt. Hon. W. E.

Hornsby-Smith, Miss P.

Buchan-Hepburn, P. G. T.

Erroll, F. J.

Horsbrugh, Rt. Hon. Florence

Bullock, Capt. M.

Fisher, Nigel

Howard, Gerald (Cambridgeshire)

Bullus, Wing Commander E. E.

Fort, R.

Howard, Greville (St. Ives)

Burden, F. A.

Foster, John

Hudson, Sir Austin (Lewisham, N.)

Butcher, H. W.

Fraser, Hon. Hugh (Stone)

Hudson, Rt. Hon. Robert (Southport)

Butler, Rt. Hon. R. A. (Saffron Walden)

Fraser, Sir Ian (Morecambe & Lonsdale)

Hudson, W. R. A. (Hull, N.)

Carr, Robert (Mitcham)

Fyfe, Rt. Hon. Sir David Maxwell

Hurd, A. R.

Carson, Hon. E.

Gage, C. H

Hutchinson, Geoffrey (Ilford, N.)

1718

1719

Hutchison, Lt.-Com. Clark (E'b'rgh'W.)

Mellor, Sir John

Smithers, Sir Waldron (Orpington)

Hutchison, Colonel James (Glasgow)

Molson, A. H. E.

Smyth, Brig. J. G. (Norwood)

Hyde, Lt.-Col. H. M.

Monckton, Sir Walter

Snadden, W. McN.

Hylton-Foster, H. B.

Moore, Lt.-Col. Sir Thomas

Scames, Capt. C.

Jeffreys, General Sir George

Morris, Hopkin (Carmarthen)

Spearman, A. C. M.

Jennings, R.

Morrison, John (Salisbury)

Spence, H. R. (Aberdeenshire, W.)

Johnson, Howard (Kemptown)

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

Spens, Sir Patrick (Kensington, S.)

Jones, A. (Hall Green)

Mott-Radclyffe, C. E.

Stanley, Capt. Hon. Richard (N. Fylde)

Joynson-Hicks, Hon. L. W

Nabarro, G.

Stevens, G. P.

Kaberry, D.

Nicholls, Harmar

Steward, W. A. (Woolwich, W.)

Kerr, H. W. (Cambridge)

Nicholson, G.

Stewart, Henderson (Fife, E.)

Lambert, Hon. G.

Nield, Basil (Chester)

Stoddart-Scott, Col. M.

Lancaster, Col. C. G.

Noble, Comdr. A. H. P

Storey, S.

Langford-Holt, J.

Nugent, G. R. H.

Strauss, Henry (Norwich, S.)

Law, Rt. Hon. R. K.

Nutting, Anthony

Stuart, Rt. Hon. James (Moray)

Leather, E. H. C.

Oakshott, H. D.

Summers, G. S.

Legge-Bourke, Maj. E. A. H.

Odey, G. W.

Sutcliffe, H.

Lennox-Boyd, A. T.

O'Neill, Rt. Hon. Sir Hugh

Taylor, Charles (Eastbourne)

Lindsay, Martin

Ormsby-Gore, Hon. W. D.

Taylor, William (Bradford, N.)

Linstead, H. N.

Orr, Capt. L. P. S.

Teeling, W.

Llewellyn, D.

Orr-Ewing, Charles Ian (Hendon, N.)

Teevan, T. L.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Orr-Ewing, Ian L. (Weston-super-Mare)

Thomas, J. P. L. (Hereford)

Lloyd, Maj. Guy (Renfrew, E.)

Osborne, C.

Thompson, Kenneth Pugh (Walton)

Lloyd, Selwyn (Wirral)

Peake, Rt. Hon. O

Thompson, R. H. M. (Croydon, W)

Lockwood, Lt.-Col. J. C.

Perkins, W. R. D.

Thorneycroft, Peter (Monmouth)

Longden, Gilbert (Herts, S. W.)

Peto, Brig. C. H. M.

Thornton-Kemsley, Col. C. N.

Low, A. R. W.

Pickthorn, K.

Thorp, Brig. R. A. F.

Lucas, Sir Jocelyn (Portsmouth, S.)

Pitman, I. J.

Tilney, John

Lucas, P. B. (Brentford)

Powell, J. Enoch

Turner, H. F. L.

Lucas-Tooth, Sir Hugh

Price, Henry (Lewisham, W.)

Turton, R. H.

Lyttelton, Rt. Hon. O

Prior-Palmer, Brig. O.

Tweedsmuir, Lady

McAdden, S. J.

Profumo, J. D.

Vane, W. M. F.

McCorquodale, Rt. Hon. M. S.

Raikes, H. V.

Vaughan-Morgan, J. K.

Macdonald, Sir Peter (I, of Wight)

Rayner, Brig. R.

Wakefield, Edward (Derbyshire, W.)

Mackeson, Brig. H. R.

Redmayne, M.

Wakefield, Sir Wavell (Marylebone)

McKibbin, A.

Remnant, Hon. P.

Walker-Smith, D. C.

McKie, J. H. (Galloway)

Renton, D. L. M.

Ward, Hon. George (Worcester)

Maclay, Hon. John

Roberts, Emrys (Merioneth)

Ward, Miss I. (Tynemoulh)

Maclean, Fitzroy

Roberts, Major Peter (Heeley)

Waterhouse, Capt. Rt. Hon. C.

MacLeod, Iain (Enfield, W.)

Robertson, Sir David (Caithness)

Watkinson, H.

MacLeod, John (Ross and Cromarty)

Robinson, Roland (Blackpool, S.)

Webbe, Sir Harold

Macmillan, Rt. Hon. Harold (Bromley)

Robson-Brown, W.

Wheatley, Major M. J. (Poole)

Macpherson, Major Niall (Dumfries)

Rodgers, John (Sevenoaks)

White, Baker (Canterbury)

Maitland, Cmdr. J. W.

Roper, Sir Harold

Williams, Charles (Torquay)

Manningham-Buller, R. E.

Ropner, Col. L

Williams, Gerald (Tonbridge)

Marlowe, A. A. H.

Russell, R. S.

Williams, Sir Herbert (Croydon, E.)

Marples, A. E.

Ryder, Capt. R. E. D.

Wills, G.

Marshall, Douglas (Bodmin)

Salter, Rt. Hon. Sir Arthur

Wilson, Geoffrey (Truro)

Marshall, Sidney (Sutton)

Sandys, Rt. Hon. D.

Wood, Hon. R.

Maude, Angus (Ealing, S.)

Savory, Prof. D. L.

York, C.

Maude, John (Exeter)

Shepherd, William

Maudling, R.

Smiles, Lt.-Col. Sir Waiter

TELLERS FOR THE NOES:

Medlicott, Brig. F.

Smithers, Peter (Winchester)

Major Conant and Mr. Vosper.

Mr. John Hay: I beg to move, in page 16, line 37, at the end, to add:
(3) This section shall not apply to any body corporate, unincorporated society or other body, the trade or business of which consists wholly or mainly of the ownership or provision of dwelling houses for letting where not less than seventy-five per cent. by number of the dwelling houses so owned or provided are dwelling houses, the rents of which are controlled under or by virtue of the Rent and Mortgage Interest Restrictions Acts.
I do not propose either to repeat the discussion which has taken place upon this matter of the Profits Tax increase generally or to anticipate the discussion that we now understand will take place on the Question, "That the Clause stand part of the Bill." I should like, however, to refresh the memory of the Committee by pointing out that, in his Budget speech, the Chancellor's main arguments for this particular increase were, firstly, that he
1720
had to fill a gap of £150 million between his revenue and his expenditure, and, secondly, that this particular proposal would prevent the inflationary pressure which has already arisen from being given fresh impetus as a consequence of increased dividends.
As to the first of those propositions, may I point out that the suggestion which this Amendment embodies would cost very little indeed? The relief which would be given would be considerable, but the cost to the Revenue would not be very much. As to the second of those propositions—the inflationary argument—while I can understand the reasoning of the right hon. Gentleman, I cannot agree with him. Even if one does accept it, one ought to ask whether that principle should be generally applied, or whether there should be certain exemptions in certain special cases.

1721
If the object of this particular increase in the Profits Tax is to prevent inflationary pressure by reducing the distribution of cash which is going to find its way into the pockets of shareholders, surely, it ought to be limited to cases where that does happen or is expected to happen? If the social or economic object which the Chancellor has in mind is to control profits, what is he going to do about cases where profits are already Statutorily controlled?
6.0 p.m.
The object of this Amendment is to deal with such a special case. It is intended to provide exemption from this increase for the property-owning company, the bulk of whose income is derived from rents controlled under the Rent Restrictions Acts. May I remind the Committee that there are two particular forms of rent control still in existence in this country. First, there is the control imposed under the Rent Restrictions Act, 1920, which pegged rents at the 1914 level, and, since 1920, those rents have been allowed to rise by only a very limited degree in order to meet certain increases in rates, in the cost of improvements, and so on. The actual increase is very small indeed. The second type of control is the 1939 control, which pegs rents at the 1939 level. Since 1939, those rents have risen by only a small amount in each case to correspond with the increase in rates which may be payable.
That is the limitation which the law already imposes upon the income which property-owning companies can draw from their properties. But while from that point of view their incomes are limited, their expenses certainly are not. Their costs for repairs and maintenance, and for the provision of new houses to replace those which become derelict, are substantially up on what they were, firstly, in 1914, and, secondly, though to a lesser extent, in 1939.
If, in fact, more is going to be taken by the Government in the form of Profits Tax out of the money available as revenue to those companies, then, obviously, there will be very much less available to them for renewals and for the repair of their existing houses. I put my case no higher than that. I say that if, in fact, this exemption is not granted, the effect on a company which draws the bulk of its revenue from properties, the rents of which are controlled under
1722
the Rent Restrictions Acts, will be to diminish the amount they will have available for new investments, for the provision of new houses and for the improvement of their existing ones.
Hon. Members should consider whether or not the Chancellor's strictures upon the increases in company dividends apply to property-owning companies. With their income controlled, their dividends are already automatically limited. When in his Budget speech the Chancellor said that in 1950 dividends were up by 14 per cent., that certainty did not apply to the property-owning companies. Their dividends are maintained at the same level or are sometimes even reduced, because the money is just not available. I apologise for the fact that I must burden the Committee with some figures, but I think it important that hon. Members should have before them certain concrete and detailed examples of how this proposal is going to work.
I want to give one example of a company which I will call "A" Limited. "A" Limited is a property-owning company, 93 per cent. of the houses it owns being subject to the Rent Restrictions Acts, either the 1920 or the 1939 control. In 1946, they paid 5 per cent. National Defence Contribution, which was, of course, the predecessor of the Profits Tax which we are discussing this afternoon. The net amount paid by that company for N.D.C. in 1946 was £6,887. In 1951–52, at the proposed new rate, they are going to pay £41,464, an increase of £34,577. That is the effect of this particular proposal upon the income of that company, an income, let me remind the Committee, which is maintained absolutely at the same level and which cannot rise because the rents are controlled.
Let me give another example. For convenience, I will call this company "B" Limited. In 1946, "B" Limited also paid National Defence Contribution at the rate of 5 per cent. The total paid in that particular form of taxation was £1,100. On top of that, the company paid £9,600 net in Income Tax, a total for that year of £10,700. In relation to their profits, that was quite a high level of taxation even then, because their chargeable profits were £23,545. In 1950, their Profits Tax was £5,000 and their Income Tax, £9,500, a total tax liability of £14,500.
Mr. J. Edwards: Could the hon. Gentleman give the comparable figure?
Mr. Hay: I was just going to give the comparable figure of the chargeable profits. They were not more but less than in 1946. The figure was £20,800.
What is going to be the position under this new proposal? Assuming, for the moment, that their profits are going to remain the same in this new year as they were last year, their Profits Tax liability will be £7,800 and their Income Tax liability £10,100, a total of £17,900. That means that in this coming year they are going to pay in total tax £17,900 as against £10,700 in 1946, an increase of £7,200 on a smaller profit. I cannot see that that is fair.
Let me emphasise again that the dividends in the case of "B" Limited have been constant over the period I have been reviewing. The rents of the great bulk of their properties are controlled at the 1914 or 1939 levels and their repair costs have gone up two and a half times since 1939. Those are two examples indicating what I have in mind regarding this Amendment.
Mr. Janner: Before the hon. Gentleman finishes with his illustration, would he say what the dividends were each year?
Mr. Hay: Certainly. The dividend paid on their A shares was 5¼ per cent. and on their B shares, which I understand are their ordinary shares, 7½ per cent.
Mrs. Jean Mann: Had they kept their properties in good repair, would not the dividends have been less, and would they not have been clear of this 50 per cent.?
Mr. Hay: No, I do not think so, because I am satisfied from personal investigation of the facts which this company have been good enough to furnish that their properties have always been kept in tip-top condition. This company is one of the very best of its kind. I have, and I am sure my hon. Friends have, a number of examples regarding other companies, but this, as I say, is one of the best property-owning companies in the country, and that is one of the reasons why I have not chosen to give its name to the Committee today. I do not think I should give openly the particulars about
1724
a company which has been good enough to furnish me with them.
Hon. Members will see that there are two major tests which I propose to apply. Obviously, if I were merely to say that exemption from this particular tax increase should be given to any company which owned rent-restricted property, that would open the door to widespread evasion. That is not my purpose. My purpose is to try and remedy what I consider to be a hardship and what, I hope, the Committee will also consider to be a hardship.
I propose two tests. Firstly, to gain the exemption suggested, the company should be one carrying out a business consisting wholly or mainly of owning or providing dwelling-houses to let. The second test is that of the houses they own and which they have put out for letting not less than 75 per cent. must be properties controlled under the Rent Acts. Of course, not all houses owned by every property-owning company are exclusively controlled properties. Some companies have service flats where rents are not necessarily controlled and others may engage in furnished letting. Others may have investments, such as stocks and shares. But what I am concerned with is the property-owning company proper. I am not wedded to that 75 per cent., and if the principle were accepted I have no doubt agreement would be quickly reached on what should be a fair yardstick. But it is the principle I want the Committee to accept today.
I hope the Government are not going to approach this matter in any kind of hostile spirit. I hate to make what may seem a controversial point, but sometimes one gets the impression that a kind of spirit of anti-landlordism infects them. I hope they are not going to look at this particular matter in that light. They must realise, as many on this side of the Committee realise, that for better or worse the bulk of dwelling-houses owned and occupied by people in this country are still under private ownership. We know the picture is changing very fast, but at the moment private ownership still controls the vast bulk of properties in this country.
Companies such as I have in mind in this Amendment provide what I consider to be an important national service to the people of this country. I feel the case

1725
which they have, and which I have endeavoured to put forward, for what they consider to be a fair and just relief is one which ought to be granted and one which, if granted, will give them a great deal of encouragement to carry on with this important work.
Mr. Black: I want to speak briefly in support of the case which has been so clearly put forward by my hon. Friend the Member for Henley (Mr. Hay). Perhaps at the outset it is proper that I should declare an interest in this matter. I want to refer the Committee to a sentence or two from the Budget speech of the Chancellor when he was dealing particularly with the reasons which led him to increase the tax on distributed profits from 30 per cent. to 50 per cent. This is what the Chancellor said on 10th April:
"But it is one thing to recognise the justification for profit in the case of the individual firm as a reward for efficiency—perhaps with an element of luck thrown in; it is quite another to ignore a situation where, by reason of the general economic climate and not through the aptitude of individual managements, the whole level of profits, and the share of the national income taken by it, is rising. Unfortunately, in recent months not only have profits gone up, but dividends have risen too, and I have little doubt that unless some action is taken this process will continue and may even gain momentum."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486; c. 854.]
We have within that paragraph a clear statement of the considerations which led the Chancellor to increase the tax on distributed profits. First, there was the fact that profits generally had increased owing to the economic climate of the nation, and secondly the fact that many companies had increased their dividends.
6.15 p.m.
My submission is that in the very limited type of company we are seeking to exclude neither of those considerations can apply, and in fact neither do apply. I want to examine for a moment those two considerations as applied to the companies owning solely or mainly properties where the rents are controlled by the Rent Restrictions Acts. First, is it possible for the profits of such companies to increase? It is quite clear that they cannot. The gross receipts are controlled at the 1939 level, subject only to an adjustment to cover increased rates, while their outgoings are very greatly increased. Taking perhaps the main item of outgoing which
1726
usually applies, namely the cost of repairs borne by the landlord, certainly no one is likely to quarrel with the statement that the cost of repairs is two and a half to three times as great as it was pre-war.
There is also the fact that in a great many cases the landlords provide services in addition to doing repairs. Where the landlord has the obligation to provide a hot water supply and central heating the cost of fuel today is at least three times the pre-war cost. Where the landlord employs porters, cleaners and other servants their wages are two to three times what they were before the war. Therefore, in this particular type of company, gross receipts are pegged at the 1939 level, whereas outgoings borne by the company have undergone a great increase. So, if we applied the test of the first of the Chancellor's conditions, there can be no increase in profits in the case of such companies.
On the question of whether such companies are able to increase dividends, I think it follows that if profits are not increased it would be only an exceptional case where the dividend could have increased. I have taken the trouble to examine this matter in some detail over the range of a number of principal companies that seem to me to fall within the provisions of the Amendment. I have taken 24 of the largest and best-known companies of which particulars are to be found in the Stock Exchange list, and I find these interesting facts. Of these 24 companies, 19 are paying smaller dividends today than they were paying before the war. One is paying the same dividend as it paid before the war, and four are paying larger dividends.
Therefore, as far as the generality of practice is concerned, companies of this particular type are paying out in the aggregate less in dividend today than they paid out before the war. It follows that under the second test applied by the Chancellor these companies clearly cannot be brought within the proper scope of the increased Profits Tax, because they are not paying increased dividends but in the generality of cases are paying smaller dividends.
I should like to make this further point in connection with my examination of the dividend record of these 24 companies, and that is that not only is it true that 19 of

1727
them are today paying smaller dividends than before the war, but during the war every one of the 24, owing to the difficulties of that time, either passed the dividend completely or else paid a very much smaller dividend than was paid before the war.
I think, therefore, that from the facts I have brought before the Committee I am entitled to put forward the general proposition that people who own ordinary shares in this limited type of company are very much worse off than the generality of ordinary shareholders; and no case can exist either by the tests applied by the Chancellor or by any other test for penalising them still further by the imposition of an increased tax on distributed profits.
I want most earnestly and most strongly to urge the Government to consider the difficult position of these companies. It is common ground on both sides of the Committee that the Rent Restrictions Acts impose great hardships and difficulties on property owners. That is true in the case of an individual who owns a rent restricted property where he pays no Profits Tax at all; and if it be true in that case, how much more is it true in the case of a limited company which owns rent restricted properties and which, in addition to bearing all the general effects of the Rent Restrictions Acts with their limitations on rents, will be expected to pay a tax on its distributed profits of no less than 50 per cent. unless this Amendment is accepted? I submit that the case for the Amendment and for doing something for the class of company covered by it is quite overwhelming, and I hope it will receive an encouraging and satisfactory reply from the Government.
Mr. Janner: I listened very carefully to the reasoned and reasonable speech made by the hon. Member for Henley (Mr. Hay), although I did not agree with him in his conclusions. I believe there is a misunderstanding on his part as to the method by which the difficulties which he presented to the Committee can be overcome. Everybody will agree, I think, that a reasonable landlord who has looked after his properties in a proper way—properties covered by the Rent Restrictions Acts—and who did not take advantage of the additional amount
1728
which was allowed by those Acts without performing the obligations additionally entailed, is entitled to some consideration in the question of the cost of repairs.
But I doubt whether this is a method by which that can be given. The cases and the figures which have been quoted have indicated that landlords have not done so badly in view of the capital invested. I asked what were the dividends in the cases quoted by the hon Member. He said in one case the dividend was 7½ per cent. and in another it was something over 5 per cent. Considering the kind of returns which people receive in other directions for the money they invest, those figures are not so bad. I could quote the hon. Gentleman some very much lower dividends.
It follows, therefore, that companies who let their properties, and who have done repairs which cost more now than they cost before the war, have still been able to pay not a bad dividend. If I may say so, that refutes many of the arguments which we have heard when questions of rent restriction have been under consideration, because, according to the story we have been told in the past, the landlord has suffered so badly when he has done repairs, that he has made a loss. It now transpires that he did not make a loss but, on the contrary, while keeping his property in repair and not allowing it to deteriorate, he has been able to receive what I think is a reasonable return for the money he has spent.
One point, I think, cannot easily be overlooked. The hon. Member for Henley said he was not wedded to the figure of 75 per cent. He said it could be altered so long as the principle was conceded. But a very difficult situation arises here, because if we were in any way at all to make an allowance to people outside the Rent Acts the companies concerned would be able to charge whatever they chose for rent. Hon. Members opposite, as well as my hon. Friends, know very well that where the Rent Acts do not apply it is not very easy to get either a house or a flat without paying extremely heavily for it.
I see some hon. Members opposite smiling, but they have only to examine some of the advertisements to realise that people do not only have to pay twice or even three times what was asked before

1729
the war. A very large premium is claimed in addition to a very substantial increase in rent. Perhaps I should go further and say that if we concede the point we should not know exactly where to put the limit as to the percentage of houses which would have to be covered by the Rent Acts in any specific case. We should be giving an advantage to companies trading in this manner by comparison with companies which are trading for other purposes.
I think there has been a serious misunderstanding on the benches opposite about the outlook of my hon. Friends in relation to the small landlord. It is very far from being true to suggest that consideration is not given to the difficulties which confront landlords who are doing their job properly. I would beg hon. Members opposite to understand that millions of pounds have gone into the pockets of bad landlords during the past 35 years since the Rent Acts first came into operation—into the pockets of people who have neglected their duty towards their tenants and who have extracted large sums from them. It may be possible to conceive some method whereby a concession might be made with respect to repairs to a house, but I do not think that we can do it by a method such as outlined in this Amendment.
Mr. Hay: The hon. Gentleman will appreciate that the question of repairs is only indirectly of importance in connection with this Amendment. What the Amendment seeks to do is not to give the landlord a concession in respect of repairs, but to exempt him and his company from the tax which the Chancellor now seeks to levy.
Mr. Janner: When the hon. Gentleman puts it that way it sounds very nice. I cannot see why the arguments I have put forward have not convinced him that that would mean the granting of exemption in one set of cases, which would be an invidious distinction between them and other companies who are not granted the exemption.
Mr. Hay: In this case the income is limited.
6.30 p.m.
Mr. Janner: But the dividends are not limited. I appreciate that the income is limited; I appreciate that they cannot make more profits; but I want the hon. Gentleman to understand that the question
1730
of the dividend payable should be taken into consideration in these matters. Even if the figures were reduced to say, 4 per cent. or 4½ per cent., the landlord would still not be doing so badly. There is no reason why the State should not have some return from that type of investment.
However, that is a very different thing. If hon. Members argue in a general sense, that is a very different matter. If they want to argue that the State should not impose this tax at all, that is a very different matter. What the hon. Gentleman the Member for Henley is attempting to do is to say that there should be a distinction in this matter, and I for my part cannot see, in view of the figures that he has given, and in view of the statements that have been made by the hon. Member for Wimbledon (Mr. Black), why there should be such a distinction in respect of this particular Measure.
There may possibly be a case for a method by which a responsible landlord, who has done his job properly and has continued to carry out the repairs, should be allowed something in respect of this tax. That, however, is a very different case from this.
Mr. Beverley Baxter: Does the hon. Gentleman not agree with this in principle? The Chancellor's reason for increasing the tax on profits and dividends was that they were rising, and that they could afford to bear tax. Here is a case where they have not risen and in which, therefore, there is no case for checking an upward rise. The tax will make these dividends lower than before. The hon. Gentleman admits that. This will force dividends down. Does he not agree that this is unfair?
Mr. Janner: What the hon. Gentleman does not understand is this. I think there is still a margin here whereby the dividend could be reduced. After all, hon. Gentlemen must understand that the holding of property is a secure investment. [HON. MEMBERS: "Not these days."] Oh, yes, it is. I do not see that there is anything to quibble about. The landlord has still got his property and, if the landlord has done what hon. Gentlemen have said he has done, and kept his property in good condition, it is still a good security. The bricks and mortar are considered to be a good security. It is not a speculative venture. It is a venture in which the property owner has his assets

1731
available. Moreover, the rate of dividend should not be any higher in that than in any other section of secure ventures of a similar nature. That is why I am of the opinion that this distinction should not be drawn here irrespective of the amount of the profits.
Mr. Osborne: Before the hon. Gentleman finishes, may I put an example to him and ask him to apply his mind to it? Lennards Real Property Company own shops operated by Lennard Boot and Shoe Company at a fixed rent agreed some years ago. When this new tax was imposed the property company could not pay the dividend it had previously paid—4½ per cent., which was modest enough—because part of the income it had received from the operating company was now taken by the Chancellor. The hon. Member was saying that property companies were a dead safe investment, but the £1 Ordinary shares of that company, which used to stand at round about 20s., are today 7s. 6d.
Mr. Janner: It is a little difficult to try to examine figures given across the Floor of the Committee without actually knowing the full facts relating to the particular case, and I should not like, as a back bencher, to try to dare to do what is sometimes done even by the Front Bench, but I should like to have a little notice, and time to look at the company's figures and balance sheets and the whole of its machinations. [Laughter.] Perhaps I should use another word, but if any hon. Gentleman can find a better one it is up to him to mention it. All sorts of peculiar things happen with companies. [Laughter.] Yes, indeed, and I should like to know the full facts before giving an answer. But I still say that the argument that I have put forward should convince the hon. Member for Henley, who moved this Amendment, and who is reasonable; and I would suggest that he find a different method of accomplishing what he has in mind.
Mr. Jennings: Before the hon. Gentleman sits down, will he not agree that my hon. Friends have given the perfect answer to the case the Chancellor made for taxing these companies?
Mr. Janner: If I had thought so I should not have spoken. I am not satisfied
1732
that the Chancellor has said everything that there is to say on this matter. I have tried to put forward an argument that he might have used, and which may be even more convincing to hon. Gentlemen opposite than the ones he raised himself.
Mr. John Rodgers: I do not want to detain the Committee for more than a few minutes, but I do wish to draw the Chancellor's attention to the possible effect this Clause may have on the community at large. A month ago, on 7th May, "The Times" had an article showing the different costs of repairs and maintenance today as compared with earlier days and said that they were turning good landlords into bad landlords. To subject landlords to this increased tax now would, I think, accelerate this very undesirable movement.
In suggesting the tax the Chancellor justified it on the ground that company profits were going up and that they would continue to rise, and that, therefore, the distribution of profits would increase. That is not so in the case of property companies. My hon. Friend the Member for Wimbledon (Mr. Black) has given a sample of 24 companies of which 19 are actually distributing less profits than they were before the war. It is generally agreed on both sides of the Committee that the cost of repairs is about three times what it was before the war. It does seem to me that to impose this extra burden on companies whose income is derived mainly from rent-controlled properties is both grossly unjust to those companies and patently absurd, because by law it prevents any increase in the income or the profits and at the same time increases the Profits Tax.
I believe that the Chancellor is merely trying to have it both ways, and that is grossly unfair. Not that I am arguing that rent control should cease at this moment or that rents should be adjusted, but we should bear in mind the extra cost there is in the repair of this property, and the fact that not to keep it in repair would be against the public interest. Surely companies who derive the bulk of their income from rent controlled properties are in a special category and should be so regarded by the Chancellor. Whether the figure be 75 per cent. or 80 per cent. of their income is immaterial. It is the principle, as my hon. Friend the

1733
Member for Henley (Mr. Hay) said, that is at stake here.
In conclusion, I would ask the Chancellor to consider the analogy of the bus companies and water undertakings. Their fares or charges are also controlled. Hitherto, they have been exempt. Now they are to be subject to 10 per cent. tax on distributions, but not the 50 per cent. tax. Yet those particular companies have the possibility of raising their fares or their charges; and, what is more, they have the possibility of passing on to the consumers their increased burdens. This is denied to property owning companies whose income is derived in the main from rent controlled properties. I urge the Chancellor to give some consideration to this Amendment.
Mr. J. Edwards: I listened with very great sympathy to what the hon. Gentleman the Member for Henley (Mr. Hay) had to say on this matter. There are echoes in this debate of the debates we used to have on the Expiring Laws Continuance Bills, when we were often reminded of the particular difficulties of those who owned properties and had to keep them in repair. This is not, however, the occasion to go into this problem, although I would not for one minute say that it did not exist.
There was, however, just one point which I did not properly understand. The hon. Member for Henley (Mr. Hay) intervened in the course of my hon. Friend's speech to say that repairs were only indirectly concerned here. If I understood him aright, he argued that there was a connection between his Amendment and the level of repairs. That I found a little difficult to understand, because, as far as I know, if repairs are done the outlay ranks as a deduction in computing the profits, and obviously there is no argument on those grounds for giving relief on the dividends that are paid. If, however, the case is that firms will not do the repairs, again I cannot see where it leads in terms of the Amendment.
Mr. Hay: May I help the hon. Gentleman? I was merely trying to make the case that, if the man's income is limited, as, in fact, is done by the Rent Restrictions Acts, and if at the same time his expenses—which include, of course, not only repairs but all sorts of other things, such as certain services—go up as well,
1734
his income remains limited, and it is unjust to impose upon him an additional 10 per cent.
Mr. Edwards: I conclude that the hon. Gentleman is saying that these firms might be under some pressure not to do as much repairing as they otherwise would because they would wish either to maintain, or not to lower, their dividend. He asked what I think was the most important question at the beginning of his speech, namely, ought there to be any exemptions? I think he himself appreciated that there were other cases of a kind, which he described that could arise, although he was not concerned with them.
Obviously, this whole matter was one which my hon. Friend had to consider when deciding what should be done, and for reasons which he gave in brief in his Budget Speech he came down against an Excess Profits Tax—and the only way in which the position of undertakings could be safeguarded in this way would be to have some kind of Excess Profits Tax. I think that is the difficult point here, because although the causes of the situation which has been described to us are different in the case under notice, the real position is not peculiar to the companies or other bodies covered by the Amendment.
I think it would be generally agreed that any company, where the profits were either fixed or were falling, would be in exactly the same position as the cases that have been given to us. Nor, I think, would it end there. The hon. Member for Sevenoaks (Mr. John Rodgers) used the phrase "grossly unfair" and talked about "gross injustice." If we are to use that term—although I did not introduce it—we have to consider justice as between people in a like position, and it is clear that any company with a fixed profit or a falling level of profit would be in the same position as companies under notice. But it would not end there, because if that were the argument we should find other people saying, "Our incomes are falling, or fixed, and we therefore ought not to bear the additional taxes which are being imposed because of the needs of re-armament." That would create an anomalous position to everybody.
Mr. Summers: In drawing the attention of the Committee to those whose profit he alleges may be fixed or falling, is the

1735
hon. Member referring only to those whose profit is so affected by law, as opposed to other economic considerations?
6.45 p.m.
Mr. Edwards: I was not applying it in that way. If we are considering the question of justice, we have to consider the position of the company as well as, if you like, the reasons for that position. After all, we are here concerned with companies who are concerned wholly or mainly with the ownership or provision of dwelling-houses, and, secondly, with those where not less than 75 per cent. by number of the dwelling-houses are owned or controlled. In so far as there is any margin there—and in one of the cases quoted there was very little—there is clearly some room to move, as my hon. Friend pointed out. All I am concerned to argue is that, if what is really behind this Amendment is the idea that we ought not to have a Profits Tax of the kind that we have, then we ought to have an Excess Profits Tax.
While I appreciate what has been said, it would not be possible for my right hon. Friend to accept this Amendment, because to do so would be to admit a principle which we think it would be very difficult to apply, and which would create anomalies in this field of Profits Tax, and also very serious anomalies in every part of the direct taxation field. For those reasons, I am sorry to say that we are not able to accept the Amendment.
Mr. Jennings: The hon. Gentleman has used an entirely different argument from that of the Chancellor in support of this tax. The Chancellor was dealing with rising profits due to no effort on the part of the company, but the Economic Secretary has used an entirely new argument.
Mr. Black: There is one point I should like to put to the Economic Secretary which seems to arise from his reply. Surely the principle is already recognised in the special treatment which has been given to industries like bus undertakings and water companies, whose charges have been fixed by law. The fact that their charges have been fixed by law is taken into consideration in computing the Profits Tax they are required to pay.
1736
We are, therefore, not asking for anything in the way of a new principle. All we are asking is that another class of undertaking, which has features common to those of the bus undertakings and water companies, and other undertakings of the same kind, should be brought within that category and treated in the same way. It is not a new principle at all. We are simply asking for the application of a principle which is already recognised and accepted to another class of undertaking, where we say the case for applying it is overwhelming.
Mr. Bell: As my hon. Friend the Member for Wimbledon (Mr. Black) pointed out, the Economic Secretary rather overlooked the main argument underlying this Amendment. The Chancellor—who I am glad to see here now, and who may perhaps now take over the authority which he delegated to the Economic Secretary—put it perfectly clearly in his Budget speech, both in passages which have already been quoted, and in this one, where he said:
"There is no doubt that the level of company profits has recently been increasing rapidly."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 854.]
He then went on to point out that during 1950 profits rose by about 14 per cent. as compared with other money incomes rising by about 7 per cent. Those were his introductory remarks to the whole question of the increased Profits Tax.
It is against that background that one has got to see the whole question of whether the particular kind of companies to which the Amendment refers are companies proper to be included in this mopping up operation—because that is how the right hon. Gentleman conceived it, as an operation to mop up excess profits which had arisen, and which had arisen, I would point out, as a result of one of the kinds of planning in which the present Minister of Local Government and Planning indulged when he was at the Exchequer. As a result, the value of money has, as we all know, gone down, and there is, therefore, a rise in many profits. But we have not got that in the case of rent controlled houses where the money return was fixed in 1939 or 1914. That is the perfectly clear case which my hon. Friend put forward.

1737
I think that there is a total distinction between the case of a company which may have smaller profits because business is going badly and the case of a company with a satisfactory or lower profit because of the effect of an Act of Parliament. I would suggest to the Economic Secretary and to his colleagues at the Treasury that the argument of anomaly is not a good one in this case, because the Rent Restrictions Acts are an anomaly par excellence and real property is put in an anomalous and disadvantageous position. It is unfair and improper if the Chancellor in introducing this as a special measure aimed against the increasing money value of profits can apply it by a general rough and ready sweep to that particular kind of ownership which has already been singled out by the law for other anomalies and extremely harsh treatment.
The hon. Member for Leicester, North-West (Mr. Janner) picked on one illustration given by my hon. Friend the Member for Henley (Mr. Hay) and said, "Good gracious, these property owners are not doing so badly. Here is one 5¼ per cent. and another 7½ per cent., and probably these two figures relate to the same company—one to A shares and the other to B shares." When my hon. Friend put to him a case of another company doing badly, he said, "You cannot take an individual example; you do not know what it really means."
Mr. Janner: The hon. Gentleman must realise that these companies can easily sell the properties when they become vacant. Unfortunately, there is no Act which prevents exorbitant profits being made by the sale of a house when it becomes vacant. If the hon. Gentleman had given me notice of the company to which he was referring it is quite within the realms of possibility that I would have been able to answer his point. One cannot answer a point when someone gives a stream of facts without giving the full facts.
Mr. Bell: The hon. Gentleman is merely underlining what I said—that one cannot base an argument on an individual case. My hon. Friend instanced that company as one which showed a rather dramatic increase in the total amount of taxation on a falling income. The fact that it also paid dividends which were not
1738
entirely negligible does not make this particular case bear out the implications which the hon. Gentleman was trying to apply to it.
I have known from experience individual owners of rent restricted property who have actually been out of pocket. If one looks at one individual case one might look at others. I have known of cases where the property was subject to a landlord's covenant of repair, and when that covenant was discharged—and it could be enforced in the courts—the landlord was actually out of pocket year by year.
Mr. Janner: We are not dealing with individual cases; we are dealing with the question of companies, and companies do not go so easily into that kind of trap. I agree that certain remedies should be applied in the case to which the hon. Gentleman has referred, but that has nothing to do with this Amendment.
Mr. Bell: The hon. Gentleman is quite wrong. This Amendment refers to companies which own property just as much as to an individual, and it refers also to unincorporated bodies, such as housing associations. It includes
"any body corporate unincorporated society or other body."
I would point out to the hon. Gentleman that it is common knowledge that rent restricted property in this country is an unprofitable investment at the present time, and that the operation of the Rent Restrictions Acts is producing the dilapidation of half the houses in England. He is quite mistaken if he thinks that because one company has been mentioned as having a dividend of 5 per cent. and another of 7 per cent. that there is no real basis or merit behind the Amendment.
Mr. Hollis Mr. Hollis (Devizes) rose—
Mr. Bell: I have not yet concluded my remarks. The other point which the Economic Secretary mentioned, and to which the hon. Member for Leicester, North-West, also referred, was the fact that the Amendment refers to the ownership of 75 per cent. by number of rent restricted houses and that that leaves a margin on other ownership which might be unrestricted houses or any other kind of property. Even property which is not subject to the Rent Restrictions Acts—

1739
and there is a good deal of it these days—is very often subject to some other kind of restriction, such as the Furnished Houses (Rent control) Act, and, as my hon. Friend has said, he is not wedded to the particular form of this Amendment—this is a principle which we are putting forward. If there ought to be some apportionment of exemption from Profits Tax, the principle of the Amendment might still be met.
It is no argument against the Amendment to say that it would be difficult to find a way to give effect to it. If one considers the burden imposed upon the landlord by the Rent Restrictions Acts—[Interruption]—I am glad to receive that support by way of acclamation, Mr. Touche.
Mr. Pannell: That is only the property owners in the Gallery.
Mr. Bell: I want to ask the Economic Secretary and the Financial Secretary to the Treasury to consider whether they cannot meet the point put to them by devising some method which would deal with the slight objections which may be made to this Amendment. It is no answer at all to say that some relief may come later by some other Measure. We all hope that some relief will be given against the Rent Restrictions Acts by some concession in the matter of repairs, but this is the Finance Bill, 1951, and we cannot allow this Clause to pass, with its high rates of Profits Tax on this kind of company, because there is some remote and unspecified prospect that something may be done in the future by way of an allowance for repairs to owners of rent restricted property. I therefore ask the Minister to see if he cannot meet the case put forward by my hon. Friend the Member for Henley.
Mr. Hollis: I must apologise to the hon. Member for Bucks, South (Mr. Bell), for having broken the tape before the gun went. We all of us have a great regard for the Economic Secretary, but he does not seem to be in his most fortunate form this afternoon. I listened to his previous speech. I thought it was the weakest speech I had ever heard, and I did not have to revise my verdict when I listened to his reply to this Amendment. He put his case in opposition to the Amendment on three grounds, all of which have been
1740
quite adequately refuted already by the development of the facts.
In the first place he said that there ought to be no exemptions. As my hon. Friend the Member for Wimbledon (Mr. Black) pointed out, whether there ought to be or whether there ought not to be, there were exemptions already in the case of water and bus undertakings. Therefore, the principle of exemption has already been conceded by His Majesty's Government.
7.0 p.m.
His second argument was that this was not an excess Profits Tax. He said that the Chancellor had considered and had rejected the principle of having an excess Profits Tax. But the argument there was not what tax the Chancellor was proposing, but what argument the Chancellor had used. The Chancellor had justified this Clause on the grounds that dividends were increasing, and, as my hon. Friend pointed out, here was a class of property where dividends were manifestly not increasing. My hon. Friend took 24 companies as an example, and each of them were paying a smaller dividend.
The third argument of the Economic Secretary was to the effect that if once this principle were introduced everyone would demand it, whether it was a case of fixed or falling profits. Again, the question is surely the difference as to whether they are fixed or falling profits owing to the development of circumstances over which nobody has any control, or whether the profits are fixed and falling owing to the deliberate action of the Government. In this case the profits are falling owing to Government action.
From the other side of the Committee we have had the speech of the Economic Secretary, which did not deal with the question at all, and the speech of the hon. Member for Leicester, North-West (Mr. Janner), was the only other contribution. His argument was that he could not support this particular Amendment because it is a discrimination in favour of one special type of company. Then he admitted that some discrimination was necessary in favour of this type of property owner, but he could not support this Amendment, though he would be only too glad on some future occasion, not specified, when some other method of tax relief should be granted. Therefore, he conceded the argument that there was

1741
a case for some special support for people owning this particular type of property.
The hon. Member further argued that the reason why they did not deserve a special discrimination was that the property was a solid asset. He said that if the worst came to the worst they could always sell the property, and they would not do badly out of it. But doubtless hon. Members noticed the phrase in which, in answer to my hon. Friend the Member for Bucks, South, he expressed that principle. He said that they could sell that property because, unfortunately for the moment, there was no Act to prevent them from doing so. I hope hon. Members noticed the adverb "unfortunately," because it showed the position to property owners.
Mr. Janner: The hon. Member must not misinterpret what I said. What I said—and I said it quite clearly—was that when property becomes vacant there is no Act to prevent the landlord or the owner of that property from charging an exorbitant sum for selling that property, which is a very different thing from what the hon. Member is saying now.
Mr. Hollis: Whether the hon. Member introduces such words as "exorbitant" or not, which arouses certain passions, surely the point is perfectly clear, that the hon. Member, if he had his way, would alter the law about the sale of property. He thinks that the present state of the law is unfortunate. Therefore, it is perfectly clear that he thinks that owners of property are not in the extremely secure position upon which the whole of his argument is based. They are only in a secure position now because the prospects of this Government surviving to pass this legislation are not very bright.
It is clear that the Economic Secretary had no answer whatever with which to resist this Amendment. The hon. Member for Leicester, North-West, has given a reason why this Amendment should be resisted, but only on condition that some other method of tax relief should be given to these people. He has not told us in what form that relief should be.
Lieut.-Commander Braithwaite: The whole Committee must feel indebted to my hon. Friend the Member for Henley (Mr. Hay), in initiating so instructive a discussion. What so often happens in the House of Commons is that when the
1742
Committee stage is conducted in a dilatory manner, as it is today, a number of points emerge which might have gone entirely undiscussed. I hope that before the Committee is asked to come to a decision the Economic Secretary will find it possible to say a word or two more to meet what, I think, was an extremely important point raised by my hon. Friend the Member for Wimbledon (Mr. Black), who pointed out that there are now exceptions in these matters, including water undertakings and omnibus companies, which destroyed the case of the Economic Secretary, who said that no breach could be made in this particular part of his front on the Profits Tax.
I was particularly interested in the speech of the hon. Member for Leicester, North-West (Mr. Janner). I hope he will allow me to say across the Floor of the Committee that I always listen with the most earnest attention to him when he deals with rent questions. I recall particularly in the year 1933, when the Government of that time introduced a Rent restrictions Bill, how well informed he was on the subject. He had just come to us after a great public service in defeating the Socialist candidate at Whitechapel, and he took a less collectivist view then than he has expressed this afternoon.
I want to remind the hon. Member that he and I happened to be in agreement in opposing one Clause of that particular Bill. At that time the cost of repairs was not rising but falling and hon. Members took the view that there was a case for a decrease under the Rent Restrictions Act, 1920. If the hon. Member is consistent and has not retrogressed too far since then, he will immediately find himself in alliance with hon. Members behind me in the view that they have expressed this afternoon, because everybody knows that the cost of repairs has moved lamentably in the opposite direction since those days, when he and I took up a perfectly proper and just position, which he has now deserted.
I am anxious to follow up the cost of repairs in whatever direction it may lead, and it has led in the opposite direction to what it was in those days. The hon. Member for Leicester, North-West, will have to explain all these matters to his constituents, probably at a very early date, but that is essentially a matter for him. I merely rise to express the hope

1743
that the Economic Secretary, who made so gracious a speech, will later on, having now found such a yawning gap in his argument, make some endeavour to close it before the Committee comes to a decision.
Mr. Jennings: I rise to protest against the reply given by the Economic Secretary to the Treasury on this Amendment. The reply did not do justice to the Amendment. First, the hon. Gentleman said that he could not accept it because it would make an exception in regard to this tax. Now we have proved to him that that argument is unsound. If the Minister knew his Bill, he would know that there are exceptions in the case of water companies and bus companies, at the lower rate of tax. For the Minister to come forward with that argument is not doing justice in this matter.
Moreover, if the Economic Secretary had read the speech of the Chancellor of the Exchequer, he would have seen exactly what the Chancellor said about the two grounds on which he was imposing this taxation. When the Chancellor's argument was rebutted by my hon. Friends, the Economic Secretary took another line which is not in accordance with the facts. The Economic Secretary has not been fair to the Committee in turning down this Amendment on grounds which he must know are not sound, and he ought to apologise to the Committee. He said definitely that there were no exceptions, but the arguments advanced on this side have shown that there are exceptions. The Economic Secretary ought to be man enough to get up and say: "I am wrong. There are exceptions, and therefore that part of my argument is baseless."
It proves to me that the Economic Secretary has not given sufficient thought to the matter. He should have read the Chancellor's speech and the grounds on which this extra taxation was imposed, grounds which have been rebutted by my hon. Friends. I am sorry that the Economic Secretary should have come forward with such a weak, poor case.
Mr. Assheton: I intervene briefly in support of the very formidable case which has been put from this side of the Committee. The answer which the Economic Secretary to the
1744
Treasury gave was in no way convincing to my hon. Friends. Whether it convinced hon. Gentlemen on the other side of the Committee, I do not know. Before I deal briefly with his speech, I want to reply to the hon. Member for Leicester, North-West (Mr. Janner). He referred to a case quoted by my hon. Friend the Member for Henley (Mr. Hay), who moved the Amendment, relating to a company which is now paying dividends of 7½ per cent and 5 per cent. That is not too bad, but the whole point of the argument is that when the tax is imposed the dividend will be very much reduced or perhaps wiped out altogether.
The main burden of our case on this side of the Committee is that a certain number of companies who are in business owning property which is rent-restricted, and they are prevented by the Rent Restrictions Acts from increasing their profits. It is not only unnecessary but unjust to take the line which appeared in the Chancellor's argument for the tax and that they should be hit by the operation of this tax. The Economic Secretary admitted that there were hardships in these cases. Everybody in this Committee knows that there are hardships. The Economic Secretary feared repercussions. When one is at the Treasury one always fears repercussions.
I beg the Minister to remember that there is no need to be so careful. As has been pointed out, there are already exceptions in this area, like the water companies, who are restrained from making more than a certain amount of profit, but who have separate treatment. I understand also that bus companies are in the same position. These facts dispose altogether of the argument about repercussions. The case put forward from this side of the Committee for the Amendment is very strong. Therefore the Amendment ought to be pressed to a Division, and I hope that my hon. Friend will do so.
7.15 p.m.
Several Hon. Members Several Hon. Members rose—
The Deputy-Chairman The Deputy-Chairman rose—
Mr. Hay: On a point of order, Sir Charles. Am I not entitled to the right of reply, as it was my Amendment?
The Deputy-Chairman: I think the Committee is ready to come to a decision on this Amendment.
Mr. Churchill: On a point of order. Several hon. Members rose, and wish to continue the discussion. On what ground are they not to be called—unless the Closure is moved?
The Deputy-Chairman: On the Committee stage hon. Members can speak as often as they like, of course. I was hoping to be able to get the Amendment disposed of.
Mr. Jennings: On a point of order—
Mr. R. J. Taylor (Lord Commissioner of the Treasury)Mr. R. J. Taylor (Lord Commissioner of the Treasury) rose in his place, and claimed to move, "That the Question be now put."
Mr. Jennings: Perhaps I might continue my point of order. I asked, during the short time that I spoke, whether the Economic Secretary to the Treasury would not withdraw that portion of his argument which we had proved to be baseless. Is there not an opportunity for the Economic Secretary to withdraw it?
The Deputy-Chairman: That is not a point of order.
Question put, "That the Question be now put."
The Committee divided: Ayes, 296; Noes, 287.

Division No. 106.]

AYES

[7.18 p.m.

Acland, Sir Richard

Darling, George (Hillsborough)

Holmes, Horace (Hemsworth)

Adams, Richard

Davies, A. Edward (Stoke, N.)

Houghton, D.

Albu, A. H.

Davies, Harold (Leek)

Hoy, J.

Allen, Arthur (Bosworth)

Davies, Stephen (Merthyr)

Hubbard, T.

Allen, Scholefield (Crewe)

de Freitas, Geoffrey

Hudson, James (Ealing, N.)

Anderson, Alexander (Motherwell)

Deer, G.

Hughes, Emrys (S. Ayrshire)

Anderson, Frank (Whitehaven)

Delargy, H. J

Hughes, Hector (Aberdeen, N.)

Attlee, Rt. Hon. C. R.

Dodds, N. N.

Hughes, Moelwyn (Islington, N.)

Awbery, S. S.

Donnelly, D.

Hynd, H. (Accrington)

Ayles, W. H.

Driberg, T. E. N.

Hynd, J. B. (Attercliffe)

Bacon, Miss Alice

Dugdale, Rt. Hon. John (W. Bromwich)

Irvine, A. J. (Edge Hill)

Baird, J.

Dye S.

Irving, W. J. (Wood Green)

Balfour, A.

Ede, Rt. Hon. J. C.

Isaacs, Rt. Hon. G. A.

Barnes, Rt. Hon. A. J.

Edelman, M.

Janner, B.

Bartley, P.

Edwards, John (Brighouse)

Jay, D. P. T.

Bellenger, Rt. Hon. F. J.

Edwards, Rt. Hon. Ness (Caerphilly)

Jeger, George (Goole)

Bonn, Wedgwood

Edwards, W. J. (Stepney)

Jeger, Dr. Santo (St. Pancras, S.)

Benson, G.

Evans, Albert (Islington, S. W.)

Jenkins, R. H.

Beswick, F.

Evans, Edward (Lowestoft)

Johnson, James (Rugby)

Bevan, Rt. Hon. A. (Ebbw Vale)

Evans, Stanley (Wednesbury)

Johnston, Douglas (Paisley)

Bins, G. H. C.

Ewart, R.

Jones, David (Hartlepool)

Blenkinsop, A

Fernyhough, E

Jones, Frederick Elwyn (West Ham, S.)

Blyton, W. R.

Field, Capt. W. J.

Jones, Jack (Rotherham)

Boardman, H.

Finch, H. J.

Jones, William Elwyn (Conway)

Booth, A.

Fletcher, Erie (Islington, E.)

Keenan, W.

Bottomley, A. G.

Follick, M.

Kenyan, C.

Bowen, E. R. (Cardigan)

Foot, M. M.

Key, Rt. Hon. C. W.

Bowles, F. G. (Nuneaton)

Forman, J. C.

King, Dr. H. M.

Braddock, Mrs. Elizabeth

Fraser, Thomas (Hamilton)

Kinghorn, Sqn. Ldr. E.

Brook, Dryden (Halifax)

Freeman, John (Watford)

Kinley, J.

Brooks, T. J. (Normanton)

Freeman, Peter (Newport)

Lang, Gordon

Broughton, Dr. A. D. D.

Gaitskell, Rt. Hon. H. T. N.

Lee, Frederick (Newton)

Brawn, Rt. Hon. George (Belper)

Ganley, Mrs. C. S.

Lee, Miss Jennie (Cannock)

Brown, Thomas (Ince)

Gibson, C. W.

Lever, Harold (Cheetham)

Burke, W. A.

Gilzean, A.

Lever, Leslie (Ardwick)

Burton, Miss E.

Glanville, James (Consett)

Lewis, Arthur (West Ham, N.)

Butler, Herbert (Hackney, S.)

Gooch, E. G.

Lewis, John (Bolton, W.)

Callaghan, L. J.

Gordon-Walker, Rt. Hon. P. C.

Lindgren, G. S

Carmichael, J.

Greenwood, Anthony (Rossendale)

Lipton, Lt.-Col. M.

Castle, Mrs. B. A.

Greenwood, Rt. Hon. Arthur (Wakefield)

Logan, D. G.

Champion, A. J.

Grenfell, D. R.

Longden, Fred (Small Heath)

Chetwynd, G. R.

Grey, C. F.

McAllister, G

Clunie, J.

Griffiths, David (Rother Valley)

MacColl, J. E

Cocks, F. S.

Griffiths, Rt. Hon. James (Llanelly)

McGhee, H. G

Coldrick, W.

Griffiths, William (Exchange)

McGovern, J

Collick, P.

Gunter, R. J.

McInnes, J.

Collindridge, F.

Hale, Joseph (Rochdale)

Mack, J. D.

Cook, T. F.

Hall, John (Gateshead, W.)

McKay, John (Wallsend)

Cooper, Geoffrey (Middlesbrough, W.)

Hall, Rt. Hon. Glenvil (Colne Valley)

Mackay, R. W. G. (Reading, N.)

Cooper, John (Deptford)

Hamilton, W. W.

McLeavy, F

Corbet, Mrs. Freda (Peckham)

Hardman, D. R.

MacMillan, Malcolm (Western Isles)

Cove, W. G.

Hargreaves, A.

McNeil, Rt. Hon. H.

Craddoek, George (Bradford, S.)

Hastings, S.

MacPherson, Malcolm (Stirling)

Crawley, A.

Hayman, F. H.

Mainwaring, W. H.

Crosland, C. A. R.

Henderson, Rt. Hon. A. (Rowley Regis)

Mallalieu, E. L. (Brigg)

Crossman, R. H. S.

Herbison, Miss M.

Mallalieu, J. P. W. (Huddersfield, E.)

Cullen, Mrs. A

Hewilson, Capt. M

Mann, Mrs. Jean

Daines, P.

Hobson, C. R

Manuel, A. C.

Dalton, Rt. Hon. H.

Holman. P.

Marquand, Rt. Hon. H. A.

Mathers, Rt. Hon. G.

Reeves, J.

Timmons, J.

Mellish, R. J.

Reid, Thomas (Swindon)

Tomney, F.

Messer, F.

Reid, William (Camlachie)

Turner-Samuels, M.

Middleton, Mrs. L.

Rhodes, H.

Ungoed-Thomas, Sir Lynn

Mikardo, Ian

Richards, R.

Usborne, H.

Mitchison, G. R.

Roberts, Rt. Hon. A.

Vernon, W. F.

Moeran, E. W.

Roberts, Goronwy (Caernarvonshire)

Viant, S. P.

Monslow, W.

Robertson, J. J. (Berwick)

Wallace, H. W.

Moody, A. S.

Robinson, Kenneth (St. Pancras, N.)

Watkins, T. E.

Morgan, Dr. H. B.

Rogers, George (Kensington, N.)

Webb, Rt. Hon. M. (Bradford, C.)

Morley, R.

Ross, William (Kilmarnock)

Weitzman, D.

Morris, Percy (Swansea, W.)

Royle, C.

Wells, Percy (Faversham)

Mort, D. L.

Shawcross, Rt. Hon. Sir Hartley

Wells, William (Walsall)

Moyle, A.

Shinwell, Rt. Hon. E.

West, D. G.

Mulley, F. W.

Shurmer, P. L. E.

Wheatley, Rt. Hon. John (Edinb'gh, E.)

Murray, J. D.

Silverman, Julius (Erdington)

While, Mrs. Eirene (E. Flint)

Nally, W.

Silverman, Sydney (Nelson)

White, Henry (Derbyshire, N. E.)

Neat, Harold (Bolsover)

Simmons, C. J.

Whiteley, Rt. Hon. W.

Noel-Baker, Rt. Hon. P. J.

Slater, J.

Wigg, G.

O'Brien, T.

Smith, Ellis (Stoke, S.)

Wilcock, Group Capt. C. A. B.

Oldfield, W. H.

Smith, Norman (Nottingham, S.)

Wilkes, L.

Oliver, G. H.

Snow, J. W.

Wilkins, W. A.

Orbach, M.

Sorensen, R. W.

Willey, Frederick (Sunderland)

Padley, W. E.

Soskice, Rt. Hon. Sir Frank

Willey, Octavius (Cleveland)

Paget, R. T.

Sparks, J. A.

Williams, David (Neath)

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Steele, T.

Williams, Rev. Llywelyn (Abertillery)

Paling, Will T. (Dewsbury)

Stewart, Michael (Fulham, E.)

Williams, Ronald (Wigan)

Panned, T. C.

Stokes, Rt. Hon. R. R.

Williams, Rt. Hon. Thomas (Don V'lly)

Pargiter, G. A.

Strachey, Rt. Hon. J.

Wilson, Rt. Hon. Harold (Huyton)

Parker, J.

Strauss, Rt. Hon. George (Vauxhall)

Winterbottom, Ian (Nottingham, C.)

Paton, J.

Stross, Dr. Barnett

Winterbottom, Richard (Brightside)

Pearson, A.

Summerskill, Rt. Hon. Edith

Wise, F. J.

Peart, T. F.

Sylvester, G. O.

Woodburn, Rt. Hon. A.

Popplewell, E.

Taylor, Bernard (Mansfield)

Woods, Rev. G. S.

Porter, G.

Taylor, Robert (Morpeth)

Wyatt, W. L.

Price, Philips (Gloucestershire, W.)

Thomas, David (Aberdare)

Yates, V. F.

Proctor, W. T.

Thomas, George (Cardiff)

Younger, Hon. K.

Pryde, D. J.

Thomas, Iorwerth (Rhondda, W.)

Pursey, Cmdr. H.

Thomas, Ivor Owen (Wrekin)

TELLERS FOR THE AYES:

Rankin, J.

Thorneycroft, Harry (Clayton)

Mr. Bowden and Mr. Hannan.

Rees, Mrs. D.

Thurtle, Ernest

NOES

Aitken, W. T.

Carr, Robert (Mitcham)

Erroll, F. J.

Alport, C. J. M.

Carson, Hon. E.

Fisher, Nigel

Amery, Julian (Preston, N.)

Channon, H.

Fort, R.

Amory, Heathcoat (Tiverton)

Churchill, Rt. Hon. W. S.

Foster, John

Arbuthnot, John

Clarke, Col. Ralph (East Grinstead)

Fraser, Hon. Hugh (Stone)

Ashton, H. (Chelmsford)

Clarke, Brig. Terence (Portsmouth, W.)

Fraser, Sir Ian (Morecambe & Lonsdale)

Assheton, Rt. Hon. R. (Blackburn, W.)

Clyde, J. L.

Fyfe, Rt. Hon. Sir David Maxwell

Astor, Hon. M. L.

Colegate, A.

Gage, C. H.

Baker, P. A. D.

Conant, Maj. R. J. E.

Galbraith, Cmdr. T. D. (Pollok)

Baldock, Lt.-Cmdr. J. M.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Galbraith, T. G. D. (Hillhead)

Baldwin, A. E.

Cooper-Key, E. M.

Gammans, L. D.

Banks, Col. C

Corbett, Lt.-Col. Uvedale (Ludlow)

Garner-Evans, E. H. (Denbigh)

Baxter, A. B.

Craddock, Beresford (Spelthorne)

Gates, Maj. E. E.

Beamish, Major Tufton

Cranborne, Viscount

Glyn, Sir Ralph

Bell, R. M.

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

Gomme-Duncan, Col. A.

Bennett, Sir Peter (Edgbaston)

Crosthwaite-Eyre, Col. O. E.

Granville, Edgar (Eye)

Bennett, Dr. Reginald (Gosport)

Crouch, R. F.

Gridley, Sir Arnold

Bennett, William (Woodside)

Crowder, Capt. John (Finchley)

Grimond, J.

Bevins, J. R. (Liverpool, Toxteth)

Crowder, Petre (Ruislip—Northwood)

Grimston, Hon. John (St. Albans)

Birch, Nigel

Cundiff, F. W.

Grimston, Robert (Westbury)

Bishop, F. P.

Cuthbert, W. N.

Harden, J. R. E.

Black, C. W.

Davidson, Viscountess

Hare, Hon. J. H. (Woodbridge)

Boles, Lt.-Col. D. C. (Wells)

Davies, Rt. Hn. Clement (M'ntg'mery)

Harris, Frederic (Croydon, N.)

Boothby, R.

Davies, Nigel (Epping)

Harris, Reader (Heston)

Bossom, A. C.

de Chair, Somerset

Harvey, Air Cdre. A. V. (Macclesfield)

Boyd-Carpenter, J. A.

De la Bère, R.

Harvey, Ian (Harrow, E.)

Boyle, Sir Edward

Deedes, W. F.

Harvie-Watt, Sir G. S.

Bracken, Rt. Hon. B.

Digby, S. W.

Hay, John

Braine, B. R.

Dodds-Parker, A. D.

Head, Brig. A. H.

Braithwaite, Sir Albert (Harrow, W.)

Donner, P. W.

Headlam, Lieut.-Col. Rt. Hon. Sir C.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Douglas-Hamilton, Lord Malcolm

Heald, Lionel

Bromley-Davenport, Lt.-Col. W.

Drayson, G. B.

Heath, Edward

Brooke, Henry (Hampstead)

Drewe, C.

Henderson, John (Cathcart)

Browne, Jack (Govan)

Dugdale, Maj. Sir Thomas (Richmond)

Hicks-Beach, Maj. W. W.

Buchan-Hepburn, P. G. T.

Duncan, Capt. J. A. L.

Higgs, J. M. C.

Bullock, Capt. M.

Dunglass, Lord

Hill, Dr. Charles (Luton)

Bullus, Wing Commander E. E.

Duthie, W. S.

Hill, Mrs. E. (Wythenshawe)

Burden, F. A.

Eccles, D. M.

Hinchingbrooke, Viscount

Butcher, H. W.

Eden, Rt. Hon. A.

Hirst, Geoffrey

Butler, Rt. Hon. R. A. (Saffron Walden)

Elliot, Rt. Hon. W. E.

Hollis, M. C.

1748

1749

Holmes, Sir Stanley (Harwich)

Marshall, Douglas (Bodmin)

Smiles, Lt.-Col. Sir Walter

Hope, Lord John

Marshall, Sidney (Sutton)

Smithers, Peter (Winchester)

Hopkinson, Henry

Maude, Angus (Eating, S.)

Smithers, Sir Waldron (Orpington)

Hornsby-Smith, Miss P.

Maude, John (Exeter)

Smyth, Brig. J. G. (Norwood)

Horsbrugh, Rt. Hon. Florence

Maudling, R.

Snadden, W. McN.

Howard, Gerald (Cambridgeshire)

Medlicott, Brig. F.

Soames, Capt. C.

Howard, Greville (St. Ives)

Mellor, Sir John

Spearman, A. C. M.

Hudson, Sir Austin (Lewisham, N.)

Molson, A. H. E.

Spence, H. R. (Aberdeenshire, W.)

Hudson, Rt. Hon. Robert (Southport)

Monckton, Sir Walter

Spens, Sir Patrick (Kensington, S.)

Hudson, W. R. A. (Hull, N.)

Moore, Lt.-Col. Sir Thomas

Stanley, Capt. Hon. Richard (N Fylde)

Hurd, A. R.

Morris, Hopkin (Carmarthen)

Stevens, G. P.

Hutchinson, Geoffrey (Ilford, N.)

Morrison, John (Salisbury)

Steward, W. A. (Woolwich, W.)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

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

Stewart, Henderson (Fife, E.)

Hutchison, Colonel James (Glasgow)

Mott-Radclyffe, C. E.

Stoddart-Scott, Col. M.

Hyde, Lt.-Col. H. M.

Nabarro, G.

Storey, S.

Hylton-Foster, H. B.

Nicholls, Harmar

Strauss, Henry (Norwich, S.)

Jeffreys, General Sir George

Nicholson, G.

Studholme, H. G.

Jennings, R.

Nield, Basil (Chester)

Summers, G. S.

Johnson, Howard (Kemptown)

Noble, Comdr. A. H. P.

Sutcliffe, H.

Jones, A. (Hall Green)

Nugent, G. R. H.

Taylor, Charies (Eastbourne)

Joynson-Hicks, Hon. L. W.

Nutting, Anthony

Taylor, William (Bradford, N.)

Kaberry, D.

Oakshott, H. D.

Teeling, W.

Kerr, H. W. (Cambridge)

Odey, G. W.

Teevan, T. L.

Lambert, Hon. G.

O'Neill, Rt. Hon. Sir Hugh

Thomas, J. P. L. (Hereford)

Lancaster, Col. C. G.

Ormsby-Gore, Hon. W. D.

Thompson, Kenneth Pugh (Walton)

Langford-Holt, J.

Orr, Capt. L. P. S.

Thompson, R. H. M. (Croydon, W.)

Law, Rt. Hon. R. K.

Orr-Ewing, Charles Ian (Hendon, N.)

Thorneycroft, Peter (Monmouth)

Leather, E. H. C.

Orr-Ewing, Ian L. (Weston-super-Mare)

Thornton-Kemsley, Col. C. N.

Legge-Bourke, Maj. E. A. H.

Osberne, C.

Thorp, Brig. R. A. F.

Lennox-Boyd, A. T.

Peake, Rt. Hon. O.

Tilney, John

Lindsay, Martin

Perkins, W. R. D.

Turner, H. F. L.

Linstead, H. N

Peto, Brig. C. H. M.

Turton, R. H.

Llewellyn, D.

Pickthorn, K.

Tweedsmuir, Lady

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Pitman, I. J.

Vane, W. M. F.

Lloyd, Maj. Guy (Renfrew, E.)

Powell, J. Enoch

Vaughan-Morgan, J. K.

Lloyd, Selwyn (Wirral)

Price, Henry (Lewisham, W.)

Vosper, D. F.

Lockwood, Lt.-Col. J. C.

Prior-Palmer, Brig. O.

Wakefield, Edward (Derbyshire, W.)

Low, A. R. W.

Profumo, J. D.

Wakefield, Sir Wavell (Marylebone)

Lucas, Sir Jocelyn (Portsmouth, S.)

Raikes, H. V.

Walker-Smith, D. C.

Lucas, P. B. (Brentford)

Rayner, Brig. R.

Ward, Hon. George (Worcester)

Lucas-Tooth, Sir Hugh

Redmayne, M.

Ward, Miss I. (Tynemouth)

Lyttelton, Rt. Hon. O.

Remnant, Hon. P.

Waterhouse, Capt. Rt. Hon. C.

McCorquodale, Rt. Hon. M. S.

Renton, D. L. M.

Watkinson, H.

Macdonald, A. J. F. (Roxburgh)

Roberts, Emrys (Merioneth)

Webbe, Sir Harold

Macdonald, Sir Peter (I. of Wight)

Roberts, Major Peter (Heeley)

White, Baker (Canterbury)

McKibbin, A.

Robertson, Sir David (Caithness)

Williams, Charles (Torquay)

McKie, J. H. (Galloway)

Robinson, Roland (Blackpool, S.)

Williams, Gerald (Tonbridge)

Maclay, Hon. John

Robson-Brown, W.

Williams, Sir Herbert (Croydon, E.)

Maclean, Fitzroy

Rodgers, John (Sevenoaks)

Wills, G.

MacLeod, Iain (Enfield, W.)

Roper, Sir Harold

Wilson, Geoffrey (Truro)

MacLeod, John (Ross and Cromarty)

Ropner, Col. L.

Winterton, Rt. Hon. Earl

Macmillan, Rt. Hon. Harold (Bromley)

Russell, R. S.

Wood, Hon. R.

Macpherson, Major Niall (Dumfries)

Ryder, Capt. R. E. D.

York, C.

Maitland, Comdr. J. W.

Salter, Rt. Hon. Sir Arthur

Manningham-Buller, R. E.

Sandys, Rt. Hon. D.

TELLERS FOR THE NOES:

Marlowe, A. A. H.

Savory, Prof. D. L.

Brigadier Mackeson and

Marples, A. E.

Shepherd, William

Major Wheatley.

Question put accordingly, "That those words be there added."
The Committee divided: Ayes, 281; Noes, 301.

Division No. 107.]

AYES

[7.30 p.m.

Aitken, W. T.

Black, C. W.

Channon, H.

Alport, C. J. M.

Boles, Lt.-Col. D. C. (Wells)

Churchill, Rt. Hon. W. S.

Amery, Julian (Preston, N.)

Boothby, R.

Clarke, Col. Ralph (East Grinstead)

Amory, Heathcoat (Tiverton)

Bossom, A. C.

Clarke, Brig. Terence (Portsmouth, W.)

Arbuthnot, John

Boyd-Carpenter, J. A.

Clyde, J. L.

Ashton, H. (Chelmsford)

Boyle, Sir Edward

Colegate, A.

Assheton, Rt. Hon. R. (Blackburn, W.)

Bracken, Rt. Hon. B.

Conant, Maj. R. J. E.

Astor, Hon. M. L.

Brains, B. R.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Baker, P. A. D.

Braithwaite, Sir Albert (Harrow, W.)

Cooper-Key, E. M.

Baldock, Lt.-Cmdr. J. M.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Corbelt, Lt.-Col. Uvedale (Ludlow)

Baldwin, A. E.

Bromley-Davenport, Lt.-Col. W.

Craddock, Beresford (Spelthorne)

Banks, Col. C.

Brooke, Henry (Hampstead)

Cranborne, Viscount

Baxter, A. B.

Browne, Jack (Govan)

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

Beamish, Major Tufton

Buchan-Hepburn, P. G. T.

Crosthwaite-Eyre, Col. O. E.

Bell, R. M.

Bullock, Capt. M.

Crouch, R. F.

Bennett, Sir Peter (Edgbaston)

Bullus, Wing Commander E. E.

Crowder, Capt. John (Finchley)

Bennett, Dr. Reginald (Gosport)

Burden, F. A.

Crowder, Petre (Ruislip—Northwood)

Bennett, William (Woodside)

Butcher, H. W.

Cundiff, F. W.

Bevins, J. R. (Liverpool, Toxteth)

Butler, Rt. Hon. R. A. (Saffron Walden)

Cuthbert, W. N.

Birch, Nigel

Carr, Robert (Mitcham)

Davidson, Viscountess

Bishop, F. P.

Carson, Hon. E.

Davies, Nigel (Epping)

de Chair, Somerset

Joynson-Hicks, Hon. L. W.

Raikes, H. V.

De la Bère, R.

Kaberry, D.

Rayner, Brig. R.

Deedes, W. F.

Kerr, H. W. (Cambridge)

Redmayne, M.

Dodds-Parker, A. D.

Lambert, Hon. G.

Remnant, Hon. P.

Donner, P. W.

Lancaster, Col. C. G.

Renton, D. L. M.

Douglas-Hamilton, Lord Malcolm

Langford-Holt, J.

Roberts, Major Peter (Heeley)

Drayson, G. B.

Law, Rt. Hon. R. K.

Robertson, Sir David (Caithness)

Drewe, C.

Leather, E. H. C.

Robinson, Roland (Blackpool, S.)

Dugdale, Maj. Sir Thomas (Richmond)

Legge-Bourke, Maj. E. A. H.

Robson-Brown, W.

Duncan, Capt. J. A. L.

Lennox-Boyd, A. T.

Rodgers, John (Sevenoaks)

Dunglass, Lord

Lindsay, Martin

Roper, Sir Harold

Duthie, W. S.

Linstead, H. N.

Ropner, Col. L.

Eccles, D. M.

Llewellyn, D.

Russell, R. S.

Eden, Rt. Hon. A.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Ryder, Capt. R. E. D.

Elliot, Rt. Hon. W. E.

Lloyd, Maj. Guy (Renfrew, E.)

Salter, Rt. Hon. Sir Arthur

Erroll, F. J.

Lloyd, Selwyn (Wirral)

Sandys, Rt. Hon. D.

Fisher, Nigel

Lockwood, Lt.-Col. J. C.

Savory, Prof. D. L.

Fort, R.

Low, A. R. W.

Shepherd, William

Foster, John

Lucas, Sir Jocelyn (Portsmouth, S.)

Smiles, Lt.-Col. Sir Wallet

Fraser, Hon. Hugh (Stone)

Lucas, P. B. (Brentford)

Smithers, Peter (Winchester)

Fraser, Sir Ian (Morecambe & Lonsdale)

Lucas-Tooth, Sir Hugh

Smithers, Sir Waldron (Orpington)

Fyfe, Rt. Hon. Sir David Maxwell

Lyttelton, Rt. Hon. O.

Smyth, Brig. J. G. (Norwood)

Gage, C. H.

McCorquodale, Rt. Hon. M. S.

Snadden, W. McN.

Galbraith, Cmdr. T. D. (Pollok)

Macdonald, Sir Peter (I. of Wight)

Soames, Capt. C.

Galbraith, T. G. D. (Hillhead)

Mackeson, Brig. H. R

Spearman, A. C. M.

Gammans, L. D.

McKibbin, A.

Spence, H. R. (Aberdeenshire, W.)

Garner-Evans, E. H. (Denbigh)

McKie, J. H. (Galloway)

Spens, Sir Patrick (Kensington, S.)

Gates, Maj. E. E.

Maclay, Hon. John

Stanley, Capt. Hon. Richard (N. Fylde)

Glyn, Sir Ralph

Maclean, Fitzroy

Stevens, G. P.

Gomme-Duncan, Col. A.

MacLeod, Iain (Enfield, W.)

Steward, W. A. (Woolwich, W.)

Gridley, Sir Arnold

MacLeod, John (Ross and Cromarty)

Stewart, Henderson (Fife, E.)

Grimston, Hon. John (St. Albans)

Macmillan, Rt. Hon. Harold (Bromley)

Stoddart-Scott, Col. M.

Grimston, Robert (Westbury)

MacPherson, Major Niall (Dumfries)

Storey, S.

Harden, J. R. E.

Maitland, Cmdr. J. W

Strauss, Henry (Norwich, S.)

Hare, Hon. J. H. (Woodbridge)

Manningham-Buller, R. E.

Studholme, H. G.

Harris, Frederic (Croydon, N.)

Marlowe, A. A. H.

Summers, G. S.

Harris, Reader (Heston)

Marples, A. E.

Sutcliffe, H.

Harvey, Air Cdre. A. V. (Macclesfield)

Marshall, Douglas (Bodmin)

Taylor, Charles (Eastbourne)

Harvey, Ian (Harrow, E.)

Marshall, Sidney (Sutton)

Taylor, William (Bradford, N.)

Harvie-Watt, Sir George

Maude, Angus (Ealing, S.)

Teeling, W.

Hay, John

Maude, John (Exeter)

Teevan, T. L.

Head, Brig. A. H.

Maudling, R.

Thomas, J. P. L. (Hereford)

Medlicott, Brig. F.

Thompson, Kenneth Pugh (Walton)

Head lam, Lieut.-Col. Rt. Hon. Sir C.

Mellor, Sir John

Thompson, R. H. M. (Croydon, W.)

Heald, Lionel

Molson, A. H. E.

Thorneycroft, Peter (Monmouth)

Heath, Edward

Monckton, Sir Walter

Thornton-Kemsley, Col. C. N.

Henderson, John (Cathcart)

Moore, Lt.-Col. Sir Thomas

Thorp, Brig. R. A. F.

Hicks-Beach, Maj. W. W.

Morrison, John (Salisbury)

Tilney, John

Higgs, J. M. C.

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

Turner, H. F. L.

Hill, Dr. Charles (Luton)

Mott-Radclyffe, C. E.

Turton, R. H.

Hill, Mrs. E. (Wythenshawe)

Nabarro, G.

Tweedsmuir, Lady

Hinchingbrooke, Viscount

Nicholls, Harmar

Vane, W. M. F.

Hirst, Geoffrey

Nicholson, G.

Vaughan-Morgan, J. K.

Hollis, M. C.

Nield, Basil (Chester)

Vosper, D. F.

Holmes, Sir Stanley (Harwich)

Noble, Cmdr. A. H. P.

Wakefield, Edward (Derbyshire, W.)

Hope, Lord John

Nugent, G. R. H.

Wakefield, Sir Wavell (Marylebone)

Hopkinson, Henry

Nutting, Anthony

Walker-Smith, D. C.

Hornsby-Smith, Miss P.

Oakshott, H. D.

Ward, Hon. George (Worcester)

Horsbrugh, Rt. Hon. Florence

Odey, G. W.

Ward, Miss I. (Tynemouth)

Howard, Gerald (Cambridgeshire)

O'Neill, Rt. Hon. Sir Hugh

Waterhouse, Capt. Rt. Hon. C.

Howard, Greville (St. Ives)

Ormsby-Gore, Hon. W. D.

Watkinson, H.

Hudson, Sir Austin (Lewisham, N.)

Orr, Capt. L. P. S.

Webbe, Sir H. (London)

Hudson, Rt. Hon. Robert (Southport)

Orr-Ewing, Charles Ian (Hendon, N.)

White, Baker (Canterbury)

Hudson, W. R. A. (Hull, N.)

Orr-Ewing, Ian L. (Weston-super-Mare)

Williams, Charles (Torquay)

Hurd, A. R.

Osborne, C.

Williams, Gerald (Tonbridge)

Hutchinson, Geoffrey (Ilford, N.)

Peake, Rt. Hon. O.

Williams, Sir Herbert (Croydon, E.)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Perkins, W. R. D.

Wills, G.

Hutchison, Colonel James (Glasgow)

Peto, Brig. C. H. M

Wilson, Geoffrey (Truro)

Hyde, Lt.-Col. H. M.

Pickthorn, K.

Winterton, Rt. Hon. Earl

Hylton-Foster, H. B.

Pitman, I. J.

Wood, Hon. R

Jeffreys, General Sir George

Powell, J. Enoch

York, C.

Jennings, R.

Price, Henry (Lewisham, W.)

Johnson, Howard (Kemptown)

Prior-Palmer, Brig. O

TELLERS FOR THE AYES:

Jones, A. (Hall Green)

Profumo, J. D.

Major Wheatley and Mr. Digby.

NOES

Acland, Sir Richard

Awbery, S. S

Benn, Wedgwood

Adams, Richard

Ayles, W. H.

Benson, G.

Albu, A. H.

Bacon, Miss Alice

Beswick, F.

Aden, Arthur (Bosworth)

Baird, J.

Bevan, Rt. Hon. A. (Ebbw Vale)

Allen, Scholefield (Crewe)

Balfour, A.

Bing, G. H. C.

Anderson, Alexander (Motherwell)

Barnes, Rt. Hon. A. J.

Blenkinsop, A.

Anderson, Frank (Whitehaven)

Bartley, P.

Blyton, W. R.

Attlee, Rt. Hon. C. R.

Bellenger, Rt. Hon. F. J.

Boardman, H.

1752

1753

Booth, A.

Hall, John (Gateshead, W.)

Moyle, A.

Bottomley, A. G.

Hall, Rt. Hon. Glenvil (Colne Valley)

Mulley, F. W.

Bowen, E. R. (Cardigan)

Hamilton, W. W.

Murray, J. D.

Bowles, F. G. (Nuneaton)

Hardman, D. R.

Nally, W.

Braddock, Mrs. Elizabeth

Hargreaves, A.

Neal, Harold (Bolsover)

Brook, Dryden (Halifax)

Hastings, S.

Noel-Baker, Rt. Hon. P. J.

Brooks, T. J. (Normanton)

Hayman, F. H.

O'Brien, T.

Broughton, Dr. A. D. D.

Henderson, Rt. Hon. A. (Rowley Regis)

Oldfield, W. H.

Brown, fit. Hon. George (Belper)

Herbison, Miss M.

Oliver, G. H.

Brown, Thomas (Ince)

Hewitson, Capt. M.

Orbach, M.

Burke, W. A.

Hobson, C. R.

Padley, W. E.

Burton, Miss E.

Holman, P.

Paget, R. T.

Butter, Herbert (Hackney, S.)

Holmes, Horace (Hemsworth)

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Callaghan, L. J.

Houghton, D.

Paling, Will T. (Dewsbury)

Carmichael, J.

Hoy, J.

Pannell, T. C.

Castle, Mrs. B. A.

Hubbard, T.

Pargiter, G. A.

Champion, A. J.

Hudson, James (Ealing, N.)

Parker, J.

Chetwynd, G. R.

Hughes, Emrys (S. Ayrshire)

Paton, J.

Clunie, J.

Hughes, Hector (Aberdeen, N.)

Pearson, A.

Cocks, F. S.

Hughes, Moelwyn (Islington, N.)

Peart, T. F.

Coldrick, W.

Hynd, H. (Accrington)

Popplewell, E.

Collick, P.

Hynd, J. S. (Attercliffe)

Porter, G.

Collindridge, F.

Irvine, A. J. (Edge Hill)

Price, Philips (Gloucestershire, W.)

Cook, T. F.

Irving, W. J. (Wood Green)

Proctor, W. T.

Cooper, Geoffrey (Middlesbrough, W.)

Isaacs, Rt. Hon. G. A.

Pryde, D. J.

Cooper, John (Deptford)

Janner, B.

Pursey, Cmdr. H.

Corbet, Mrs. Freda (Peckham)

Jay, D. P. T.

Rankin, J.

Cove, W. G.

Jeger, George (Goole)

Rees, Mrs. D.

Craddock, George (Bradford. S.)

Jeger, Dr. Santo (St. Pancras, S.)

Reeves, J.

Crawley, A.

Jenkins, R. H.

Reid, Thomas (Swindon)

Crosland, C. A. R.

Johnson, James (Rugby)

Reid, William (Camlachie)

Crossman, R. H. S.

Johnston, Douglas (Paisley)

Rhodes, H.

Cullen, Mrs. A.

Jones, David (Hartlepool)

Richards, R.

Daines, P.

Jones, Frederick Elwyn (West Ham. S.)

Roberts, Rt. Hon. A.

Dalton, Rt. Hon. H.

Jones, Jack (Rotherham)

Roberts, Emrys (Merioneth)

Darling, George (Hillsborough)

Jones, William Elwyn (Conway)

Roberts, Goronwy (Caernarvonshire)

Davies, A. Edward (Stoke, N.)

Keenan, W.

Robertson, J. J. (Berwick)

Robinson, Kenneth (St. Pancras, N.)

Davies, Rt. Hn. Clement (Montgomery)

Kenyon, C.

Rogers, George (Kensington, N.)

Davies, Harold (Leek)

Key, Rt. Hon. C. W.

Ross, William (Kilmarnock)

Davies, Stephen (Merthyr)

King, Dr. H. M.

Royle, C.

de Freitas, Geoffrey

Kinghorn, Sqn. Ldr. E.

Shawcross, Rt. Hon. Sir Hartley

Deer, G.

Kinley, J.

Shinwell, Rt. Hon. E.

Delargy, H. J.

Lang, Gordon

Shurmer, P. L. E.

Dodds, N. N.

Lee, Frederick (Newton)

Silverman, Julius (Erdington)

Donnelly, D.

Lee, Miss Jennie (Cannock)

Silverman, Sydney (Nelson)

Driberg, T. E. N.

Lever, Harold (Cheetham)

Simmons, C. J.

Dugdale, Rt. Hon. John (W. Bromwich)

Lever, Leslie (Ardwick)

Slater, J.

Dye, S.

Lewis. Arthur (West Ham, N.)

Smith, Ellis (Stoke, S.)

Ede, Rt. Hon. J. C.

Lewis, John (Bolton, W.)

Smith, Norman (Nottingham, S.)

Edelman, M.

Lindgren, G. S.

Snow, J. W.

Edwards, John (Brighouse)

Lipton, Lt.-Col. M.

Sorensen, R. W.

Edwards, Rt. Hon. Ness (Caerphilly)

Logan, D. G.

Soskice, Rt. Hon. Sir Frank

Edwards, W. J. (Stepney)

Longden, Fred (Small Heath)

Sparks, J. A.

Evans, Albert (Islington, S. W.)

McAllister, G.

Steele, T.

Evans, Edward (Lowestoft)

MacColl, J. E.

Stewart, Michael (Fulham, E.)

Evans, Stanley (Wednesbury)

Macdonald, A. J. F. (Roxburgh)

Stokes, Rt. Hon. R. R.

Ewart, R.

McGhee, H. G.

Strachey, Rt. Hon. J.

Fernyhough, E.

McGovern, J.

Strauss, Rt. Hon. George (Vauxhall)

Field, Cast. W. J.

McInnes, J.

Stross, Dr. Barnett

Finch, H. J.

Mack, J. D.

Summerskill, Rt. Hon. Edith

Fletcher, Eric (Islington, E.)

McKay, John (Wallsend)

Sylvester, G. O.

Follick, M.

Mackay, R. W. G. (Reading, N.)

Taylor, Bernard (Mansfield)

Fool, M. M.

McLeavy, F.

Taylor, Robert (Morpeth)

Forman, J. C.

MacMillan, Malcolm (Western Isles)

Thomas, David (Aberdare)

Fraser, Thomas (Hamilton)

McNeil, Rt. Hon. H.

Thomas, George (Cardiff)

Freeman, John Watford)

MacPherson, Malcolm (Stirling)

Thomas, Iorwerth (Rhondda, W.)

Freeman, Peter (Newport)

Mainwaring, W. H.

Thomas, Ivor Owen (Wrekin)

Gaitskell, Rt. Hon. H. T. N.

Mallalieu, E. L. (Brigg)

Thorneycroft, Harry (Clayton)

Ganley, Mrs. C. S.

Mallalieu, J. P. W. (Huddersfield, E.)

Thurtle, Ernest

Gibson, C. W.

Mann, Mrs. Jean

Timmons, J.

Gilzean, A.

Manuel, A. C.

Tomney, F.

Glanville, James (Consett)

Marquand, Rt. Hon. H. A.

Turner-Samuels, M.

Gooch, E. G.

Mathers, Rt. Hon. G.

Ungoed-Thomas, Sir Lynn

Gordon-Walker, Rt. Hon. P. C.

Mellish, R. J.

Usborne, H.

Granville, Edgar (Eye)

Messer, F.

Vermin, W. F.

Greenwood, Anthony (Rossendale)

Middleton, Mrs. L.

Viant, S. P.

Greenwood, Rt. Hon. Arthur (Wakefield)

Mikardo, Ian

Wallace, H. W.

Grenfell, D. R.

Mitchison, G. R.

Watkins, T. E.

Grey, C. F.

Moeran, E. W.

Webb, Rt. Hon. M. (Bradford, C.)

Griffiths, David (Rother Valley)

Monslow, W.

Weitzman, D.

Griffiths, Rt. Hon. James (Llanelly)

Moody, A. S.

Wells, Percy (Faversham)

Griffiths, William (Exchange)

Morgan, Dr. H. B.

Wells, William (Walsall)

Grimond, J.

Morley, R.

West, D. G.

Gunter, R. J.

Morris, Percy (Swansea, W.)

Wheatley, Rt. Hn. John (Edinb'gh E.)

Hale, Joseph (Rochdale)

Mort, D. L.

White, Mrs. Eirene (E. Flint)

1754

1755

White, Henry (Derbyshire, N. E.)

Williams, David (Neath)

Woodburn, Rt. Hon. A.

Whiteley, Rt. Hon. W.

Williams, Rev. Llywelyn (Abertillery)

Woods, Rev. G. S.

Wigg. G.

Williams, Ronald (Wigan)

Wyatt, W. L.

Wilcock, Group Capt. C. A. B.

Williams, Rt. Hon. Thomas (Don Valley)

Yates, V. F.

Wilkes, L.

Wilson, Rt. Hon. Harold (Huyton)

Younger, Hon. K.

Wilkins, W. A.

Winterbottom, Ian (Nottingham, C.)

Willey, Frederick (Sunderland)

Winterbottom, Richard (Brightside)

TELLERS FOR THE NOES:

Willey, Octavius (Cleveland)

Wise, F. J.

Mr. Bowden and Mr. Hannan.

Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Lyttelton: I want to make it quite clear at the outset that we do not object to this Clause because it is a tax upon profits, but because of the effect it will have upon industrial capital. We are against the cupping and bleeding of industry to the present extent. It means that if a company distributes all its profits, the Exchequer takes 66 per cent. If the company distributes none, it takes 52¾ per cent. of those profits This process will destroy industrial capital and the ability of companies to expand.
The Chancellor of the Exchequer the other day tried to waive aside this matter of the depletion of industrial capital. He pointed out the large capital formation which has taken place since the end of the war, in which, of course, he was quite correct. With that I entirely agree, and I would hasten to add that the depletion of industrial capital has not given industry great concern, although it has given them some concern, until the last 18 months when rising prices have had startling effects upon the true profits and fortunes of joint stock companies in industry.
Before I get on to that point, I want to say that we pride ourselves in this period of re-armament on trying to pay our way out of current revenue. I think the Chancellor would claim that is what he is doing; but in that matter, of course, he disagrees very sharply with the hon. Member for Edmonton (Mr. Albu), who treated us to a little speech the day before yesterday, when he produced some rather damp cracker out of his handbag; and he appears, as he is not in his place, to have been trying to get away from the smell the damp cracker ever since.
What the hon. Member for Edmonton says is that in these times companies must raise capital in order to maintain their present assets. There is a grammatical expression called "meiosis", which means saying something very severe in a rather refined way. What the hon. Member for Edmonton, who is a naked
1756
inflationist, says is that companies must raise capital in order to maintain their assets. What he really means is that they must raise capital to pay their taxes, so that that would have very much the same effect, although perhaps not quite the same, if ever the Government floated a defence loan.
Mr. Glenvil Hall: My hon. Friend is not in his place, obviously for a very good reason. The right hon. Member must remember that we were talking then about repairs and the renewal of plant.
Mr. Lyttelton: I am talking about the renewal of plant now.
Mr. Hall: I understood that the right hon. Member was talking about raising money to pay dividends.
Mr. Lyttelton: I was talking about the depletion of industrial capital. Industrial capital is used for the renewal or modernisation of plant or for the expansion of business, so that I am on exactly the same lines of argument as was the hon. Member for Edmonton. I do not wish to be unfair or to say more than that I am sorry he is not in his place. I am sure he has very good reasons for not being here, one of which probably is that he does not want to hear what I have to say. I do not want to make any point of that, but I think I am not being unfair to the argument which he deployed.
The nature of this tax is unsound, at any rate at this level because what we are doing is raising revenue but at the expense of the lifeblood of industry in the next three or four years. As I said during the earlier debate on the Amendment, much the worst effects, unfortunately, of the Profits Tax are on the developing companies, and on the small and medium-sized companies in particular. Above all, the worst effects are on the developing company, because they have not had time to write down their plant and assets to a figure which will enable them to survive without continual recourse to the capital market in a period of still further rises in price which, I think, we are about to see.

1757
I am extremely sorry, but I feel that I must inflict upon the Committee some discussion on this matter of the depletion of industrial capital, which the Chancellor, I think, is making much too light of. As I have already said, I give the right hon. Gentleman the point that there has been a very large capital formation since the war. I do not know of any board room in which this particular matter of the depletion of industrial capital is not a very burning question. Indeed, it is a little odd that the Tucker Committee appointed by the Government should devote a large part of their Report to discussing a problem which the Chancellor says is really of no account. I beg of him, therefore, to believe that it is of some account.
I turn now to some discussion of the matter, for which I must apologise. I think it is true to say that the Institute of Chartered Accountants could not define precisely what is a profit. The reason they cannot do so is because it is something quite outside figures; something much more incalculable than figures is contained in the matter of profits. A profit cannot really be struck until the company or the man who makes a profit is satisfied that, having distributed it, he could still remain in business and carry on his trade.
7.45 p.m.
I saw a most interesting thing in the 1920's: the effect of inflation in Germany upon the small retailers and small industrial businesses. It may sound paradoxical to say so, but they all went bankrupt from making profits. This is what happened. Take the ordinary sort of confectionery or small sweetmeat shop. They bought some marzipan or other sweetmeat for 10,000 marks, and at the given moment they sold the sweetmeats for 100,000 marks. At that moment the Institute of Chartered Accountants would have said that they would have made a profit of 90,000 marks, but when it came to the matter of continuing to trade they could not replace the sweetmeats or marzipan—
Mr. Snow: Bubble-gum.
Mr. Lyttelton: —and so they had to go out of business. Unfortunately, the rent and rates and taxes continued, and they went bankrupt for that reason.
1758
A more industrial example is of the jobbing turner, with a lathe which he bought for £500, who takes in jobbing work and one day is induced by some merchant to sell his lathe for £1,000. Now he cannot get a licence. If he does get a licence, he does not get a lathe; even if he does get a lathe, he probably has to pay £3,000 for it. He is put out of business, just like the confectioner, by taking a profit. That is exactly what will happen if industrial capital is bled to this extent
We heard earlier today something about the retention of profits in industrial companies as being provocative. Quite apart from the fact that the gearing between an increase of distributed profits and an increase in wages is roughly one to ten, a fact on which the Government are generally quite silent, I suggest with all seriousness that the depletion of industrial capital concerns the labour side of industry—that is not a phrase of which I am particularly fond, because I should like to think that we were all on the same side as far as industry was concerned.
It concerns the workman on the bench as much as, if not more than, the shareholder, because one cannot expect to maintain the equipment of industry—and we all know that the horse-power available at the bench is much below what it is in the United States—in a modern condition and keep on renewing it as it should be renewed, unless there is a great inducement to companies to collect undistributed profits.
Our Amendment would have done something to help that particular wish, and I very much hoped that we would get something out of the Chancellor, but he has not given us anything. Over the next three or four years the Government are going to ask a great many workmen to work with tools which are unworthy of their skill. I remember in the war having seen some operations carried on by highly skilled men—the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) will remember the incidents of which I am thinking—at an immense waste of their skill, things which could have been done perfectly well with automatics. One saw that happening particularly in small businesses, because they had been through a severe depression, no doubt, and had been obliged to let their industrial capital, their handling facilities and their machine tools get into a state which was far from what

1759
it should have been. We really must not lose sight of the fact that at this rate of Profits Tax industrial capital is going to be bled.
I have said before that in my own company we have had to make reserves of more than the depreciation allowed by the Revenue in order to keep our assets in some sort of line with replacement costs. I am not making any party or political point; this is a matter which, even in long-established companies, is causing the utmost anxiety. It is far worse in those companies from which we must expect a lot of our economic strength to be derived in the near future, who are perhaps exploiting new processes of manufacturing new materials, as in the plastic industry, or are engaged in one of the thousand and one new processes of invention which have been thrown up even since the war. These are the concerns who will feel the thing most.
In our view it is not only to the longest established and matured industrial concerns that we have to look, in the policy of trying to get lively and expanding enterprises in all the new fields which modern science is opening up. I hope that the Chancellor will have second thoughts between now and Report on the possibility of giving a little more impetus to that. Even if we accept, though reluctantly, the proposal for a distributed Profits Tax, I think he ought to be prepared to reduce the undistributed Profits Tax. No doubt it is very tempting in the interests of revenue, and I do not blame him for that, but I think he is getting revenue now in a way which will cause a great deal of dislocation in the future.
The Chancellor and his predecessors have had a very good deal out of the industrial companies over the question of dividends. He asked for something which was not enforceable in law, or which he did not wish to enforce by law, and he got a good response. After three years his reply is a swingeing tax on the distributed profits of the very people on whose good will he has relied during the past three years.
Mr. S. N. Evans: The right hon. Member for Aldershot (Mr. Lyttleton) always puts the case for large-scale industry with considerable ability and in a genial manner, but I do not think we ought to
1760
allow ourselves to be unduly depressed about what he had to say with regard to industrial companies reserves and the effects which will flow from their depletion. A paradox of the moment is that strange contradiction between the pessimism of the proprietors of businesses and the rugged health of their balance sheets.
I do not regard this question of profits with any hostility. Indeed I myself am a business man and, of course, business men are citizens, taxpayers and parents like everyone else. I certainly start out with no hostility to the earning of legitimate profits, but I am bound to say that at the moment profits seem to me to be getting a little out of hand. I would say therefore that this tax is, because of that, an anti-inflationary measure.
With regard to what was said earlier about the observation of the Economic Secretary that it would be provocative to lessen the tax and therefore worsen the position of the wage earners compared with shareholders, I think that was a legitimate observation. After all, we must have some regard to the forces at work in the world. Today we have an educated proletariat, and if we are not prepared to give a fair crack of the whip to the workers, we may have very much more trouble than this tax will bring.
I was looking at that excellent paper the "Daily Herald" which this morning had something to say about current profits. It points out that in the food group Unilever profits are £20 million up on 1949; I.C.I, made £29 million against £15,830,000; Dunlop Rubber Co. £17½ million compared with £9,400,000—
Mr. Lyttelton: I think there had been a large increase of capital between the two periods.
Mr. Evans: Yes. I am particularly interested in Dunlop Rubber, because I pay about £2,000 a year for Dunlop tyres. I must say I was a bit shocked when I saw their balance-sheet, because over the past 12 months, between 1st January, 1950, and 1st January, 1951, there were four price increases which amounted in all to 75 per cent.; £20 tyres on 1st January, 1950, were £35 by 1st January, 1951—a 75 per cent. increase in prices of tyres; 85 per cent. increase in profit. It seemed to me there must be some connection between these two things. There seems

1761
also to be some irresponsibility, having regard to an inflationary trend, more evident than at any other time in the last six years. This I fear much more than the Russians. I cannot find any excuse at all for the severe increases amounting to 75 per cent. in 12 months when as the result of them profit in the same year goes from £9 million to £17 million, an increase of 85 per cent.
Mr. Lyttelton: There is a great deal in the argument which the hon. Member is deploying. I think that profits are too buoyant. If there were any sign of the Government resisting or turning down the rise in prices, industrialists would act differently.
Mr. Evans: We have no assurance of that. I am trying to rebut the right hon. Gentleman's argument that we are skimming off so much fat that companies will not have the money left to effect the necessary replacements and expansions.
Mr. Pitman: May I ask the hon. Gentleman whether in the figures he has given he has taken into account the very considerable additional capital issues?
Mr. Evans: I am not unaware of the £10 million new capital which was mentioned this afternoon. I have no check on that, but I accept what was said.
Mr. Lyttelton: On Dunlop's?
Mr. Evans: Oh, yes. I could give half a dozen illustrations but I take Dunlop's—they were mentioned by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) in order to save the time of the Committee. Supposing we give 10 per cent. on the new capital or indeed 20 per cent.; that would mean another £2 million accounted for but the profit would still be £6 million up on 1949. The point I am making is that there cannot have been justification for all these 1950 price increases—10 per cent.; 12½ per cent.; 17½ per cent.; 20 per cent.—having regard to the balance sheet which is produced at the end of the year.
I think it is about time we industrialists—and I call myself an industrialist—started to have a higher regard for the needs of the nation than some of us are exhibiting at the moment. Until we do we are presenting ourselves as an everlasting temptation to the Chancellor. The fact of the matter is that, due to a long
1762
period of rationed scarcity, we have acquired a "cost plus" psychology. We have got to the stage where we do not wait until our costs are increased; we anticipate the increase and get in first. This is very dangerous and I think it is about time that the Federation of British Industries and all the trade associations got together to arrive at a new policy in this matter. Until we do, it seems to me to be the duty of the Chancellor to skim off a good deal of this profit, which I am bound to say I regard as almost immoral.
8.0 p.m.
I would say to hon. Members opposite that it is not beyond the bounds of possibility that one day there may be a transference of political power. Then this problem would be theirs. This nonsense cannot go on. We have done very well in the last six years, but our economy could be wrecked by an inflationary spiral. Those in charge of industry and commerce generally are those best fitted to give a lead in the matter of arresting this inflationary trend, which I must say has me terrified.
My final word must be that unless we industrialists are prepared to play the game in this matter and to think in terms of cutting costs and prices instead of continually passing the buck to the consumer, the Chancellor will have to think very deeply about what he should do. I listened to the hon. Member for Mitcham (Mr. Carr) the other day discussing another matter—the increased Petrol Tax. He said that that would mean that the cost of a pound of shoe polish would go up by 1d. Inevitably, he said, this would have to be passed on to the consumer. That is the psychology of industry at the moment. Everything has to be passed on to the consumer. We seem to have lost the habit of thinking in terms of increased turnover and greater efficiency absorbing increased costs.
As these profit figures come out day after day, they frighten me very much. We have an intelligent, educated proletariat today watching these matters. It is no good the Opposition seeking to disguise this. We are going to have a tough time for a good many years. The psychology that prevails throughout the nation will decide whether or not we shall get by. The huge increase in profits which has been revealed as the result of

1763
1950 trading are a strong deterrent to men pulling their weight in the factories. For all those reasons, I uphold the increase which the Chancellor has introduced, and I hope that my fellow industrialists and commercial men will have serious regard to the inflationary trend which is developing and to which they only can put an end.
Mr. Maudling: The hon. Member for Wednesbury (Mr. S. N. Evans) was, I think, referring to the accounts of the Dunlop Rubber Company. Surely, he should have pointed out that a very large proportion of the increased profit shown in their profit and loss account was what the Americans refer to as "inventory profit," and that the increased profit was counter-balanced to a very large extent by the increased cost of holding and replacing their essential stock in trade. Although the profit was counterbalanced by the increased cost of building and replacing stock, yet that profit itself carried tax at the rate of 50 per cent. or 60 per cent.
I want to refer to two matters which concern this Clause. The first is a rather technical point, and the second is the broader point of the position of business savings. I do not think that so far any reference has been made to the special position of companies which have a high gearing in their capital structure—a high proportion of preference shares. It has been pointed out on more than one occasion that the present system of Profits Tax, where preference dividends are not allowable as a charge, must inevitably bear hardly on companies which have a high gearing and a high amount of preference capital.
That was bad enough when the figure for distributed profits stood at 30 per cent. Now it is being increased to 50 per cent., and the effect on a number of companies, which—for reasons which they are perfectly entitled to have and which have never been challenged—have chosen a capital structure with a high proportion of preference capital, will, in many cases, be to put them in very serious difficulties. The Chancellor ought to bear that in mind. I hope that he will be able to refer to that point if he replies to the debate. I hope that he will go further than the remark made by the present Attorney-General on this point some years ago, when he said that, after all, the companies
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could always change their capital structure, because in practice I do not think it is such a simple matter as that.
I want to come back to the question of company savings. I use the word "savings" rather than the word "reserves," because I think that the word "reserves" has tended to be a little confusing on more than one occasion. Our main objection to the present level of Profits Tax—the two levels combined in this Clause—is that it falls too heavily on company savings.
We argue that company savings at the moment are not adequate. Company savings are not solely the concern of the capitalist. They are just as much the concern of those employed in the businesses. It is only necessary to look at some modern factories, where one may find as much as £5,000 of capital equipment installed for every man employed, to realise how vitally important it is, if employment is to be maintained with a high level of wages, that the companies should be in a position to modernise and maintain their capital equipment.
This is not merely what the Economic Secretary to the Treasury seemed to refer to as a matter affecting a very narrow section of the community. This affects the community as a whole. If the savings of business are not adequate, then the country as a whole will suffer. After all, I think the Committee realises that in present circumstances, apart from the substantial body of saving that flows through the private enterprise insurance companies, the only other main source of individual saving is the saving made by industrial companies.
Earlier today my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) quoted some figures from the Economic Survey which showed, I think, conclusively, that after full provision had been made for stock appreciation, there would not be enough left over to companies to maintain their assets in view of the vastly increased, and increasing, costs of those capital assets. It is the main burden of our argument on the Profits Tax that at the moment companies are not in a position at the present level of taxation to maintain out of their reserves their capital assets.
That argument has been answered on one or two previous occasions by, for

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example, the hon. Member for Edmonton (Mr. Albu) and by the Chancellor, who rather tended to confirm the hon. Member's point of view, and it was referred to in the Millard Tucker Committee Report. The line of reply is, so far as I can see, roughly, first, that that is not true and that companies have got adequate reserves and, secondly, that even if it were true, it is a good thing and should be so.
The hon. Member for Edmonton seemed rather to take the second point of view. He seemed to argue—basing his remarks partly, I think, on the Millard Tucker Committee Report—that if one accepted the principle that a business was entitled to maintain its physical assets in being before it was considered as arriving at a profit for Profits Tax purposes, then one would be allowing the holder of equity shares a privilege in the face of inflation which was not possessed by any other member of the community. That is an argument which I think the Millard Tucker Committee used and which, on the face of it, is attractive. But, surely, it is not an accurate one.
Let us take, for instance, people who, instead of putting their money into ordinary shares, put it into the ownership of a house. The man who bought a house on a mortgage from a building society, which was a very reasonable thing to do many years ago, has seen the money value of his house go up as the real value of his mortgage has gone down. Perhaps the hon. Member for Edmonton has a motor car. Anyone who has been in possession of a motor car has gained by the rise in prices in recent years.
I think it was the hon. Member for Coventry, East (Mr. Crossman), who, in one of those broadcasts in which I am told he is rather adept, was asked what one should do with one's savings in order to deal with this rise in prices. He gave the advice that one should put one's money in wine, clothing and land. I do not know whether that is the right order. That was on the basis that those who might be the holders of ordinary shares would benefit when prices rose.
The second point that underlines the argument is the belief that inflation is with us for ever. If prices always go on rising, there is much to be said for the line of argument taken by the hon. Member for Edmonton, but I doubt if either he or
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the Chancellor would be prepared to state that in their opinion inflation is with us for good and that prices will go on going up for ever. Perhaps, if they do think so, they will be prepared to say so.
Surely it is true that the people who gain when prices go up are those who lose when prices come down? The distinction which should be drawn in industrial concerns is surely the distinction to be drawn between what I might call money stocks and stocks which represent physical assets. For example, let us take debentures, which give the right to the holder to a certain amount of capital, plus a certain payment of income expressed in terms of money. The holder of the equity is really entitled to a share of the productive capacity of the assets of the business, and these two classes of shareholders or loan stock holders are in completely different positions.
The people who hold stock expressed in terms of money gain when prices go down because the value of their stock in terms of money remains, while the value of that stock in real terms increases. The holder of the equity is the person who will gain when prices go up and will have to take the risk of losing when prices come down, and the argument, surely, is that the person who holds the equity, who has really invested his money in a certain productive capacity, is entitled to say, before his income is assessed for Profits Tax purposes, that he is entitled out of the earnings of these productive assets to maintain that amount of productive capacity.
Mr. Ellis Smith: I have listened with great sympathy all the afternoon to this story that is being told, and I should now like the hon. Gentleman to reply to a point I want to bring out. Let us suppose that we allowed the companies to retain more, or that the tax was less. What guarantee have we that the capital assets would be maintained? That is the first point. My second question is this. What guarantee have we got that more would be spent on maintaining the efficiency of the capital equipment, because those publications of the Young Conservatives a few years ago contained the greatest indictment against the hon. Gentleman and his friends, because the concession which they are now advocating has not been used in the past for the purpose of maintaining the efficiency of industry?
Mr. Maudling: I was intending to come to the question of the use that would be made of increased company savings, and, in particular, the question of the increase being used to maintain the existing earning capacity of the company.
Surely, if there were a larger amount of industrial savings, it is obvious that they would be applied to maintaining the earning capacity of the companies, especially if the owners cannot maintain it at the present level. I was arguing that before the Revenue strike a profit on which the holder of the equity should be charged tax he is entitled to maintain out of the profits the physical level of production; otherwise, we get the ridiculous position, which is the final conclusion of the argument of the hon. Member for Edmonton, that a man may go on making profits and yet be completely broke. Although on the Stock Exchange it is said "You cannot go broke making a profit," in modern Socialist economics this seems to be the case. I think the situation would be simplified a little if we permitted the introduction of no-par value shares, because the present system leads to much confusion on this particular subject.
8.15 p.m.
I turn now to the other argument used by the Chancellor in his rather vigorous speech on Clause 13, in which I thought he was trying to follow the motto "Anything Nye can do I can do better." He seemed to say that we could not be right in saying that the working capital of industrial companies is being run down, while, at the present moment, the demand for capital equipment is in excess of capital equipment producing capacity. It is a very powerful argument, although I do not think that it is by any means conclusive.
I think it would have been fairer if the Chancellor had referred to the cash position rather than to the reserves position of companies, the distinction between which has been pointed out by one of my hon. Friends. If he had been a little more forthcoming in the past on the question of bonus shares and the capitalisation of reserves, he perhaps would not have been so misled on this point. A very high proportion of companies' reserves at the moment is held against actual physical assets, either its plant or stock-in-trade, and the only reserve which they have, in a true sense,
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is the money they can use at once to meet any difficulty that arises. The disposable reserves, the reserves that can be thrown into the balance are very much smaller indeed than the total reserves in the conventional use of the word.
I think the Chancellor's next point was that, although the companies had plenty of reserves, if a particular company did not possess adequate cash with which to buy capital equipment they could at any rate get more money by borrowing, and that there would be no difficulty either in raising capital or in obtaining loans at the bank, and that no such difficulties had been experienced.
That, again, appears to be a strong argument, but I think it has many disadvantages. The first is that it is a bad thing to go on heaping additional charges on the same assets in present circumstances, particularly as such charges are of an increasingly rigid kind. The sort of money which can be raised now is loan stock, which reduces flexibility of management. It is not right to say that it is quite simple, that if a company has not got the adequate cash they can soon borrow it, because it is not in that way that the maintenance of industrial assets should be carried out if industrial concerns are to maintain financial health.
One last point about the relation of the yield of tax to the Budgetary problem. I suggested earlier, in interrupting the Economic Secretary, that to tax company savings is merely transferring savings from one pocket to another, or rather from a company holder to the Chancellor of the Exchequer. I referred to the action of the Chancellor on the question of the initial allowances, on which he said that the result of cancelling the initial allowances would be that it would bring in to the Exchequer £170 million, but what he did not explain was that that £170 million was not a contribution to the monetary problem, but was merely a means of discouraging capital investment.
If the Chancellor is right in saying that a transfer of savings in that case has no effect on the main inflationary problem, then, surely, in this case as well, a transfer of savings has no effect on the inflationary problem. The question is whether the savings being made by industry should remain in their hands or be transferred to the State. There are more ways of destroying private industry

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than by nationalisation itself. The destroying or the grabbing by the State of savings is just as effective, and probably more insidious.
Mr. Jenkins: The hon. Member for Barnet (Mr. Maudling) always gives us extremely persuasive arguments, and his speech this evening has been no exception. I felt that, so far as his point dealing with preference shares was concerned, there was something in what he said. If, as I hope will be the case—because I think this Protfis Tax is a good tax—we are going to continue it for a long time, I hope my right hon. Friend will consider the position of preference shares under it.
Fairly early in his speech, the hon. Member for Barnet seemed to be afraid that we on this side of the Committee were not paying enough attention to the question of corporate savings. I would not attempt to minimise their importance in our economy at the present time. They have been, and still are, a most essential part of the means of paying for the investment programme.
There are two aspects of these savings, and we must consider this debate against their background. In other words, the savings of companies not only help to pay for the investment programme, but it must also be remembered that they belong to individual shareholders. While, from a national point of view, there may be a short-term advantage in their being as high as possible, there is also an important distributive effect in so far as it encourages the capital wealth of the individual shareholders. One cannot consider the first point without considering the second.
The hon. Member for Barnet put, forward some of the points previously put forward by the right hon. Member for Aldershot (Mr. Lyttelton). I thought he put them forward rather less vehemently and more persuasively. The key note of the right hon. Gentleman's speech was that at the present moment we were bleeding industrial capital. That represents a point of view which we hear very frequently from hon. Members opposite, but which is greatly exaggerated.
Nobody is going to argue that with costs rising, depreciation allowances are in themselves sufficient to meet replacement
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costs as opposed to historical costs. In this connection, my hon. Friend the Member for Edmonton (Mr. Albu), in an extremely interesting speech the other night, went a little further. I think it would be wrong to suggest that in recent years depreciation allowances, plus the taxed profits which companies have been able to put to reserve, have not been more than adequate to maintain the capital of those companies intact.
I think that has certainly been the case, and, indeed, if that is not the case, then it is very strange indeed that companies should at the present time be indulging in this great spate of dividend increases. After all, if company capital is not being maintained intact at the present time, what are we to believe? We are to believe that at the present time many companies are indulging in a great wave of dividend increases, of paying dividends out of capital, not in a legal, but certainly in a real sense.
I cannot reconcile the point of view put forward from the other side that industry is barely able to keep going at the present time with these sweeping increases which have been taking place. After all, the responsibility for maintaining industrial capital intact is not solely that of my right hon. Friend. Surely, in the first place, it is the responsibility of the people who control it. Someone suggested that all these dividend increases were essential if companies were to preserve their credit and to raise new capital.
Is the hon. Gentleman who suggested that seriously contending that many companies who have not raised their dividends in recent months and years have not been able to raise substantial sums of money?
Mr. Pitman: It must be obvious that if a company cannot maintain its dividends and does not pay those dividends, its ability to raise capital is compromised to an impossible degree.
Mr. Jenkins: The hon. Gentleman cannot really be following what I am saying. I was not discussing a situation where a company was not paying a dividend or was reducing its dividend, but the situation which has been the typical one in recent months in which a company already paying a substantial dividend has chosen this moment when, according to hon. Members opposite, company resources are being bled and depleted as

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never before, to make substantial additional payments to their shareholders.
Mr. Pitman: I do not want the hon. Gentleman to misunderstand me. He was quoting an hon. Friend of mine and saying what he had said. I heard him say that it was necessary for companies to maintain their dividends, not to increase them.
Mr. Jenkins: If the hon. Member was arguing the case of non-existing dividends being reduced, he was certainly tilting at windmills.
Colonel J. R. H. Hutchison: Has the hon. Gentleman really calculated how many dividends have been reduced? While I agree that a number of companies have increased their dividends, there is a number of companies whose dividends have been reduced, and the balance is not nearly so impressive as the hon. Gentleman is trying to make out.
Mr. Jenkins: I should have thought that the general situation was very much more as I have been describing it than as the hon. and gallant Gentleman suggests.
The hon. Member for Barnet tried to join issue with my hon. Friend the Member for Edmonton—who has been much mentioned, and who I see is just joining us in this debate—on the question of whether or not the present system was unfair to the equity shareholder. He quoted a number of examples of individuals who bought personal effects such as houses, cars, or whatever they might be, and said that those people were enjoying the benefits which he is claiming for equity shareholders, and which my hon. Friend denied to them. I do not think that just because there are certain people in this category—and after all the amount of money spent on houses, cars or other things is very small compared with the total amount of money invested—who have had this good fortune, that is an argument for extending it to the equity shareholders.
Again, if it is suggested that this tax at the present time is very unfair to the ordinary shareholder and to risk taking, it is a curious fact that at the very moment when the tax has been put up so sharply one sees one of the biggest switches into equities that there has been for a long time. There is no evidence
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here that equity shareholders are being unfairly treated at the present time.
8.30 p.m.
The hon. Member for Barnet also replied to some points made by my right hon. Friend the Chancellor in his speech a night or two ago about the important thing being the physical limitation on investment. I thought he made a number of interesting points, but I do not think they were really convincing. So many hon. Members on that side of the Committee—though not generally the hon. Member for Barnet—continually talk as though if the Chancellor had been able over the last few years to make concessions of various sorts to industry there was no physical limit to what they could have done in the way of investment.
On the other hand, everybody knows that over the period since this Government has been in office, and certainly at the present time, investment is and has been taking place to the very limit of the physical resources available. That being so, I do not see how one can argue that one can secure any improvement in investment and consequently any increase in productivity as a result of a concession here and in this way.
Hon. Members deploy arguments, some of them moderately convincing, most of them not very convincing, but they never face the fundamental point that on this issue one is not only dealing with the question of how much one might put to investment, but that all these proposals for concessions on the Profits Tax are proposals to carry through a great redistribution of income in favour of the wealthier classes at the present time. That seems to me absolutely intolerable at a moment when, with the cost of rearmament, one is facing a slight overall fall in the standard of living. Until hon. Members face this point, discuss it and they too find an answer to it, they cannot be taken seriously at all on these Profits Tax proposals of theirs.
Sir Ian Fraser: The hon. Member for Stechford (Mr. Jenkins) has devoted a good deal of his speech to making the point that the rises that have taken place in the values of equity shares on the Stock Exchange are due to increased dividends that have been paid or to increased confidence in the future, which I suppose he

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implies means confidence in the Government. I suggest that these increases in the value of equity shares are due to a very great fear that money will continue to lose its value. In other words, they are a hedge against inflation and no more than that.
As to the point that dividends have been increased and that that in itself is a reason for justifying an increase of Profits Tax, I shall try to deal with that in the general argument to which I want to address myself for a few moments. A profit is not without honour save in Socialist Britain, and this is an extremely dangerous situation. The Clause which we are discussing confirms and increases the Profits Tax, and I want to devote a few moments to examining deleterious effects and to seeking, if I can—with all friendliness since they feel very strongly on this matter—to persuade hon. Members opposite that a profit is really a very good thing not only for those who enjoy it but for the whole community.
One of the very great dangers for our whole economic system and for the living of our people in the future is the idea which hon. and right hon. Members opposite have sedulously and ignorantly cultivated for so long—I say "ignorantly" because if it were not it would be quite inexcusable—that the making of profit is a social crime. Quite the contrary is the case. The test of the efficiency, desirability, public support, and power of survival of any business lies in this question, "Can it make a profit?" In commerce and industry the difference between one side of the account and the other is called a profit. In public affairs it is sometimes called a surplus.
But whether one is the owner of a business of one's own or a director of a public concern, or the National Coal Board or even the Chancellor of the Exchequer, one's most important concern at the end of the financial year is to see that one has more on one side than the other. Even in the case of the trade union secretary or the manager of a slate club it is equally important to have more on the one side than on the other. If not, one either closes down or is fortunate enough to receive a subsidy from the head office, or, if one is a nationalised industry, from the taxpayer. I do not think it can be denied that if there is not more on the one side than on the other,
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the industry cannot continue unless somebody pays for it.
The making of a profit, therefore, is something which we should all approve, applaud and praise, and the national financial policy should be directed towards encouraging those who make a profit and to rewarding them, both personally and corporately. That is my principal objection to the Profits Tax and especially to an increase in it. I agree that this method, together with others, may be used to pay for re-armament, but I do not think we should allow the tax to go by without comment, especially in view of the party political capital which will be made out of it in various parts of the country by Socialists who will claim credit among working men and women because they have increased the profits tax, as if it were a clever thing or a wise thing to do. I suggest that it is a most unfortunate thing to have to do, because the making of a profit is the mainspring of the whole of the wealth of this land.
May I ask hon. Members to consider what is the source of the wealth from which we have paid for the good things we have had in the past six years? A great part of it has come out of the profits of our Victorian and earlier ancestors. Without their thrift, their investment, their incentive to make a fortune for themselves and their families, we should not have had the money to pay for many of the schemes which have been of great value to us in the past five or six years.
Mr. Ellis Smith: How did they get it?
Sir I. Fraser: By work. All wealth arises out of work. [HON. MEMBERS: "Hear, hear."] There is no other source of wealth, and it is the accumulation of the organised wealth of the Victorian era which has enabled us to survive two wars and to engage in a very large social programme since the second war. I think I have sufficiently made my point and I am only too happy about the approval which it receives from hon. Members opposite.
The second source from which the wealth has come to us is the capitalist country of the United States. Great sums have come from there. The third source is, of course, our own industries—the 80 per cent. of our work and labour and sources of supply and activity in this land which has remained free. These industries have gone on earning money, paying

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dividends, making profits. Without that there would have been no contribution towards the expenditure of the past six years.
Can anyone tell me of one example in which a Socialist industry has made any money? All those industries do is spend it. It is the capitalism of the Victorian era and the present day and the capitalism of the United States which have kept us alive in spite of a Socialist Government, and when we adopt an attitude of mind that all who make a profit and seek to do better for themselves and their families are doing something anti-social, something which is to be penalised by Chancellors of the Exchequer, we are making a great mistake; and if we adopt that attitude long enough we shall rob ouselves of the main source of our wealth.
A wise trade union leader will take his men into battle for higher wages, and, if need be, will use the ultimate sanction of the strike, when the company concerned is full of profits. He would be a fool if he took them out when there were no profits. He knows that perfectly well. Consequently, the making of a profit is not only an advantage to the people who own the equity—providing they can get increased dividends—but it is also of very great advantage to the men employed in the business, because the one time to go to the employer to get more money, or, if need be to strike, is when he is full of money and making good profits, and especially when he is paying a higher dividend.
Let trade union leaders, therefore, remember that to make allies of the Government is to sell the men who put them into power. What they should do instead is to encourage the making of profits by businesses—
The Temporary Chairman (Mr. Diamond): I am sorry to interrupt the hon. Gentleman, but he must realise that we are not discussing the theory of profits, but the Profits Tax.
Sir I. Fraser: Yes, Mr. Diamond. I shall do my best to confine myself to your Ruling, which I greatly appreciate. In so far as this tax will limit profits and dividends, I maintain that it is very bad for the economy of the country, and that to make profits is best not only for the equity holders and the managers but also for the men employed in the businesses.
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That is why I do not want this Clause to stand part. I hold that regard for the law of supply and demand is a wise policy, and that in so far as we depart from it we fly in the face of human nature. If taxation of the kind which we now see exemplified in this Clause had existed in the last 50 years we should never have had the 101 smaller businesses arise out of the enterprise and initiative of the small men and develop until they began to export and make wealth for our land by trading all over the world. This kind of attitude exemplified by this Clause is the kind of attitude that, unless it is stopped, is going to bring our country to ruin. We cannot fly against human nature. We had much better make it work for us.
Mr. M. Philips Price: The hon. Member for Morecambe and Lonsdale (Sir I. Fraser) has introduced a rather controversial party note to our discussion on this Clause which, I think, is rather unfortunate. [HON. MEMBERS: "Why?"] Up to now the discussion has been of a dispassionate and objective nature. I am sorry he introduced that note. However, he did say something which was quite worth listening to. He thought that investment in equities and real estate was a hedge against inflation. There is something in that. I agree that that proves all the more the need to clip that hedge, as the Chancellor is doing in this Clause. To continue the agricultural metaphor, he is not laying that hedge, but clipping it, because it is this rush of money into real estate and equities which follows a rise in prices and profits, which is just the thing it is vital for a Chancellor of the Exchequer to look into, as my right hon. Friend is doing in this Clause.
The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) said a very interesting thing when he referred to what went on in Germany during the inflation following the First World War. I happened to be in Germany at that time. He said that the inflation that went on then ruined thousands of people in small enterprises. I would add something further. The inflation that went on then gave enormous profits to men like Thyssen—the big industrialists. Although it may have made things difficult for some small people in business because they could not get bank credit, or were not, so to speak, credit-worthy, in the main all that I saw during that period was very large profits

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being made and a very unhealthy state of affairs being created, very largely because there were no taxes levied on profits, or even on incomes, commensurate with the needs of the nation. We are not faced with an inflationary period as serious as that.
8.45 p.m.
Mr. Ellis Smith: Nowhere near it.
Mr. Price: I agree, nowhere near it. Still, it is quite right that every Chancellor of the Exchequer should watch in a period like this to see that things do not get out of hand.
The Opposition have, in much of their argument on this Clause, expressed fear of the depletion of industrial capital. If that were true, it would certainly be a matter for very serious concern, but it is difficult to be disturbed about the effects of this if one examines the published balance sheets of companies and the profits made by them, even if they are not distributed. I do not think there is anything wrong in making profits, and I am very glad that in his Budget speech the Chancellor mentioned the fact that in a mixed economy such as we have today, and are likely to have for a long time to come, the profit motive must be taken into consideration. I do not deny that for one moment.
During the war I was a member of the Select Committee on National Expenditure. The hon. Member for Croydon, East (Sir H. Williams) was also a member, as was Sir George Schuster, a distinguished Member of the House at that time. I remember that we went into the question of profits on war contracts, and we found that profits were of a varying nature. Some companies made higher profits because they were the most efficient, and companies making the least profits were often the most inefficient. But there are two aspects to profits. There are profits caused by efficient operations and profits caused by the economic condition of the country over which the entrepreneur has no control; he is merely a beneficiary without any activity on his part.
The first type of profit we want to encourage as much as possible—the profit due to enterprise, to using the latest methods, and to understanding the "know-how." Today I do not say all, but at any rate some of the profit is due to conditions entirely outside the control
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of a company, and due to rising world prices. If things are not to get out of hand, the Chancellor must watch this, and I think he has done the right thing, because he has increased the tax, not on undistributed profits but on distributed profits.
I remember in the autumn of 1949, when the former Chancellor of the Exchequer, Sir Stafford Cripps, raised the Profits Tax from 20 per cent. to 30 per cent., hon. Gentlemen opposite were full of prophecies of woe about what would happen. The figures that appear in the Economic Survey and in the White Paper on National Income and Expenditure do not bear that out. It is true that the hon. and learned Member for Wirral (Mr. Selwyn Lloyd), who opened the debate on the first Amendment today, quoted some figures of personal savings and argued that those figures showed that they had gone down over the last few years. He quoted from Table 26 of the Economic Survey. But that Table also shows that over the last 12 months undistributed profits have gone up £221 million.
The same thing is also shown in the National Income and Expenditure figures (tables 9 and 10). The total income of companies over the last 12 months has gone up £218 million. The dividends and interest on profits distributed have gone up by only £24 million. That is very reasonable. I think that it shows that the incentive of the Chancellor's Profits Tax is against the distribution of profits and for putting profits to reserve. The same statement shows that taxes and tax reserves have gone up by £74 million and undistributed profits have gone up also by £74 million.
All that seems to show that it is a wise thing to encourage putting to reserve for the purpose of improving a business in whatever way it may be necessary. I think that there is no doubt that companies, rather than relying on raising money on the Stock Exchange, are increasingly financing their improvements by methods of this kind. I think that is desirable, and that this Clause gives a further incentive by raising the tax on distributed profits from 30 per cent. to 50 per cent. and keeping the 10 per cent. tax on undistributed profits where it is. I hope, therefore, that the Clause will be approved without any further objections being raised to it.
Mr. Henry Strauss: I am sorry that the hon. Member for Stechford (Mr. Jenkins) has gone, because I think that he performed a very useful function in repeating almost every fallacy that has ever been made on the subject of this tax. Perhaps I might say, even at this late date, as I took no part in any of the Budget discussions and have not spoken on the Finance Bill so far, how much I enjoyed the Chancellor's original Budget speech, which seemed to me to be far the best exposition of a Budget we have heard since the Socialist Government came to power. The weakest point, I thought, in his exposition was when he came to justify the proposals now contained in this Clause. I think that the fallacies of which he was then guilty were repeated subsequently both by him and by the Financial Secretary to the Treasury.
Perhaps the most absurd example was in a speech by the Financial Secretary in the Budget debate, from which I will quote a sentence in a few moments. Of course, the background to our discussion was well expressed by the hon. Member for Wednesbury (Mr. S. N. Evans) in an earlier speech in the discussion in which I am now taking part. He expressed alarm at the background of inflation, and that alarm, I think, is shared by every thoughtful person in the Committee. It has been expressed, to do him justice, by the Chancellor himself, and it has been expressed frequently, of course, from these benches.
What is the proposition underlying this Clause when we remember this background of inflation? It is that there is something improper in the nominal raising of a dividend as measured in a depreciated currency even if the real value of that dividend may be less than before. May I quote a statement which I think is the acme of absurdity? It was uttered by a man of great intellectual attainments, namely, the Financial Secretary to the Treasury and, therefore, is all the more remarkable. This is what he said in the debate on 12th April last:—
"In the last few months we have also been urged to consider other ideas such as statutory limitation of dividends, a capital gains tax and so forth."
Now mark the next sentence:
"Indeed, in a period of rising prices and profits some case can be made out for all
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these things."—[OFFICIAL REPORT, 12th April, 1951; Vol. 486, c. 1214.]
Of course, if he had said in a period of stationary prices or of falling prices the sentence would have made sense, but to say that there is a great objection to a person receiving more money at a time of rising prices is to say something, which, on the face of it, is ridiculous.
Which hon. Member opposite, who has experience of trade unions—and many hon. Members opposite are honourably connected with trade unions—would say to their trade union members that they must never want more money at a time of rising prices? They would be laughed out of court. What is, therefore, the proposition underlying that quotation from the Financial Secretary? It is that, at a time of inflation, at a time when the value of money is continuously going down, it is improper if the return to the investor does not drop equally rapidly. If it is maintained or slightly increased hon. Members opposite pretend to be very much shocked. That is quite absurd.
The hon. Member for Edmonton (Mr. Albu) the other night made remarks on this subject, to which many of my hon. Friends have alluded. I was surprised that the Chancellor of the Exchequer went out of his way, as I thought, to identify himself with the sentiments contained in that speech. What did the hon. Member for Edmonton say? Let me again use his exact words, and these appeared on 6th June, 1951, when he said this:
"If this is not done, the result is that the ordinary shareholders maintain the real value of their investment in money terms, and they are the only section of the investing community, or the saving community, that does so."—[OFFICIAL REPORT, 6th June, 1951; Vol. 488, c. 1143.]
The proposition of the hon. Member for Edmonton is that if a man believes in British industry so much that he places his money in it, he ought to lose his money as rapidly as he would have lost it if he had subscribed to a gilt-edged security when the Minister of Local Government and Planning was at the Exchequer. But is that really so desirable? Is it desirable that a belief in British industry should necessarily be followed by the person who has, that belief losing his money? I say it is quite undesirable.
He was quite wrong in saying that every person at a time of inflation could

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protect his savings or investments in equities unless the Chancellor of the Exchequer insisted on such taxes. As was pointed out by my hon. Friend the Member for Barnet (Mr. Maudling), every person who buys any object of value, no matter what it is, finds that the value of the object goes up as the price of money goes down. The only people to be penalised in this way are the people who do not put their money into buying commodities of various values, but who believe in British industry and put their money into that.
9.0 p.m.
Do we really desire that there should be no kind of hedge against inflation? It was an inadequate hedge though the hon. Member for Stechford seemed to think that people were doing very well indeed who invest in ordinary shares. He left out three-quarters of the picture.
What is the other side of the rise in the nominal value of ordinary shares? It is the fall in the gilt-edged market. People are trying to get rid of any sort of money claim, as the value of money depreciates, and they are putting their money into equities as some sort of hedge, but an inadequate one, against inflation. I wonder whether hon. Gentlemen opposite ever thought of this? Do they imagine there is any investor who puts his money into ordinary shares today who would not much rather that the nominal value of the shares that he bought remained stationary and that the £ maintained its value, rather than that the nominal value of the shares went up and the £ fell even faster?
Some figures were given by my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in moving the first Amendment. May I give certain other figures, taken from the White Paper on National Income and quoted by the "Economist"? One of them was given by the hon. Member for Gloucester, West (Mr. Philips Price), in the speech that he has just made. Dividends and interest are up by £24 million, from £803 million to £827 million. After the deduction of tax that means roughly an increase of £13 million in the total of dividends and interest, as recorded in the Government White Paper. That figure takes no account of what new capital may have been put into industry.
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What is the comparative figure for wages and salaries, after that deduction? The comparative figure to the £13 million for dividends and interest is £377 million. Those are figures which ought to be borne in mind when hon. Members are considering—considering fairly, if they wish to do so—this increase in dividends of which so much has been said.
Let me give some of the consequences of the doctrine enunciated by the Financial Secretary to the Treasury. I was sorry at the beginning of my speech, when I alluded to the Financial Secretary, that he was not present. I am glad to see that he has now returned. The doctrine to which I referred was that in the passage which I quoted from his speech, about there being much to be said for limitation of dividends at a time of rising prices, a statement which I described as "nonsense." How much nonsense it is will be seen from the considerations which follow.
The doctrine must be that no matter how much the currency depreciates, the ordinary shares should continue to receive no more than the same nominal amount in the depreciated currency. Why should the ordinary shareholder be subjected to that continuous loss? The loss to him as an individual is obvious. It is completely unfair, but what about the penalising of the efficiency of the company? The hon. Member for Gloucester, West, approved, as I should have thought a man of his common sense would approve, such profits as are made as a result of efficiency, but those profits, if they are allowed to benefit the shareholders at all, are subject to the penal tax which the hon. Member is supporting. It is a penalty on efficiency.
What is the influence on saving? Unless the real value of the dividend as contrasted with the nominal value of the dividend can be maintained and occasionally increased, it gives no hedge at all against inflation, and the hon. Member apparently does not wish it to give any hedge against inflation. How is the company to finance itself when it needs more money? It will be entirely unable to do so by a further issue of ordinary shares. If this doctrine is long held, it will be able only to borrow money. If it borrows money on debentures, it means that when there is a slump that company can be brought to an end by

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those who have a claim on the debentures. They may be able to wind up the company. It is surely a much healthier state for British industry that equities should have a good reputation.
I repeat what I said last year, that I detest inflation and that I believe that as a result of inflation a great many profits are too easily made. I would stop inflation and, with it, easily made profits, and the profits that were then made would necessarily be the reward of efficiency. But if there is to be inflation with a continuous fall in the value of the £, then I should prefer British industry to be making good profits in the depreciated currency rather than not to be making such profits, because it would be disastrous if at a time of falling currency the nominal amount of profits earned did not increase.
The Economic Secretary said on an earlier Amendment that any modification of the Clause would be provocative. I believe that hon. Members opposite sometimes think that I am provocative, but I often wish that, if they were provoked, they would be provoked into thought. The provocation which the Economic Secretary deplored was really a provocation to which hon. Members of all parties ought to respond by explaining to any who do not understand them some of the elementary facts about company profits and finances. I have never taken that very low view of the worker in industry which some hon. Members seem to take in thinking that he is incapable of understanding the simple proposition that if everything a company has to buy to keep its plant up-to-date and in condition is more expensive, more money has to be placed to reserve. The worker is quite capable of understanding all those things, and I believe that he understands them much better than many junior Ministers do.
In so far as they are easily made, profits are easily made today as a result of inflation, and the result of this tax is twofold. First, it results in great difficulty in placing a sufficient sum to reserve; and, secondly, it constitutes such a drain on current savings that they have to be employed on keeping capital assets in being. Indeed, if the hon. Member for Edmonton is to be believed, they
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would be insufficient even for that purpose; according to him, further capital has to be raised for that object. These current savings are subject to a drain to keep capital assets in being instead of being available for the financing of new enterprises, and the financing of new enterprises is not unimportant if this country is to maintain its great commercial and industrial position.
I apologise to the Committee if I have detained it too long. Let me say at once that I accept the defence for this tax put up on two or three occasions by the Chancellor of the Exchequer and by the Financial Secretary to the Treasury. They have not, however, produced a direct defence for the tax. Their defence may be paraphrased in these words: "We thought of two or three things that were even sillier and decided not to do them." That is the defence which was produced by the Financial Secretary. I agree that limitation of dividends would have been silly, I agree that a capital levy would have been silly, but that does not mean that this tax is not a bad one.
Sometimes one gets into such a position that one has to tolerate even a bad tax. We have got into that position today, but I hope that hon. Members will not go on thinking it is a good tax, because it is not necessarily even good Socialism to take that view. At the time, long ago, when the Minister of Local Government and Planning had not so far forgotten all the economics he had learned at Cambridge—which enabled him to get a second class—he wrote a book on this subject in which he said what an extraordinarily bad tax it was. So to think the Profits Tax a bad tax does not even make one a bad Socialist, it only means that one is not a completely ignorant Socialist.
Do not let hon. and right hon. Gentlemen opposite be too frightened of recognising the truth about this tax. It is a bad tax. It is absurd that a man of the intellectual prominence of the Financial Secretary should have uttered the sentence I have quoted that
"in a period of rising prices and profits some case can be made out for all those things."
In a period of rising prices and profits! If the hon. Gentleman will look at that sentence carefully, he will come to the conclusion that it would have made much more sense if he had said, "In a period

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of stable prices or of falling prices. "The fact that he said it about rising prices made the sentence nonsensical. However I do not blame the hon. Gentleman for that because, as I said, the whole defence of the Government for this tax is, "We thought of three things that were even sillier and have not adopted any of them."
Mr. Gaitskell: We have now spent over five hours on this Clause and perhaps it would be a good thing if I were to sum up the arguments on both sides. We have had a number of excellent speeches, and points for and against have been thoroughly canvassed. I want particularly to refer to the speeches of my hon. Friends the Members for Wednesbury (Mr. S. N. Evans) and Stechford (Mr. Jenkins), and also the speech of the hon. Member for Barnet (Mr. Maudling). I thought those three were extraordinarily good.
9.15 p.m.
The case for this tax is fairly familiar to the Committee. I explained in my Budget Statement that one of the principles that I thought we ought to follow, in considering where to raise taxation, was to look for those sectors of the economy which were likely to be doing relatively well; in other words, we would see where incomes were rising and we would skim off there rather than go for the incomes which were stationary or falling.
I think it would be generally accepted that during a period of rising prices and during a period of re-armament, one would certainly expect a relative increase in the share of profits, before tax, in the distribution of the national income. As it happens, the facts which I submitted at the time of the Budget equally I think are not in dispute. I said then that the estimated increase in profits for 1950 over 1949 was 14 per cent., which was, of course, substantially greater than the increase in the national income and, therefore, indicated that profits were taking a larger share.
In passing, I might say that the main reason, I think, for that development was obviously the devaluation of the pound and the effect that it had, particularly on the export industries. The actual company figures that have come out recently seem to me to bear out what I have just said. But I do not think there is very
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much doubt that in the period to come, the tendency for profits—profits before tax, that is—to go up in relation to other sources of income is likely to continue.
Indeed, so far as the more recent figures go, they confirm that. For example, for the first four months of 1951 the declared profits are, in fact, just 14 per cent. above the corresponding period of 1950, but in May the increase in profits for those companies whose results were declared in that month was no less than 27 per cent. above the corresponding figure for last year, giving us so far for this year an average of rather over 19 per cent. It will, of course, be within the knowledge of hon. Members that, in a number of well-known cases, large companies have made exceptionally large profits. I agree that in one or two cases that has been associated with an increase in their capital.
Mr. Frederic Harris: In quoting those figures, is the right hon. Member omitting altogether the increased capital in relation to the one year against the other?
Mr. Gaitskell: I was dealing with the one year against the other. Even including an allowance for the increase in capital, that would certainly not make any material difference to the figures.
The case of Dunlop's was referred to earlier today. If we take, for example, Shell, the increase in profits is 35 per cent.; in the case of Unilever it is 60 per cent., and in the case of Imperial Chemical Industries it is also 60 per cent.; in the case of Courtaulds, it is double. Those are all very striking figures—nobody can question that. Even when we allow for increases of capital, they show a quite remarkable development.
I have already told the Committee what I think the explanation is, but those figures certainly are not just a bagatelle. Indeed, I think that figures of that sort suggest that the argument, to which I will come in a moment, which was the main argument used by the Opposition, that really these increased profits were necessary to finance the higher cost of replacement or the higher value of stocks—in other words, that a lot of them were really no more than the higher cost of the stocks—cannot be sustained. They suggest, to me at any rate, that the profits,

1787
even if we allow for that—I am not for the moment saying whether or not we should—were quite exceptionally large. Therefore, I maintain that what has happened since the Budget has certainly in no way weakened the case we put forward then for the increase in the Profits Tax.
I argued in favour of it, in particular this year, that it would be for some a restraining influence on the payment of dividends. I should like the Committee to be perfectly clear on this. I did not in fact say I considered it necessary that there should be an absolute reduction in dividends, but I did say that this tendency for dividends to increase, figures rising from 10.7 per cent. over the previous year in January; 9.7 per cent. in February; 14.4 per cent. in March and a much lower figure if we go back to the last part of 1950—
Mr. Churchill: Can the right hon. Gentleman mention at this stage what would be the effect on the Revenue, which I believe takes 70 per cent. of the profits, if there were a substantial measure of reduction of prices leading to a reduction of profits? Surely he ought to touch on that point during his argument.
Mr. Gaitskell: I was explaining that so far as this year was concerned—I do not think that the right hon. Gentleman heard, perhaps he came in a little after I had explained the point—my main motive was to try to restrain the increase in dividend payments which were being made. I pointed out in my Budget Statement how these have been increasing, and increasing in view of the larger volume of profit which was being earned.
I have already given the figures to the House. In April the increase over the previous year was 8.5 per cent. and therefore, though it is obviously very unwise to take one month alone and say that is conclusive it is perhaps some indication that the rate at which dividend payments had been increasing was being slowed down. I am glad to say that in May, despite these rather striking figures which have appeared in the Press, the rate of increase over last year was 8.8 per cent. In dividend payments at any rate we are just holding the line.
Mr. Selwyn Lloyd: I take it that by giving that last figure the Chancellor has accepted the figure I gave for April of
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8½ per cent. Would he also accept the other figure of capital employed in business, an increase of 12½ per cent.?
Mr. Gaitskell: I should think it more difficult to measure capital employed in business, and I would prefer not to accept that figure until I had seen the basis of calculation. Hon. Members will probably agree that if we look at this sector of the economy and say that incomes are going up, we should tax on distributed rather than on undistributed profits. We should put an increase on distributed profits. I think that perhaps that has already had some influence. At the same time I would not press the argument there too far.
Hon. Members opposite have argued, both during their discussion on the Motion, "That the Clause stand part of the Bill" and on the discussion on the earlier Amendment, for a reduction on the tax on undistributed profits. They seem to assume, or many of them seem to assume, that that would be bound to increase the corporate savings to exactly the same extent. In other words, the money the company saved by not having to pay such a high rate of tax on undistributed profits would be put to reserve.
That I cannot accept. The hon. Member for Chippenham (Mr. Eccles) did see the point made by my hon. Friend the Economic Secretary that one cannot possibly argue that a change in the rate of tax on undistributed profits would not affect the position of the company as to what dividends it would distribute. In fact, the company would have so much extra money not being paid in tax that it might decide to put it into dividends. It might not. If it did, it would have to pay a certain proportion in tax, but it might nevertheless do so.
Mr. Churchill: I must interrupt again. Does the right hon. Gentleman assign sufficient weight to the fact that he gets between 60 per cent. and 70 per cent.—perhaps he would give the figure—of all these profits? If he does, why does he allow this howl against profit-making to continue without mentioning the fact that he is the profiteer?
Mr. Gaitskell: I am afraid that the right hon. Gentleman does not seem to be able to follow my speech very well. I apologise if perhaps it has not been altogether as clear as he would have liked. He has not been here during the debate

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earlier, and it is much more difficult for him to pick it up. I gave the exact figure, I think, during my speech on the Second Reading of the Finance Bill, but I dare say that the right hon. Gentleman was not here on that occasion either.
Mr. Churchill: Perhaps the right hon. Gentleman would do me the kindness to state now, as we are discussing the Motion "That the Clause stand part of the Bill"—and this is a most important matter—what is the accepted figure for the share which the Revenue takes from the profits of companies?
Mr. Gaitskell: The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) gave the figures this afternoon. As far as I know, they were quite correct, and I do not wish to challenge them. Perhaps the right hon. Gentleman will read his right hon. Friend's speech tomorrow.
Mr. Churchill: With great respect to the Chancellor of the Exchequer, my right hon. Friend stated the case for the Opposition. What is important is to have it from the lips of the Chancellor of the Exchequer, representing as he does the administration of the day.
Mr. Gaitskell: Of course, it all depends on what proportion of profits are distributed. One could take various figures. The right hon. Member for Aldershot took one case where the profits were wholly distributed and another where no profit was distributed. As far as I recollect, the precise figures were, that when all was distributed, it was 66 per cent., and when none of it was distributed it was—
Mr. Lyttelton: It was 52¼ per cent.
Mr. Gaitskell: Yes.
Mr. Churchill: There is complete agreement on the facts.
Mr. Gaitskell: Although the right hon. Gentleman may be concerned to prolong the proceedings, I do not think that this is getting us much further. Perhaps he would allow me to continue now that I have explained the position to him.
The main argument of the Opposition is that, despite these large profits, industry is being bled of her life blood and that there is a shortage, or that there is going to be a serious shortage, of industrial
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capital. All I can say is that, in the first place, I do not think the figures I have given really bear that out. [HON. MEMBERS: "You do not know."] Hon. Members say that we do not know. I concede that no evidence has been produced that that is the case.
Let me say, however, that I realise that hon. and right hon. Members opposite are perfectly sincere when they say that they believe that is happening. But it is a very natural tendency when taxation is involved to say that something is doing national damage when in fact it is damaging one personally. Everybody does that. It is natural enough. I do not think that there is any serious evidence that industry is really being destroyed in this way. When we say, "Look at the demand for equipment at the moment; look at the amount of investment that companies wish to carry out," then the Opposition say, "But you wait and see. It will not always be like that." That is an argument they can put forward but they must not expect it to weigh very heavily with us, because there is no evidence. They are merely saying that they believe that in due course this will come upon us.
Mr. Osborne: May I give an example? The right hon. Gentleman says that we are bringing forward hypothetical cases. I give him the case of everyone engaged in the woollen industry today. Wool which before the war was 3s. a lb. today costs 23s. a lb. If we are to do the same amount of work and employ the same amount of labour, we want £1 extra working capital for every lb. of wool we use. Therefore, if we are to provide the same employment and have the same turnover, a company carrying, say, half a million lbs. weight of yarn wants £500,000 more of working capital. If the Chancellor takes it away in undistributed Profits Tax we are, therefore, that much weaker and not able to do our job.
9.30 p.m.
Mr. Gaitskell: I could not in any case accept the view that necessarily the financing of the higher priced stocks must be done out of profits. I really think that that is an extraordinary doctrine to put forward, especially at a time of very large increases in wool prices. It really is quite impossible to give, as indeed the Tucker Report shows quite clearly, this privileged

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position to the equity holder and the industrialist. That is their objection to this proposal, as the hon. Member probably knows.
I think I had better say at once, since hon. Members opposite keep on saying that all true profits would take account of the fall in the value of money, that the Tucker Committee completely disagreed with that argument, and said that there was not even a very strong basis for it, and, as far as the accountancy bodies are concerned, they certainly did not share that view. The idea that profits should be so re-defined as to take account of the fall in the value of money was completely turned down by the Tucker Committee.
Mr. Summers Mr. Summers rose—
Mr. Gaitskell: I really cannot give way again; I have given way several times.
The next point is this. If, in fact, companies are really so short of capital at the moment, as the hon. Member for Chippenham conceded, it really is indefensible that they should be increasing their dividend payments in this way and on the scale which some of them are doing. The hon. Member for Chippenham admitted that that was so. When it comes to a tax of this kind, nevertheless, that is wrong, although the companies are behaving badly. That is really what the hon. Member is saying, and he completely ignores the whole background of the situation, which my hon. Friend the Member for Wednesbury so clearly sketched in.
The fact is that, in present circumstances—and I have never for a moment disguised it from the House or the Committee—we are faced with a dangerous situation, most dangerous, I think, because of the possibility of a costs inflation; that is to say, an inflation in which we get wages, prices and profits following one another in a spiral which eventually leads the ordinary citizen into a feeling that the value of money will go on falling and lead to greater expenses, a lower rate of saving and so on.
We have discussed this on many occasions, and I have no wish to disguise my own anxieties on the whole situation. If we look at it from that angle, we have to ask ourselves what sort of consequence there is going to be from that situation if we relieve industry and the equity holder
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of this proposed increase in tax, and I have no doubt at all that it would be a most disastrous consequence. It is all very well for hon. Members opposite to say that I should have explained it to the trade unions, pointing out how important it was that we should have higher profits. With some of these profits as they are at the moment, it would take a lot of explaining.
Mr. Churchill: Does the right hon. Gentleman set himself to judge whether the profit has been legitimately, properly or economically acquired in each case or not, before he takes the 66 per cent. which the Exchequer pockets of all these profits?
Mr. Gaitskell: I have never taken the view that these profits were immoral, but I do think they are fortuitous. They are general, or at least many of them are; that is to say, they are the result of a general world situation, and not particularly the result of the efficient management of individual companies. I am not saying that the companies are not efficient, but the general level of profits is certainly the result of world factors. That is all I am saying.
I should like to bring the Committee back to this very real problem. If we are worried about the dangers of inflation, as I know hon. Members opposite are, then we have to consider the reactions. This is what "The Times," in a leader today which hon. Members may have seen, had to say about this:
"The high level of profits, and the weakening of dividend restraint, are a constant source of exasperation to almost the whole trade union movement."
I beg hon. Members opposite not to overlook that. If we are going to ask our friends to exercise restraint in putting forward wage claims, then it is no use at the same time exasperating them first of all by large profits and then by taking off the tax we have just imposed. I think that any serious consideration of this problem must take that very much into account.
I am not quite clear exactly what attitude the Opposition take to this Clause. I understand—of course, we have already voted on it—that they would like to see a reduction in the tax on undistributed profits. We have discussed that already, and I do not propose to say any more about it. But are they or are they not

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in favour of the Clause? I gathered from the right hon. Gentleman that they were not proposing to oppose it, but I must tell him that in his absence a number of his hon. Friends expressed considerable hostility towards the Clause. Well, we shall be interested to see which way they vote on it. Are they going to accept the Government's proposal for an increase in the Profits Tax, despite all the anxieties they have put to us today? In that case, I must say that I do not think much of their anxieties.
Mr. Lyttelton: I am sure the right hon. Gentleman does not wish to be unfair. We have already proposed a reduction in the undistributed Profits Tax. It was our main contribution. He had better wait and see what we do on the other matter.
Mr. Gaitskell: Of course, I shall wait and see with considerable interest what the right hon. Gentleman does. If hon. Members opposite do not go into the Lobby against it, the right hon. Gentleman will not expect me to take seriously the criticisms made against the Clause by hon. Members opposite.
Mr. Lyttelton: The right hon. Gentleman really must be fair. We have proposed a reduction in the total tax which would amount to about £33 million. That is a substantial sum, and it is misleading to the Committee to say that we are hostile without wishing to reduce the tax.
Mr. Gaitskell: If, in fact, the right hon. Gentleman is in favour of the tax, I do not know what the argument is about. Certainly the speeches from the other side have been against it. The issue is really this. In present circumstances we say it is absolutely the right thing to do to increase the tax on distributed profits quite considerably. The Opposition say, in effect, that the Profits
Tax is already too high. They claim that there is a shortage of capital for industry. We say there is no sign of that. They say, "never mind, it will appear some time." Well, we are not satisfied with an argument of that kind. We keep our eye far more on the immediate situation which we know is dangerous, and we are not going to be persuaded by the Opposition to drop a tax in favour of equity shareholders in a time of inflation, because we know that were we to do that it would only make the inflationary danger far greater than it is already.
Several Hon. Members Several Hon. Members rose—
The Chairman: The Question I have to put is—
Mr. Osborne: On a point of order. When we first started discussing the Amendments, I understood you to say, Major Milner, that if we held our peace over the narrow points contained in them, there would be ample opportunity for discussion on the Question "That the Clause stand part of the Bill." A certain number of us have been in the House the whole time hoping to exercise that right. Shall we not get the opportunity of doing so?
The Chairman: I really cannot listen to that sort of argument on every occasion. This debate has now continued, on the Clause as well as on the Amendments, since before 4 o'clock. I am sure it is the desire in all parts of the Committee to make progress.
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place, and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 295: Noes, 289.

Division No. 108.]

AYES

[9.40 p.m.

Acland, Sir Richard

Bartley, P.

Braddock, Mrs. Elizabeth

Adams, Richard

Bellenger, Rt. Hon. F. J.

Brook, Dryden (Halifax)

Albu, A. H.

Benn, Wedgwood

Brooks, T. J. (Normanton)

Allen, Arthur (Bosworth)

Benson, G.

Broughton, Dr. A. D. D.

Allan, Scholefield (Crewe)

Beswick, F.

Brown, Rt. Hon. George (Belper)

Anderson, Alexander (Motherwell)

Bevan, Rt. Hon. A. (Ebbw Vale)

Brown, Thomas (Ince)

Anderson, Frank (Whitehaven)

Bing, G. H. C.

Burke, W. A.

Attlee, Rt. Hon. C. R.

Blenkinsop, A.

Burton, Miss E.

Awbery, S. S.

Blyton, W. R.

Butter, Herbert (Hackney, S.)

Ayles, W. H.

Boardman, H.

Callaghan, L. J.

Bacon, Miss Alice

Booth, A.

Carmichael, J.

Baird, J.

Bottomley, A. G.

Castle, Mrs. B. A.

Balfour, A.

Bowdon, H. W.

Champion, A. J.

Barnes, Rt. Hon. A. J.

Bowles, F. G. (Nuneaton)

Chetwynd, G. R.

Clunie, J.

Hynd, H. (Accrington)

Price, Philips (Gloucestershire, W.)

Cocks, F. S.

Hynd, J. B. (Attercliffe)

Proctor, W. T.

Coldrick, W.

Irvine, A. J. (Edge Hill)

Pryde, D. J.

Collick, P.

Irving, W. J. (Wood Green)

Pursey, Cmdr. H.

Collindridge, F.

Isaacs, Rt. Hon. G. A.

Rankin, J.

Cook, T. F.

Janner, B.

Rees, Mrs. D.

Cooper, Geoffrey (Middlesbrough, W.)

Jay, D. P. T.

Reeves, J.

Cooper, John (Deptford)

Jeger, George (Goole)

Reid, Thomas (Swindon)

Corbel, Mrs. Freda (Peckham)

Jeger, Dr. Santo (St. Pancras, S.)

Reid, William (Camlachie)

Cove, W. G.

Jenkins, R. H.

Rhodes, H.

Craddock, George (Bradford, S.)

Johnson, James (Rugby)

Richards, R.

Crawley, A.

Johnston, Douglas (Paisley)

Robens, Rt. Hon. A.

Crosland, C. A. R.

Jones, David (Hartlepool)

Roberts, Goronwy (Caernarvonshire)

Crossman, R. H. S.

Jones, Frederick Elwyn (W. Ham, S.)

Robertson, J. J. (Berwick)

Cullen, Mrs. A.

Jones, Jack (Rotherham)

Robinson, Kenneth (St. Pancras, N.)

Daines, P.

Jones, William Elwyn (Conway)

Rogers, George (Kensington, N.)

Dalton, Rt. Hon. H.

Keenan, W.

Ross, William

Darling, George (Hillsborough)

Kenyon, C.

Royle, C.

Davies, A. Edward (Stoke, N.)

Key, Rt. Hon. C. W.

Shawcross, Rt. Hon. Sir Hartley

Davies, Harold (Leek)

King, Dr. H. M.

Shinwell, Rt. Hon. E

Davies, Stephen (Merthyr)

Kinghorn, Sqn. Ldr. E.

Shurmer, P. L. E.

de Freitas, Geoffrey

Kinley, J.

Silverman, Julius (Erdington)

Deer, G.

Lang, Gordon

Silverman, Sydney (Nelson)

Delargy, H. J.

Lee, Frederick (Newton)

Simmons, C. J.

Dodds, N. N.

Lee, Miss Jennie (Cannock)

Slater, J.

Donnelly, D.

Lever, Leslie (Ardwick)

Smith, Ellis (Stoke, S.)

Driberg, T. E. N.

Lewis, Arthur (West Ham, N.)

Smith, Norman (Nottingham, S.)

Dugdale, Rt. Hon. John (W. Bromwich)

Lewis, John (Bolton, W.)

Snow, J. W.

Dye, S.

Lindgren, G. S.

Sorensen, R. W.

Ede, Rt. Hon. J. C.

Lipton, Lt.-Col. M.

Soskice, Rt. Hon. Sir Frank

Edelman, M.

Logan, D. G.

Steele, T.

Edwards, John (Brighouse)

Longden, Fred (Small Heath)

Stewart, Michael (Fulham, E.)

Edwards, Rt. Hon. Ness (Caerphilly)

McAllister, G.

Stokes, Rt. Hon. R. R.

Edwards, W. J. (Stepney)

MacColl, J. E

Strachey, Rt. Hon. J.

Evans, Albert (Islington, S. W.)

McGhee, H. G.

Strauss, Rt. Hon. George (Vauxhall)

Evans, Edward (Lowestoft)

McGovern, J.

Stross, Dr. Barnett

Evans, Stanley (Wednesbury)

McInnes, J.

Summerskill, Rt. Hon. Edith

Ewart, R.

Mack, J. D.

Sylvester, G. O.

Fernyhough, E.

McKay, John (Wallsend)

Taylor, Bernard (Mansfield)

Field, Capt. W. J.

Mackay, R. W. G. (Reading, N.)

Taylor, Robert (Morpeth)

Finch, H. J.

McLeavy, F.

Thomas, David (Aberdare)

Fletcher, Eric (Islington, E.)

MacMillan, Malcolm (Western Isles)

Thomas, George (Cardiff)

Follick, M.

McNeil, Rt. Hon. H.

Thomas, Iorwerth (Rhondda, W.)

Foot, M. M.

MacPherson, Malcolm (Stirling)

Thomas, Ivor Owen (Wrekin)

Forman, J. C.

Mainwaring, W. H.

Thorneycroft, Harry (Clayton)

Fraser, Thomas (Hamilton)

Mallalieu, E. L. (Brigg)

Thurtle, Ernest

Freeman, John (Watford)

Mallalieu, J. P. W. (Huddersfield, E.)

Timmons, J.

Freeman, Peter (Newport)

Mann, Mrs. Jean

Tomney, F.

Gaitskell, Rt. Hon. H. T. N.

Manuel, A. C.

Turner-Samuels, M.

Ganley, Mrs. C. S.

Marquand, Rt. Hon. H. A.

Ungoed-Thomas, Sir Lynn

Gibson, C. W.

Mathers, Rt. Hon. G.

Usborne, H.

Gilzean, A.

Mellish, R. J

Vernon, W. F

Glanville, James (Consett)

Messer, F.

Viant, S. P.

Gooch, E. G.

Middleton, Mrs. L.

Wallace, H. W.

Gordon-Walker, Rt. Hon. P. C.

Mikardo, Ian.

Watkins, T. E.

Greenwood, Anthony (Rossendale)

Mitchison, G. R.

Webb, Rt. Hon. M. (Bradford. C.)

Greenwood, Rt. Hn. Arthur (Wakefield)

Moeran, E. W.

Weitzman, D.

Grenfell, D. R.

Monslow, W.

Wells, Percy (Faversham)

Grey, C. F.

Moody, A. S.

Wells, William (Walsall)

Griffiths, David (Rother Valley)

Morgan, Dr. H. B.

West, D. G.

Griffiths, Rt. Hon. James (Llanelly)

Morley, R.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Griffiths, William (Exchange)

Morris, Percy (Swansea, W.)

White, Mrs. Eirene (E. Flint)

Gunter, R. J.

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

White, Henry (Derbyshire, N. E.)

Hale, Joseph (Rochdale)

Mort, D. L.

Whiteley, Rt. Hon. W.

Hall, John (Gateshead, W.)

Moyle, A.

Wigg, G.

Hall, Rt. Hon. Glenvil (Colne Valley)

Mulley, F. W.

Wilcock, Group Capt. C. A. B.

Hamilton, W. W.

Murray, J. D.

Wilkes, L.

Hannan, W.

Nally, W.

Wilkins, W. A.

Hardman, D. R.

Neal, Harold (Bolsover)

Willey, Frederick (Sunderland)

Hargreaves, A.

Noel-Baker, Rt. Hon. P. J.

Willey, Octavius (Cleveland)

Hastings, S.

O'Brien, T.

Williams, David (Neath)

Hayman, F. H.

Oldfield, W. H.

Williams, Rev. Llywelyn (Abertillery)

Henderson, Rt. Hon. Arthur (Tipton)

Oliver, G. H.

Williams, Ronald (Wigan)

Herbison, Miss M.

Orbach, M.

Williams, Rt. Hon. Thomas (Don V'lly)

Hewitson, Capt. M.

Padley, W. E.

Wilson, Rt. Hon. Harold (Huyton)

Hobson, C. R.

Paget, R. T.

Winterbottom, Ian (Nottingham, C.)

Holman, P.

Paling, Rt. Hon. W. (Dearne Valley)

Winterbottom, Richard (Brightside)

Holmes, Horace (Hemsworth)

Paling, Will T. (Dewsbury)

Wise, F. J.

Houghton, D.

Panned, T. C.

Woodburn, Rt. Hon. A.

Hoy, J.

Pargiter, G. A.

Woods, Rev. G. S.

Hubbard, T.

Parker, J.

Wyatt, W. L.

Hudson, James (Ealing, N.)

Paton, J.

Yates, V. F.

Hughes, Emrys (S. Ayrshire)

Peart, T. F.

Younger, Hon. K.

Hughes, Hector (Aberdeen, N.)

Popplewell, E.

Hughes, Moelwyn (Islington, N.)

Porter, G.

TELLERS FOR THE AYES:

Mr. Pearson and Mr. Sparks.

1796

1797

NOES

Aitken, W. T.

Fisher, Nigel

McCorquodale, Rt. Hon. M. S.

Alpert, C. J. M.

Fort, R.

Macdonald, A. J. F. (Roxburgh)

Amery, Julian (Preston, N.)

Foster, John

Macdonald, Sir Peter (I. of Wight)

Amory, Heathcoat (Tiverton)

Fraser, Hon. Hugh (Stone)

Mackeson, Brig. H. R.

Arbuthnot, John

Fraser, Sir Ian (Morecambe & Lonsdale)

McKibbin, A.

Ashton, H. (Chelmsford)

Fyfe, Rt. Hon. Sir David Maxwell

McKie, J. H. (Galloway)

Assheton, Rt. Hon. R. (Blackburn, W.)

Gage, C. H.

Maclay, Hon. John

Astor, Hon. M. L.

Galbraith, Cmdr. T. D. (Pollok)

Maclean, Fitzroy

Baker, P. A. D.

Galbraith, T. G. D. (Hillhead)

MacLeod, Iain (Enfield, W.)

Baldock, Lt.-Cmdr. J. M.

Gammans, L. D.

MacLeod, John (Ross and Cromarty)

Baldwin, A. E.

Garner-Evans, E. H. (Denbigh)

Macmillan, Rt. Hon. Harold (Bromley)

Banks, Col. C.

Gates, Maj. E. E.

Macpherson, Major Niall (Dumfries)

Baxter, A. B.

Glyn, Sir Ralph

Maitland, Cmdr. J. W.

Beamish, Maj. Tufton

Gomme-Duncan, Col. A.

Manningham-Buller, R. E.

Bell, R. M.

Granville, Edgar (Eye)

Marlowe, A. A. H.

Bennett, Sir Peter (Edgbaston)

Gridley, Sir Arnold

Marples, A. E.

Bennett, Dr. Reginald (Gosport)

Grimston, Hon. John (St. Albans)

Marshall, Douglas (Bodmin)

Bennett, William (Woodside)

Grimston, Robert (Westbury)

Marshall, Sidney (Sutton)

Bevins, J. R. (Liverpool, Toxteth)

Harden, J. R. E.

Maude, Angus (Ealing S.)

Birch, Nigel

Hare, Hon. J. H. (Woodbridge)

Maude, John (Exeter)

Bishop, F. P.

Harris, Frederic (Croydon, N.)

Maudling, R.

Black, C. W.

Harris, Reader (Heston)

Medlicott, Brig. F.

Boles, Lt.-Col. D. C. (Wells)

Harvey, Air Cdre. A. V. (Macclesfield)

Mellor, Sir John

Boothby, R.

Harvey, Ian (Harrow, E.)

Molson, A. H. E.

Bossom, A. C.

Harvie-Watt, Sir George

Monckton, Sir Walter

Bowen, E. R. (Cardigan)

Hay, John

Moore, Li.-Col. Sir Thomas

Boyd-Carpenter, J. A.

Head, Brig. A. H.

Morrison, John (Salisbury)

Boyle, Sir Edward

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

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

Bracken, Rt. Hon. B.

Heald, Lionel

Mott-Radclyffe, C. E.

Braine, B. R.

Heath, Edward

Nabarro, G.

Braithwaite, Sir Albert (Harrow, W.)

Henderson, John (Cathcart)

Nicholls, Harmar

Braithwaite, Lt.-Cr. G. (B'istol, N. W.)

Hicks-Beach, Maj. W. W.

Nicholson, G.

Bromley-Davenport, Lt.-Col. W.

Higgs, J. M. C.

Nield, Basil (Chester)

Brooke, Henry (Hampstead)

Hill, Dr. Charles (Luton)

Noble, Cmdr. A. H. P.

Browne, Jack (Govan)

Hill, Mrs. E. (Wythenshawe)

Nugent, G. R. H.

Buchan-Hepburn, P. G. T.

Hinchingbrooke, Viscount

Nutting, Anthony

Bullock, Capt. M.

Hirst, Geoffrey

Oakshott, H. D.

Bullus, Wing Commander E. E.

Hollis, M. C.

Odey, G. W.

Burden, F. A.

Holmes, Sir Stanley (Harwich)

O'Neill, Rt. Hon. Sir Hugh

Butcher, H. W.

Hope, Lord John

Ormsby-Gore, Hon. W. D.

Butler, Rt. Hn. R. A. (Saffron Walden)

Hopkinson, Henry

Orr, Capt. L. P. S.

Carr, Robert (Mitcham)

Hornsby-Smith, Miss P.

Orr-Ewing, Charles Ian (Hendon, N.)

Carson, Hon, E.

Horsbrugh, Rt. Hon. Florence

Orr-Ewing, Ian L. (Weston-super-Mare)

Channon, H.

Howard, Gerald (Cambridgeshire)

Osborne, C.

Churchill, Rt. Hon. W. S.

Howard, Greville (St. Ives)

Peake, Rt. Hon. O.

Clarke, Col. Ralph (East Grinstead)

Hudson, Sir Austin (Lewisham, N.)

Perkins, W. R. D.

Clarke, Brig. Terence (Portsmouth, W.)

Hudson, Rt. Hon. Robert (Southport)

Peto, Brig. C. H. M.

Clyde, J. L.

Hudson, W. R. A. (Hull, N.)

Pickthorn, K.

Colegate, A.

Hurd, A. R.

Pitman, I. J.

Conant, Maj. R. J. E.

Hutchinson, Geoffrey (Ilford, N.)

Powell, J. Enoch

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Price, Henry (Lewisham, W.)

Cooper-Key, E. M.

Hutchison, Col. James (Glasgow)

Prior-Palmer, Brig. O.

Corbett, Lt.-Col. Uvedale (Ludlow)

Hyde, Lt.-Col. H. M.

Profumo, J. D.

Craddock, Beresford (Spelthorne)

Hylton-Foster, H. B.

Raikes, H. V.

Cranborne, Viscount

Jeffreys, General Sir George

Rayner, Brig. R.

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

Jennings, R.

Redmayne, M.

Crosthwaite-Eyre, Col. O. E.

Johnson, Howard (Kemptown)

Remnant, Hon. P.

Crouch, R. F.

Jones, A. (Hall Green)

Renton, D. L. M.

Crowder, Capt. John (Finchley)

Joynson-Hicks, Hon. L. W.

Roberts, Emrys (Merioneth)

Crowder, Petre (Ruislip—Northwood)

Kaberry, D.

Roberts, Maj. Peter (Heeley)

Cundiff, F. W.

Kerr, H. W. (Cambridge)

Robertson, Sir David (Caithness)

Cuthbert, W. N.

Kingsmill, Lt.-Col. W. H.

Robinson, Roland (Blackpool, S.)

Davidson, Viscountess

Lambert, Hon. G.

Robson-Brown, W.

Daines, Rt. Hon. C. (Montgomery)

Lancaster, Col. C. G.

Rodgers, John (Sevenoaks)

Davies, Nigel (Epping)

Langford-Holt, J.

Roper, Sir Harold

de Chair, Somerset

Law, Rt. Hon. R. K.

Ropner, Col. L.

De la Bère, A.

Leather, E. H. C.

Russell, R. S.

Deedes, W. F.

Legge-Bourke, Maj. E. A. H.

Ryder, Capt. R. E. D.

Digby, S. Wingfield

Lennox-Boyd, A. T

Salter, Rt. Hon. Sir Arthur

Dodds-Parker, A. D.

Lindsay, Martin

Sandys, Rt. Hon. D.

Donner, P. W.

Linstead H. N.

Savory, Prof, D. L.

Douglas-Hamilton, Lord Malcolm

Llewellyn, D.

Shepherd, William

Drayson, G. B.

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Smiles, Lt.-Col. Sir Walter

Drewe, C.

Lloyd, Maj. Guy (Renfrew, E.)

Smithers, Peter (Winchester)

Dugdale, Maj. Sir Thomas (Richmond)

Lloyd, Selwyn (Wirral)

Smithers, Sir Waldron (Orpington)

Duncan, Capt. J. A. L

Lockwood, Lt.-Col. J. C.

Smyth, Brig. J. G. (Norwood)

Dunglass, Lord

Longden, Gilbert (Herts, S. W.)

Snadden, W. McN.

Duthie, W. S.

Low, A. R. W.

Soames, Capt. C.

Eccles, D. M.

Lucas, Sir Jocelyn (Portsmouth, S.)

Spearman, A. C. M.

Eden, Rt. Hon. A.

Lucas, P. B. (Brentford)

Spence, H. R. (Aberdeenshire, W.)

Elliot, Rt. Hon. W. E.

Lucas-Tooth, Sir Hugh

Spens, Sir Patrick (Kensington, S.)

Erroll, F. J.

Lyttelton, Rt. Hon. C.

Stanley, Capt. Hon. Richard (N. Fylde)

1798

1799

Stevens, G. P.

Thorneycroft, Peter (Monmouth)

Watkinson, H.

Steward, W. A. (Woolwich, W.)

Thornton-Kemsley, Col. C. N

Webbe, Sir H. (London & Westminster)

Stewart, Henderson (Fife, E.)

Thorp, Brig. R. A. F.

Wheatley, Maj. M. J. (Poole)

Stoddart-Scott, Col. M.

Tilney, John

White, Baker (Canterbury)

Storey, S.

Turner, H. F. L.

Williams, Charles (Torquay)

Strauss, Henry (Norwich, S.)

Turton, R. H.

Williams, Gerald (Tenbridge)

Summers, G. S.

Tweedsmuir, Lady

Williams, Sir Herbert (Croydon, E.)

Sutcliffe, H.

Vane, W. M. F.

Wills, G.

Taylor, Charles (Eastbourne)

Vaughan-Morgan, J. K.

Wilson, Geoffrey (Trure)

Taylor, William (Bradford, N.)

Wake field, Edward (Derbyshire, W.)

Winterton, Rt. Hon. Earl

Teeling, W.

Wakefield, Sir Waved (Marylebone)

Wood, Hon. R.

Teevan, T. L.

Walker-Smith, D. C.

York, C.

Thomas, J. P. L. (Hereford)

Ward, Hon. George (Worcester)

Thompson, Kenneth Pugh (Walton)

Ward, Miss I. (Tynemouth)

TELLERS FOR THE NOES:

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Waterhouse, Capt. Rt. Hon. C.

Mr. Studholme and Mr. Vosper.

Question, "That the Clause stand part of the Bill," put accordingly, and agreed to.

Mr. Churchill: I do not know why there should be this hilarity and air of surprise because I am anxious to ascertain the intentions of the Government, and because on the last Question we abstained from giving direct opposition to the Clause. There were various concessions and considerations which were open, and—
Mr. James Hudson: Get into order.
Mr. Churchill: I follow public affairs quite closely, and we always like to vote against the Government, but my hon. Friends and advisers here had the feeling that there was something in the Clause we ought not to oppose, and, therefore, we did not wish to take a direct—[HON. MEMBERS: "Order."] Order about what?—take a direct line on the main question. But what I rose for—[HON. MEMBERS: "For what? "]
I beg to move, "That the Chairman do report Progress and ask leave to sit again."
I apologise to you, Major Milner, and to the Committee for not having mentioned it at the beginning, because I thought prologue might, perhaps, be more agreeable and convenient to the Committee. I move this Motion not in order to attempt to lay down the law on the subject, but to ask the Leader of the House what his intentions are, what his wishes are, about the progress of this Bill, and the methods he intends to employ tonight, and on the subsequent nights and mornings which lie before us.
The Secretary of State for the Home Department (Mr. Ede): Of course, Major Milner, if we were to accept this Motion I am afraid that the progress you could report would be very small, and, therefore, I am quite sure that the right hon.
1800
Gentleman will not expect me to accept the Motion at this hour.
Some hours ago through the usual channels we made it known that we were anxious to make substantial progress with the Bill without imposing undue inconvenience on any part of the Committee, and also to enable important matters to come in the early parts of Sittings. I also announced that last week, and did my best to implement it. We have taken almost exactly six hours on the Clause we have just passed. I was hoping that by midnight we could have reached Clause 31. I was hoping some hours ago that that would be possible. We could then tomorrow start, as soon after 3.30 as possible, on Clause 32, which is one that I think ought to be debated, if possible, at a time when the Committee is fresh, and then proceed to the end of the Clauses and start with the new Clauses during tomorrow's Sitting, which I had also hoped we should be able to end about midnight; then we could take the remaining new Clauses and the Schedules on Wednesday; and I would also have been prepared, if we could have reached an arrangement, to give the whole of Thursday to the discussion of the Bill.
Mr. Nally: Over-generous.
Mr. Ede: I do not want to start a controversy about that with my hon. Friend.
Last week the Committee took 34 hours and 39 minutes on the Bill. I think that another 32 hours, which is roughly the period I propose, ought to enable us to get through the Bill, and I very sincerely hope that it may be possible for this to be arranged. The offer was made in perfectly good faith, and as far as I am concerned if there were a genuine desire on the part of the Opposition to achieve this I should do all I could on this side of the Committee to implement it. I am, of course, disappointed that under this

1801
arrangement I should not be able to watch the right hon. Gentleman's gallant efforts through his quadruped at Ascot on Thursday, but business must come before pleasure, as no doubt the right hon. Gentleman will agree. I have, in consultation with my right hon. Friends the Chancellor and the Patronage Secretary, done the very best I can to make an offer to the Committee which should enable us to have adequate discussion on the Bill without undue inconvenience to anybody.
Mr. Churchill: I should like to pay my tribute, not for the first time, to the careful, patient and conciliatory manner in which the right hon. Gentleman the Home Secretary discharges his duties as Leader of the House. We all appreciate his good feeling and his desire to have everything go through as smoothly as possible—to the advantage of the Government. Also, we are always a little bit influenced by the agreeable nature of his personality. I was sorry that he marred the somewhat serious arguments which he laid forward—and which I shall refer to in a minute—by referring to matters which apparently concern not the House but the turf. We all know the right hon. Gentleman's addiction to that pursuit, and this momentary lapse will, I am sure, be pardoned on both sides of the Committee.
The right hon. Gentleman naturally wishes to get his business through as quickly as possible. We wish to make as severe a test as we can of the proposals in the Budget and to bring them to issue in the Committee. When he spoke about discussions which had taken place through the usual channels I was very much obliged to him, because anything that happens through the usual channels is, of course, entirely confidential—until it is made public. That seems to be the rule followed in regard to most of our secrets nowadays.
10.0 p.m.
The right hon. Gentleman has made a series of proposals through the Patronage Secretary, who I see in the corner, which were denounced immediately they had been uttered from below the Gangway as being too generous. [HON. MEMBERS: "Hear, hear."] We have never asked for the generosity of hon. Members opposite. All we ask for is fair play and that they should rule in accordance with the principles of democracy when supported by
1802
the will of the people. [Interruption.] When I began, I was talking to every quarter of the House and not to the hon. Gentleman whose acquaintance I have not the pleasure to enjoy. I do not feel that this is a matter upon which bargains can be made through the usual channels. The discussion of the Budget should proceed, as it does, in accordance with the rights of Members of Parliament and of the Opposition to oppose and so forth, and with the use of the Closure governed, as it is, when demanded, by the long tradition of the House.
I have seen many Budgets carried through the House—I have even carried five myself—and I know well how lengthy the discussions may be. It is all part of the process in which our way of life is sustained that great consideration should be shown, not in the interests of generosity to the Opposition, but as an Act of Parliament—an affirmation which is one of the great foundations on which our ancient civilisation rests. Therefore, we were not able to come to any agreement about details and so forth and say, "It is all wound up and settled." It is not settled. The right hon. Gentleman must decide what hours he chooses to sit. He has a Government majority—What was it last time?—in these matters, and I think that he had much better conduct the Bill—he and the Chancellor of the Exchequer—with the ability, discretion and good feeling which animates on other occasions and let us do our part, as we are called upon to do, as we think fit.
We certainly do not wish to have further discussions on this Bill governed by some detailed good faith arrangement between the Patronage Secretary and my hon. Friends on this side. We think it much better that they should flow out in the normal course and Parliament should take its stake and fortunes as they come, confident that it has a right to do so as one of the great elements and sources of British national life.
I want to point out to the right hon. Gentleman that he did not tell us what he was going to do or what he wished even for tonight on the basis that there is not an agreement or deal between parties. Would he kindly do so now?
Mr. Ede: The right hon. Gentleman asked me what my intentions were, and my intentions are to work to the hours

1803
that I have mentioned when I was replying to him. I share with him a desire that the conduct of our affairs should be in accordance with the best Parliamentary traditions, and give and take across the Floor of the Committee in exchanges on such a Motion as this is part of the traditional procedure of the House. The right hon. Gentleman does not feel that he can promise we shall have Clause 31 by midnight. Very well, we must sit through the night until such time as public transport is available.
Mr. Churchill: We are now only at Clause 24. The right hon. Gentleman proposes we should deal with Clauses 25, 26, 27, 28, 29, 30 and 31. I must say it seems to me an abuse of the overwhelming majority which he possesses, and I trust will be resisted by every means in our power.
Major Guy Lloyd: I should like to put to the Leader of the House a question which I have been asked many times by my constituents and which is relevant to this Motion—why should we stay up till all hours of the night—
Mr. Thurtle: On a point of order. Have you not, Major Milner, collected the voices?
Major Lloyd: I am speaking with the permission of the Chairman and on a Motion to report Progress. I wish to ask the Leader of the House for an answer to the question which has been repeatedly put to me by my constituents; why should we sit all hours of the night when we took a long Whitsuntide Recess and when, presumably, we are going to rise towards the end of July? Surely there was a long time to discuss the Budget and the vital questions which are at issue on it.
Why should the right hon. Gentleman and the Government continue to adopt the attitude which they do? Why cannot they give us ample time to discuss these matters? Why should they not give us ample time to represent our constituents and to put forward their point of view? Why should they demand that we must get to a definite stage on this Bill? Is that democracy that we are to be told and ordered to get to a certain Clause by a certain time? Is that free debate in a free democracy? I say it is not, and I would
1804
ask the right hon. Gentleman to consider the question which is being asked all over the country by men and women of all parties, why this folly, why this totalitarian system of compelling us to reach a certain stage? The right hon. Gentleman should be more reasonable and give us longer time. Why have such a Whitsuntide Recess and then keep us here to all hours of the night?
Mr. Selwyn Lloyd: To suggest that we can reach Clause 31 by midnight is very unreasonable. Clauses 27 and 28, particularly 28, raise very wide constitutional issues, and Clause 28 alone would take much longer than midnight. To consent to the Government steam-rolling these three or four Clauses in that time is altogether out of the question. Therefore, I wish to impress my point upon the right hon. Gentleman that he is proposing to turn out something, in fact, which we could never carry out.
Before the Committee votes upon this Motion, it should have some idea whether the original proposition made by the Leader of the House was reasonable. I want to follow up what has just been said by my right hon. Friend. If we are to reach Clause 31 by midnight tonight it will involve dealing with something like six pages of the Order Paper and something like 40 Amendments. Is it the right hon. Gentleman's idea of a reasonable attitude to the Business of this Committee that Amendments should go through at the rate of about five to the hour?
These are complicated matters, Clause 28 in particular. There are three pages of Amendments dealing with that Clause alone. I should have thought that clear heads would be needed, and people not excessively tired, to deal with matters affecting the liberty of a great many people. How can the right hon. Gentleman possibly expect to get these Clauses by Twelve o'Clock, with any reasonable discussion? I ask the right hon. Gentleman to reconsider his attitude and to make a more reasonable proposition.
Mr. Ede: I respond to the request of the hon. and learned Member for Wirral (Mr. Selwyn Lloyd). Of course, if any counter proposal were put forward with regard to the later stages of the Bill that would work within the total time that I have mentioned, I should be perfectly willing to consider it. This offer—and I

1805
do not think there is any very great secret about it—was made many hours ago, when it would have been possible, without any damage to the procedure of the Committee, to have had a decision on Clause 24.
Lieut.-Colonel Sir Thomas Moore: Is the total time sacrosanct?
Mr. Nally: I venture to put one or two observations in the hope of guidance from my right hon. Friend who has recommended a course of conduct which I should have thought would appeal to all the sides of the Committee. I ventured to make an interjection on the subject of this proposal being too generous, and the Leader of the Opposition, quite rightly and fairly, rebuked me by saying that the Opposition had never asked for generosity. That is perfectly true, but in point of fact they have far too often had it, although they never asked for it. This is a classic case in point. What is proposed—if I understand it rightly, and I speak subject to correction—is that an additional day should be given compared with last year or the year before, despite the fact that the Budget was far less controversial—the Budget has been regarded as far less controversial by most newspapers in the country.
The other point, upon which I want to impress my right hon. Friend, and upon which I am speaking with the knowledge that a good many hon. Members on this Committee are behind it, is that we have grown tired on these benches—[HON. MEMBERS: "Hear, hear."]—of a set of circumstances under which, if this Committee extends beyond twelve o'clock, it will be 30 or 40 Labour Members who will sleep about here, without any Conservative Member being present.
10.15 p.m.
That is a circumstance which we are not prepared to tolerate. [HON. MEMBERS: "Oh!"] If the Government have business to do and the reasonable arrangement they have proposed to the Opposition has not been accepted, then deplorable as it is in many ways, so far as many of us on these benches are concerned we expect my right hon. Friend to go ahead and have Government business done in the very fair time schedule he has put to the Opposition. It has been rejected because last Thursday night and tonight, for the first time for many years, the Leader of the Opposition is leading the ballet
1806
chorus for the purpose of Press publicity, and doing what the Chair has been doing consistently since 1945, taking part in all-night sittings.
Mr. Godfrey Nicholson: At last we know who is the power behind the throne, but I must say that I am not very much impressed with the great constitutional authority who guides the Labour benches. I do not propose to give the Committee a lecture on constitutional procedure, but I do propose to ask the Leader of the House and all hon. Members to consider whether we are not making ourselves a little bit ridiculous in the eyes of the country in going away for long holidays and then sitting up all night. Hon. Members go home bleary-eyed, conscious of their innocence, to their wives, posing as heroes after having spent 24 hours in this building.
I believe that the people as a whole are rather impressed once, but after that they think we are a pack of idiots. There is a perfectly good way out of it. We should not just dance to the Government tune and dash through pages and pages of Amendments at breakneck speed, but should allot a proper proportion of days to the discussion of the Finance Bill. The Leader of the House offers himself to the Committee as a great House of Commons man and a keen parliamentarian and upholder of Parliamentary democracy, but I suggest that he is going the best way about it to bring the House of Commons into disrepute.
Brigadier Rayner: I support what has been said by my hon. Friend the Member for Farnham (Mr. Nicholson) and my hon. and gallant Friend the Member for Renfrew, East (Major Lloyd). We all realise that the Leader of the House is one of the most reasonable of Ministers, but can he not answer the question put to him as to why the debate should finish on Thursday night? As far as we know, there is no important legislation on the tapis for the rest of this Session. Why should the debate finish on Thursday night? Will he please answer that question?
Sir I. Fraser: I had the advantage during the weekend of spending an hour with Sir Bryan Fell, who will be remembered by older hon. Members as one of the wisest of our Clerks. He is now retired. We were talking over the question of all-night sittings and of the

1807
Finance Bill and he reminded me that in 1909 the House sat throughout the month of August and had some 900 divisions on the Committee stage of a Finance Bill. Is the Committee less capable—[HON. MEMBERS: "No!"]—of sustaining powerful arguments—[HON. MEMBERS: "No!"]—or of doing its duty—[HON. MEMBERS: "No."]—than our forefathers were? [HON. MEMBERS: "No."] I am told that in those times the Clerks of the House used to have a week off and then a week on so that they might carry out their duties.
The hon. Gentleman the Member for Bilston (Mr. Nally) has indicated his dissent from the all-night Sitting. I affirm that if we were to agree to avoid the all-night sitting, we could only do that by having one Chief Whip, and that means one party, that means destruction of the rights of Parliament, that means destroying the principal function of this House of Commons debating and guarding the taxpayer in all matters of taxation. I think that we ought, as the right hon. Gentleman the Member for Woodford (Mr. Churchill) advised us, to let this debate take its proper course and let every matter have full discussion and a fair hearing.
Mr. Derek Walker-Smith: The control of taxation is the most ancient as it is one of the most vital responsibilities of the House of Commons. I should be wanting in my duty if I did not say that the attitude and approach of the Leader of the House to these matters is a betrayal of that ancient responsibility. The right hon. Gentleman now invites the Committee to join him in that betrayal by shirking its duty to make a full investigation to the financial proposals that have come before us.
It is perfectly true that there is a financial time-table which the constitution
of the country requires to be followed, but it is not true that it is necessary, in order to conform to that timetable, to give the very limited amount of hours to the discussion of the Finance Bill that is being done this year. I hold it to be entirely inappropriate and wholly wrong that, for example, the discussion on the Question that Clause 13 stand part of the Bill, which is sanctioning the levying of Income Tax and Surtax for the whole year, was closured after four hours. The discussion on Clause 24, which is making important variations—
The Chairman: We cannot discuss the details of Closures on this Motion.
Mr. Walker-Smith: With respect, Major Milner, I am doing so purely for purposes of illustration. I am making the point that the right hon. Gentleman starts with this idea: he says, "I will allot so many hours and the discussion must be cribbed, cabined and confined within that short period." I echo what has been said by my hon. Friends, that there is a feeling in the country that the administration of the discussion by Parliament of the Finance Bill has been mishandled by the right hon. Gentleman, who forces discussion in the middle of the night on technical matters which could well be discussed at a proper time if he were content to make the timetable of the House operate as it could and should do. I hope the right hon. Gentleman will realise that the House expects this Committee to do its duty, and that it expects the Leader of the House to make provision to enable the Committee so to do.
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."
The Committee divided: Ayes, 297; Noes, 289.

Division No. 109.]

AYES

[10.25 p.m.

Acland, Sir Richard

Bellenger, Rt. Hon. F. J.

Brooks, T. J. (Normanton)

Adams, Richard

Benn, Wedgwood

Broughton, Dr. A. D. D.

Albu, A. H.

Benson, G.

Brown, Rt. Hon. George (Belper)

Allen, Arthur (Bosworth)

Beswick, F.

Brown, Thomas (Ince)

Alien, Scholefiled (Crawe)

Bevan, Rt. Hon. A. (Ebbw Vale)

Burke, W. A.

Anderson, Alexander (Motherwell)

Bing, G. H. C.

Burton, Miss E.

Anderson, Frank (Whitehaven)

Blenkinsop, A.

Butler, Herbert (Hackney, S.)

Attlee, Rt. Hon. C. R.

Blyton, W. R.

Callaghan, L. J.

Awbery, S. S.

Boardman, H.

Carmichael, J.

Ayles, W. H.

Booth, A.

Castle, Mrs. B. A.

Bacon, Mist Alice

Bottomley, A. G.

Champion, A. J.

Baird, J.

Bowden, H. W.

Chetwynd, G. R.

Balfour, A.

Bowles, F. G. (Nuneaton)

Clunie, J.

Barnes, Rt. Hon. A. J.

Braddock, Mrs. Elizabeth

Cocks, F. S.

Bartley, P.

Brook, Dryden (Halifax)

Collick, P.

Cook, T. F.

Janner, B.

Rankin, J.

Cooper, Geoffrey (Middlesbrough, W.)

Jay, D. P. T.

Rees, Mrs. D

Cooper, John (Deptford)

Jeger, George (Goole)

Reeves, J.

Corbel, Mrs. Freda (Peckham)

Jeger, Dr. Santo (St. Pancras. S.)

Reid, Thomas (Swindon)

Cove, W. G.

Jenkins, R. H.

Reid, William (Camlachie)

Craddock, George (Bradford, S.)

Johnson, James (Rugby)

Rhodes, H.

Crawley, A.

Johnston, Douglas (Paisley)

Richards, R.

Crosland, C. A. R.

Jones, David (Hartlepool)

Robens, Rt. Hon. A.

Crossman, R. H. S.

Jones, Frederick Elwyn (W. Ham, S.)

Roberts, Goronwy (Caernarvonshire)

Cullen, Mrs. A.

Jones, Jack (Rotherham)

Robertson, J. J. (Berwick)

Daines, P.

Jones, William Elwyn (Conway)

Robinson, Kenneth (St. Pancras, N.)

Dalton, Rt. Hon. H.

Keenan, W.

Rogers, George (Kensington, N.)

Darling, George (Hillsborough)

Kenyon, C.

Ross, William

Davies, A. Edward (Stoke, N.)

Key, Rt. Hon. C. W.

Royle, C.

Davies, Harold (Leek)

King, Dr. H. M.

Shawcross, Rt. Hon. Sir Hartley

Davies, Stephen (Merthyr)

Kinghorn, Sqn. Ldr. E.

Shinwell, Rt. Hon. E.

de Freitas, Geoffrey

Kinley, J.

Shurmer, P. L. E.

Deer, G.

Lang, Gordon

Silverman, Julius (Erdington)

Delargy, H. J.

Lee, Frederick (Newton)

Silverman, Sydney (Nelson)

Dodds, N. N.

Lee, Miss Jennie (Cannock)

Simmons, C. J.

Donnelly, D.

Lever, Harold (Cheetham)

Slater, J.

Driberg, T. E. N.

Lever, Leslie (Ardwick)

Smith, Ellis (Stoke, S.)

Dugdale, Rt. Hon. John (W. Bromwich)

Lewis, Arthur (West Ham, N.)

Smith, Norman (Nottingham, S.)

Dye, S.

Lewis, John (Bolton, W.)

Snow, J. W.

Ede, Rt. Hon. J. C.

Lindgren, G. S.

Sorensen, R. W.

Edelman, M.

Lipton, Lt.-Col. M.

Soskice, Rt. Hon. Sir Frank

Edwards, John (Brighouse)

Logan, D. G.

Sparks, J. A.

Edwards, Rt. Hon. Nets (Caerphilly)

Longden, Fred (Small Heath)

Steele, T.

Edwards, W. J. (Stepney)

McAllister, G.

Stewart, Michael (Fulham, E.)

Evans, Albert (Islington, S. W.)

MacColl, J. E.

Stokes, Rt. Hon. R. R.

Evans, Edward (Lowestoft)

McGhee, H. G.

Strachey, Rt. Hon. J.

Evans, Stanley (Wednesbury)

McGovern, J.

Strauss, Rt. Hon. George (Vauxhall)

Ewart, R.

McInnes, J.

Stross, Dr. Barnett

Fernyhough, E.

Mack, J. D.

Summerskill, Rt. Hon. Edith

Field, Capt. W. J.

McKay, John (Wallsend)

Sylvester, G. O.

Finch, H. J.

Mackay, R. W. G. (Reading, N.)

Taylor, Bernard (Mansfield)

Fletcher, Eric (Islington, E.)

McLeavy, F.

Taylor, Robert (Morpeth)

Follick, M.

MacMillan, Malcolm (Western Isles)

Thomas, David (Aberdare)

Foot, M. M.

McNeil, Rt. Hon. H.

Thomas, George (Cardiff)

Forman, J. C.

MacPherson, Malcolm (Stirling)

Thomas, Iorwerth (Rhondda, W.)

Fraser, Thomas (Hamilton)

Mainwaring, W. H.

Thomas, Ivor Owen (Wrekin)

Freeman, John (Watford)

Mallalieu, E. L. (Brigg)

Thorneycroft, Harry (Clayton)

Freeman, Peter (Newport)

Mallalieu, J. P. W. (Huddersfield, E.)

Thurtle, Ernest

Gaitskell, Rt. Hon. H. T. N.

Mann, Mrs. Jean

Timmons, J.

Ganley, Mrs. C. S.

Manuel, A. C.

Tomney, F.

Gibson, C. W.

Marquand, Rt. Hon. H. A.

Turner-Samuels, M.

Gitzean, A.

Mathers, Rt. Hon. G.

Ungoed-Thomas, Sir Lynn

Glanville, James (Consett)

Mellish, R. J

Usborne, H.

Gooch, E. G.

Messer, F.

Vernon, W. F.

Gordon-Walker, Rt. Hon. P. C.

Middleton, Mrs. L

Viant, S. P.

Greenwood, Anthony (Rossendale)

Mikardo, Ian.

Wallace, H. W.

Greenwood, Rt. Hn. Arthur (Wakefield)

Mitchison, G. R.

Watkins, T. E.

Grenfell, D. R.

Moeran, E. W.

Webb, Rt. Hon. M. (Bradford, C.)

Grey, C. F.

Monslow, W.

Weitzman, D.

Griffiths, David (Rother Valley)

Moody, A. S.

Wells, Percy (Faversham)

Griffiths, Rt. Hon. James (Llanetly)

Morgan, Dr. H. B.

Wells, William (Walsall)

Griffiths, William (Exchange)

Morley, R.

West, D. G.

Gunter, R. J.

Morris, Percy (Swansea, W.)

Wheatley, Rt. Hon. John (Edinb'gh B.)

Hole, Joseph (Rochdale)

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

White, Mrs. Eirene (E. Flint)

Hall, John (Gateshead, W.)

Mort, D. L.

White, Henry (Derbyshire, N. E.)

Hall, Rt. Hon. Glenvil (Colne Valley)

Moyle, A.

Whiteley, Rt. Hon. W.

Hamilton, W. W.

Mulley, F. W.

Wigg, G.

Hannan, W.

Murray, J. D.

Wilcock, Group Capt. C. A. B.

Hardman, D. R.

Nally, W.

Wilkes, L.

Hargreaves, A.

Neal, Harold (Bolsover)

Wilkins, W. A.

Hastings, S.

Noel-Baker, Rt. Hon. P. J.

Willey, Frederick (Sunderland)

Hayman, F. H.

O'Brien, T.

Willey, Octavius (Cleveland)

Henderson, Rt. Hon. Arthur (Tipton)

Oldfield, W. H.

Williams, David (Neath)

Herbison, Miss M

Oliver, G. H.

Williams, Rev. Llywelyn (Abertillery)

Hewitson, Capt. M

Orbach, M.

Williams, Ronald (Wigan)

Hobson, C. R.

Padley, W. E

Williams, Rt. Hon. Thomas (Don V'lly)

Holman, P.

Paget, R. T.

Williams, W. T. (Hammersmith, S.)

Holmes, Horace (Hemsworth)

Paling, Rt. Hon. W. (Dearne Valley)

Wilson, Rt. Hon. Harold (Huyton)

Houghton, D.

Paling, Will T. (Dewsbury)

Winterbottom, Ian (Nottingham, C.)

Hoy, J.

Pannell, T. C.

Winterbottom, Richard (Brightside)

Hubbard, T.

Parglter, G. A.

Wise, F. J.

Hudson, James (Ealing, N.)

Parker, J.

Woodburn, Rt. Hon. A.

Hughes, Emrys (S. Ayrshire)

Paton, J.

Woods, Rev. G. S.

Hughes, Hector (Aberdeen, N.)

Pearson, A.

Wyatt, W. L.

Hughes, Moelwyn (Islington, N.)

Peart, T. F.

Yates, V. F.

Hynd, H. (Accrington)

Porter, G.

Younger, Hon. K.

Hynd, J. B. (Attercliffe)

Price, Philips (Gloucestershire, W.)

Irvine, A. J. (Edge Hill)

Proctor, W. T.

TELLERS FOR THE AYES

Irving, W. J. (Wood Green)

Pryde, D. J.

Mr. Collindridge and

Isaacs, Rt. Hon. G. A.

Pursey, Cmdr. H.

Mr. Popplewell

1810

1811

NOES

Aitken, W. T.

Fisher, Nigel

McCorquodale, Rt. Hon. M. S.

Alport, C. J. M.

Fort, R.

Macdonald, A. J. F. (Roxburgh)

Amery, Julian (Preston, N.)

Foster, John

Macdonald, Sir Peter (I. of Wight)

Amory, Heathcoat (Tiverton)

Fraser, Hon. Hugh (Stone)

Mackeson, Brig. H. R.

Arbuthnot, John

Fraser, Sir Ian (Morecambe & Lonsdale)

McKibbin, A.

Ashton, H. (Chelmsford)

Fyfe, Rt. Hon. Sir David Maxwell

McKie, J. H. (Galloway)

Assheton, Rt. Hon. R. (Blackburn, W.)

Gage, C. H.

Maclay, Hon. John

Astor, Hon. M. L.

Galbraith, Cmdr. T. D. (Pollok)

Maclean, Fitzroy

Baker, P. A. D.

Galbraith, T. G. D. (Hillhead)

MacLeod, Iain (Enfield, W.)

Baldock, Lt.-Cmdr. J. M

Gammans, L. D.

MacLeod, John (Ross and Cromarty)

Baldwin, A. E.

Garner-Evans, E. H. (Denbigh)

Macmillan, Rt. Hon. Harold (Bromley)

Banks, Col. C.

Gates, Maj. E. E.

Macpherson, Major Niall (Dumfries)

Baxter, A. B.

Glyn, Sir Ralph

Maitland, Cmdr. J. W.

Beamish, Maj. Tufton

Gomme-Duncan, Col. A.

Manningham-Buller, R. E.

Bed, R. M.

Granville, Edgar (Eye)

Marlowe, A. A. H.

Bennett, Sir Peter (Edgbaston)

Gridley, Sir Arnold

Marples, A. E.

Bennett, Dr. Reginald (Gosport)

Grimston, Hon. John (St. Albans)

Marshall, Douglas (Bodmin)

Bennett, William (Woodside)

Grimston, Robert (Westbury)

Marshall, Sidney (Sutton)

Bevins, J. R. (Liverpool, Toxteth)

Harden, J. R. E.

Maude, Angus (Ealing S.)

Birch, Nigel

Hare, Hon. J. H. (Woodbridge)

Maude, John (Exeter)

Bishop, F. P.

Harris, Frederic (Croydon, N.)

Maudling, R.

Black, C. W.

Harris, Reader (Heston)

Medlicott, Brig. F.

Boles, Lt.-Col. D. C. (Wells)

Harvey, Air Core. A. V. (Macclesfield)

Mellor, Sir John

Boothby, R.

Harvey, Ian (Harrow, E.)

Molson, A. H. E.

Bossom, A. C.

Harvie-Watt, Sir George

Monckton, Sir Walter

Bowen, E. R. (Cardigan)

Hay, John

Moore, Lt.-Col. Sir Thomas

Boyd-Carpenter, J. A.

Head, Brig. A. H.

Morris, Hopkin (Carmarthen)

Boyle, Sir Edward

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

Morrison, John (Salisbury)

Bracken, Rt. Hon. B.

Heald, Lionel

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

Braine, B. R.

Heath, Edward

Mott-Radclyffe, C. E.

Braithwaite, Sir Albert (Harrow, W.)

Henderson, John (Cathcart)

Nabarro, G.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Hicks-Beach, Maj. W. W.

Nicholls, Harmar

Bromley-Davenport, Lt.-Col. W.

Higgs, J. M. C.

Nicholson, G.

Brooke, Henry (Hampstead)

Hill, Dr. Charles (Luton)

Nield, Basil (Chester)

Browne, Jack (Govan)

Hill, Mrs. E. (Wythenshawe)

Noble, Cmdr. A. H. P.

Buchan-Hepburn, P. G. T.

Hinchingbrooke, Viscount

Nugent, G. R. H.

Bullock, Capt. M.

Hirst, Geoffrey

Nutting, Anthony

Bullus, Wing Commander E. E.

Hollis, M. C.

Oakshott, H. D.

Burden, F. A.

Holmes, Sir Stanley (Harwich)

Odey, G. W.

Butcher, H. W.

Hope, Lord John

O'Neill, Rt. Hon. Sir Hugh

Butler, Rt. Hn. R. A. (Saffron Walden)

Hopkinson, Henry

Ormsby-Gore, Hon. W. D.

Carr, Robert (Mitcham)

Hornsby-Smith, Miss P.

Orr, Capt. L. P. S.

Carson, Hon. E.

Horsbrugh, Rt. Hon. Florence

Orr-Ewing, Charles Ian (Hendon, N.)

Channon, H.

Howard, Gerald (Cambridgeshire)

Orr-Ewing, Ian L. (Weston-super-Mare)

Churchill, Rt. Hon. W. S.

Howard, Greville (St. Ives)

Osborne, C.

Clarke, Col. Ralph (East Grinstead)

Hudson, Sir Austin (Lewisham, N.)

Peaks, Rt. Hon. O.

Clarke, Brig. Terence (Portsmouth, W.)

Hudson, Rt. Hon. Robert (Southport)

Perkins, W. R. D.

Clyde, J. L.

Hudson, W. R. A. (Hull, N.)

Peto, Brig. C. H. M.

Colegate, A.

Hurd, A. R.

Pickthorn, K.

Conant, Maj. R. J. E.

Hutchinson, Geoffrey (Ilford, N.)

Pitman, I. J.

Cooper, Son. Ldr. Albert (Ilford, S.)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Powell, J. Enoch

Cooper-Key, E. M.

Hutchison, Col. James (Glasgow)

Price, Henry (Lewisham, W.)

Corbett, Lt.-Col. Uvedale (Ludlow)

Hyde, Lt.-Col. H. M.

Prior-Palmer, Brig. O.

Craddock, Beresford (Spelthorne)

Hylton-Foster, H. B.

Profumo, J. D.

Cranborne, Viscount

Jeffreys, General Sir George

Raikes, H. V.

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

Jennings, R.

Rayner, Brig. R

Crosthwaite-Eyre, Col. O. E.

Johnson, Howard (Kemptown)

Redmayne, M.

Crouch, R. F.

Jones, A. (Hall Green)

Remnant, Hon. P.

Crowder, Capt. John (Finchley)

Joynson-Hicks, Hon. L. W.

Renton, D. L. M.

Crowder, Petre (Ruislip-Northwood)

Kaberry, D.

Roberts, Emrys (Merioneth)

Cundiff, F. W.

Kerr, H. W. (Cambridge)

Roberts, Maj. Peter (Heeley)

Cuthbert, W. N.

Kingsmill, Lt.-Col. W. H.

Robertson, Sir David (Caithness)

Davidson, Viscountess

Lambert, Hon. G.

Robinson, Roland (Blackpool, S.)

Davies, Rt. Hon. C. (Montgomery)

Lancaster, Col. C. G.

Robson-Brown, W.

Davies, Nigel (Epping)

Langford-Holt, J.

Rodgers, John (Sevenoaks)

de Chair, Somerset

Law, Rt. Hon. R. K.

Roper, Sir Harold

De la Bère, R.

Leather, E. H. C.

Ropner, Col. L.

Deedes, W. F.

Legge-Bourke, Maj. E. A. H.

Russell, R. S.

Digby, S. Wingfield

Lennox-Boyd, A. T.

Ryder, Capt. R. E. D.

Dodds-Parker, A. D.

Lindsay, Martin

Salter, Rt. Hon. Sir Arthur

Donner, P. W.

Linstead, H. N.

Sandys, Rt. Hon. D

Douglas-Hamilton, Lord Malcolm

Llewellyn, D.

Savory, Prof. D. L.

Drayson, G. B.

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Shepherd, William

Drewe, C.

Lloyd, Maj. Guy (Renfrew, E.)

Smiles, Lt.-Col. Sir Walter

Dugdale, Maj. Sir Thomas (Richmond)

Lloyd, Selwyn (Wirral)

Smithers, Peter (Winchester)

Duncan, Capt. J. A. L.

Lockwood, Lt.-Col. J. C.

Smithers, Sir Waldron (Orpington)

Dunglass, Lord

Longden, Gilbert (Herts, S. W.)

Smyth, Brig. J. G. (Norwood)

Duthie, W. S.

Low, A. R. W.

Snadden, W. McN.

Eccles, D. M.

Lucas, Sir Jocelyn (Portsmouth, S.)

Soames, Capt. C.

Eden, Rt. Hon. A.

Lucas, P. B. (Brentford)

Spearman, A. C. M.

Elliot, Rt. Hon. W. E.

Lucas-Tooth, Sir Hugh

Spence, H. R. (Aberdeenshire, W.)

Erroll, F. J.

Lyttelton, Rt. Hon. O

Spens, Sir Patrick (Kensington, S.)

1812

1813

Stanley, Capt. Hon. Richard (N. Fylde)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Waterhouse, Capt. Rt. Hon. C.

Stevens, G. P.

Thorneycroft, Peter (Monmouth)

Watkinson, H.

Steward, W. A. (Woolwich, W.)

Thornton-Kemsley, Col. C. N.

Webbe, Sir H. (London & Westminster)

Stewart, Henderson (Fife, E.)

Thorp, Brig. R. A. F

Wheatley, Maj. M. J. (Poole)

Stoddart-Scott, Col. M.

Tilney, John

White, Baker (Canterbury)

Storey, S.

Turner, H. F. L.

Williams, Charles (Torquay)

Strauss, Henry (Norwich, S.)

Turton, R. H.

Williams, Gerald (Tonbridge)

Summers, G. S.

Tweedsmuir, Lady

Williams, Sir Herbert (Croydon, E.)

Sutcliffe, H.

Vane, W. M. F.

Wills, G.

Taylor, Charles (Eastbourne)

Vaughan-Morgan, J. K.

Wilson, Geoffrey (Truro)

Taylor, William (Bradford, N.)

Wakefield, Edward (Derbyshire, W.)

Winterton, Rt. Hon. Earl

Teeling, W.

Wakefield, Sir Wavell (Marylebone)

Wood, Hon. R.

Teevan, T. L.

Walker-Smith, D. C.

York, C.

Thomas, J. P. L. (Hereford)

Ward, Hon. George (Worcester)

Thompson, Kenneth Pugh (Walton)

Ward, Miss I. (Tynemouth)

TELLERS FOR THE NOES:

Mr. Studholme and Mr. Vosper.

Original Question put accordingly, "That the Chairman do report Progress and ask leave to sit again."
The Committee divided: Ayes, 289; Noes, 298.

Division No. 110.]

AYES

[10.35 p.m.

Aitken, W. T.

Davidson, Viscountess

Hudson, Sir Austin (Lewisham, N.)

Alport, C. J. M.

Davies, Nigel (Epping)

Hudson, Rt. Hon. Robert (Southport)

Amery, Julian (Preston, N.)

de Chair, Somerset

Hudson, W. R. A. (Hull, N)

Amory, Heathcoat (Tiverton)

Do la Bère, R.

Hurd, A. R.

Arbuthnot, John

Deedes, W. F.

Hutchinson, Geoffrey (Ilford, N.)

Ashton, H. (Chelmsford)

Dodds-Parker, A. D.

Hutchison, Lt.-Com. Clark (E'b'rgh W)

Assheton, Rt. Hon. R. (Blackburn. W.)

Donner, P. W.

Hutchison, Col. James (Glasgow)

Astor, Hon. M. L.

Douglas-Hamilton, Lord Malcolm

Hyde, Lt.-Col. H. M.

Baker, P. A. D.

Drayson, G. B.

Hylton-Foster, H. B.

Baldock, Lt.-Cmdr. J. M.

Dugdale, Maj. Sir Thomas (Richmond)

Jeffreys, General Sir George

Baldwin, A. E.

Duncan, Capt. J. A. L.

Jennings, R.

Banks, Col. C.

Dunglass, Lord

Johnson, Howard (Kemptown)

Baxter, A. B.

Duthie, W. S.

Jones, A. (Hall Green)

Beamish, Maj. Tufton

Eccles, D. M.

Joynson-Hicks, Hon. L. W.

Bell, R. M.

Eden, Rt. Hon. A.

Kaberry, D.

Bennett, Sir Peter (Edgbaston)

Elliot, Rt. Hon. W. E.

Kerr, H. W. (Cambridge)

Bennett, Dr. Reginald (Gosport)

Erroll, F. J.

Kingsmill, Lt.-Col. W. H.

Bennett, William (Woodside)

Fisher, Nigel

Lambert, Hon. G.

Bevins, J. R. (Liverpool, Toxteth)

Fort, R.

Lancaster, Col. C. G.

Birch, Nigel

Foster, John

Langford-Holt, J.

Bishop, F. P

Fraser, Hon. Hugh (Stone)

Law, Rt. Hon. R. K.

Black, C. W.

Fraser, Sir Ian (Morecambe & Lonsdale)

Leather, E. H. C.

Boles, Lt.-Col. D. C. (Wells)

Fyfe, Rt. Hon. Sir David Maxwell

Legge-Bourke, Maj. E. A. H.

Boothby, R.

Gage, C. H.

Lennox-Boyd, A. T.

Bossom, A. C.

Galbraith, Cmdr. T. D. (Pollok)

Lindsay, Martin

Bowen, E. R. (Cardigan)

Galbraith, T. G. D. (Hillhead)

Linstead, H. N.

Boyd-Carpenter, J. A.

Gammans, L. D.

Llewellyn, D.

Boyle, Sir Edward

Garner-Evans, E. H. (Denbigh)

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Bracken, Rt. Hon. B.

Gates, Maj. E. E.

Lloyd, Maj. Guy (Renfrew, E.)

Braine, B. R.

Glyn, Sir Ralph

Lloyd, Selwyn (Wirral)

Braithwaite, Sir Albert (Harrow, W.)

Gomme-Duncan, Col. A.

Lockwood, Lt.-Col. J. C.

Braithwaite, Lt.-Cr. G. (B'lstol, N. W.)

Granville, Edgar (Eye)

Longden, Gilbert (Herts, S. W.)

Bromley-Davenport, Lt.-Col. W.

Gridlay, Sir Arnold

Low, A. R. W.

Brooke, Henry (Hampstead)

Grimston, Hon. John (St. Albans)

Lucas, Sir Jocelyn (Portsmouth, S.)

Browne, Jack (Govan)

Grimston, Robert (Westbury)

Lucas, P. B. (Brentford)

Buchan-Hepburn, P. G. T.

Harden, J. R. E.

Lucas-Tooth, Sir Hugh

Bullock, Capt. M.

Hare, Hon. J. H. (Woodbridge)

Lyttelton, Rt. Hon. O.

Bullus, Wing Commander E. E.

Harris, Frederic (Croydon. N.)

McCorquodale, Rt. Hon. M. S.

Burden, F. A.

Harris, Reader (Heston)

Macdonald, A. J. F. (Roxburgh)

Butcher, H. W.

Harvey, Air Cdre. A. V. (Macclesfield)

Macdonald, Sir Peter (I. of Wight)

Butler, Rt. Hn. R. A. (Saffron Walden)

Harvey, Ian (Harrow, E.)

Mackeson, Brig. H. R.

Carr, Robert (Mitcham)

Harvie-Watt, Sir George

McKibbin, A.

Carson, Hon. E.

Hay, John

McKie, J. H. (Galloway)

Channon, H.

Head, Brig. A. H.

Maclay, Hon. John

Churchill, Rt. Hon. W. S.

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

Maclean, Fitzroy

Clarke, Col. Ralph (East Grinstead)

Heald, Lionel

MacLeod, Iain (Enfield, W.)

Clarke, Brig. Terence (Portsmouth, W.)

Heath, Edward

MacLeod, John (Ross and Cromarty)

Clyde, J. L.

Henderson, John (Cathcart)

Macmillan, Rt. Hon. Harold (Bromley)

Colegate, A.

Hicks-Beach, Maj. W. W.

Macpherson, Major Niall (Dumfries)

Conant, Maj. R. J. E

Higgs, J. M. C.

Maitland, Cmdr. J. W.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Hill, Dr. Charles (Luton)

Manningham-Buller, R. E.

Cooper-Key, E. M.

Hill, Mrs. E. (Wythenshawe)

Marlowe, A. A. H.

Cornell, Lt.-Col. Uvedale (Ludlow)

Hinchingbrooke, Viscount

Marples, A. E.

Craddock, Berasford (Spelthorne)

Hirst, Geoffrey

Marshall, Douglas (Bodmin)

Cranborne, Viscount

Hollis, M. C.

Marshall, Sidney (Sultan)

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

Holmes, Sir Stanley (Harwich)

Maude, Angus (Ealing S.)

Crosthwaite-Eyre, Col. O. E.

Hope, Lord John

Maude, John (Exeter)

Crouch, R. F.

Hopkinson, Henry

Maudling, R.

Crowder, Capt. John (Finchley)

Hornsby-Smith, Miss P.

Medlicott, Brig. F.

Crowder, Peter (Ruislip—Northwood)

Horsbrugh, Rt. Hon. Florence

Mellor, Sir John

Cundiff, F. W.

Howard, Gerald (Cambridgeshire)

Molson, A. H. E.

Cuthbert, W. N.

Howard, Greville (St. Ives)

Monckton, Sir Walter

Moore, Lt.-Col. Sir Thomas

Roberts, Maj. Peter (Heeley)

Teeling, W.

Morris, Hopkin (Carmarthen)

Robertson, Sir David (Caithness)

Teevan, T. L.

Morrison, John (Salisbury)

Robinson, Roland (Blackpool, S.)

Thomas, J. P. L. (Hereford)

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

Robson-Brown, W.

Thompson, Kenneth Pugh (Walton)

Mott-Radclyffe, C. E.

Rodgers, John (Sevenoaks)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Nabarro, G.

Roper, Sir Harold

Thorneycroft, Peter (Monmouth)

Nicholls, Harmar

Ropner, Col. L.

Thornton-Kemsley, Col. C. N.

Nicholson, G.

Russell, R. S.

Thorp, Brig. R. A. F.

Nield, Basil (Chester)

Ryder, Capt. R. E. D.

Tilney, John

Noble, Cmdr. A. H. P.

Salter, Rt. Hon. Sir Arthur

Turner, H. F. L

Nugent, G. R. H.

Sandys, Rt. Hon. D.

Turton, R. H.

Nutting, Anthony

Savory, Prof. D. L.

Tweedsmuir, Lady

Oakshott, H. D.

Shepherd, William

Vane, W. M. F.

Odey, G. W.

Smiles, Lt.-Col. Sir Walter

Vaughan-Morgan, J. K.

O'Neill, Rt. Hon. Sir Hugh

Smithers, Peter (Winchester)

Vosper, D. F.

Ormsby-Gore, Hon. W. D.

Smithers, Sir Waldron (Orpington)

Wakefield, Edward (Derbyshire, W.)

Orr, Capt. L. P. S.

Smyth, Brig. J. G. (Norwood)

Wakefield, Sir Wavell (Marylebone)

Orr-Ewing, Charles Ian (Hendon, N.)

Snadden, W. McN.

Walker-Smith, D. C.

Orr-Ewing, Ian L. (Weston-super-Mare)

Soames, Capt. C.

Ward, Hon. George (Worcester)

Osborne, C.

Spearman, A. C. M.

Ward, Miss I. (Tynemouth)

Peake, Rt. Hon. O.

Spence, H. R. (Aberdeenshire, W.)

Waterhouse, Capt. Rt. Hon. C.

Perkins, W. R. D.

Spens, Sir Patrick (Kensington, S.)

Watkinson, H.

Peto, Brig. C. H. M.

Stanley, Capt. Hon. Richard (N. Fylde)

Webbe, Sir H. (London & Westminster)

Pickthorn, K.

Stevens, G. P.

Wheatley, Maj. M. J. (Poole)

Pitman, I. J.

Steward, W. A. (Woolwich, W.)

White, Baker (Canterbury)

Powell, J. Enoch

Stewart, Henderson (Fife, E.)

Williams, Charles (Torquay)

Price, Henry (Lewisham, W.)

Stoddart-Scott, Col. M.

Williams, Gerald (Tonbridge)

Prior-Palmer, Brig. O.

Storey, S.

Williams, Sir Herbert (Croydon, E.)

Profumo, J. D.

Strauss, Henry (Norwich, S.)

Wills, G.

Raikes, H. V.

Stuart, Rt. Hon. James (Moray)

Wilson, Geoffrey (Trure)

Rayner, Brig. R.

Studholme, H. G.

Winterton, Rt. Hon. Earl

Redmayne, M.

Summers, G. S.

Wood, Hon. R.

Remnant, Hon. P.

Sutcliffe, H.

York, C.

Renton, D. L. M.

Taylor, Charles (Eastbourne)

Roberts, Emrys (Merioneth)

Taylor, William (Bradford, N.)

TELLERS FOR THE AYES:

Mr. Drewe and Mr. Digby

NOES

Acland, Sir. Richard

Cook, T. F.

Gibson, C. W.

Adams, Richard

Cooper, Geoffrey (Middlesbrough, W.)

Gilzean, A.

Albu, A. H.

Cooper, John (Deptford)

Glanville, James (Consett)

Allen, Arthur (Bosworth)

Corbet, Mrs. Freda (Peckham)

Gooch, E. G.

Allen, Scholefield (Crewe)

Cove, W. G.

Gordon-Walker, Rt. Hon. P. C.

Anderson, Alexander (Motherwell)

Craddock, George (Bradford, S.)

Greenwood, Anthony (Rossendale)

Anderson, Frank (Whitehaven)

Crawley, A.

Greenwood, Rt. Hn. Arthur (Wakefield)

Attlee, Rt. Hon. C. R.

Crosland, C. A. R.

Grenfell, D. R.

Awbery, S. S.

Crossman, R. H. S.

Grey, C. F.

Ayles, W. H.

Cullen, Mrs. A.

Griffiths, David (Rother Valley)

Bacon, Miss Alice

Daines, P.

Griffiths, Rt. Hon. James (Llanelly)

Baird, J.

Dalton, Rt. Hon. H.

Griffiths, William (Exchange)

Balfour, A.

Darling, George (Hillsborough)

Gunter, R. J.

Barnes, Rt. Hon. A. J

Davies, A. Edward (Stoke, N.)

Hale, Joseph (Rochdale)

Bartley, P.

Davies, Rt. Hon. C. (Montgomery)

Hall, John (Gateshead, W.)

Bellenger, Rt. Hon. F. J.

Davies, Harold (Leek)

Hall, Rt. Hon. Glenvil (Colne Valley)

Bonn, Wedgwood

Davies, Stephen (Merthyr)

Hamilton, W. W.

Benson, G.

de Freitas, Geoffrey

Hannan, W.

Beswick, F.

Deer, G.

Hardman, D. R.

Bevan, Rt. Hon. A. (Ebbw Vale)

Delargy, H. J.

Hargreaves, A.

Bing, G. H. C.

Dodds, N. N.

Hastings, S.

Blenkinsop, A.

Donnelly, D.

Hayman, F. H

Blyton, W. R.

Driberg, T. E. N.

Henderson, Rt. Hon. Arthur (Tipton)

Boardman, H.

Dugdale, Rt. Hon. John (W. Bromwich)

Herbison, Miss M.

Booth, A.

Dye, S.

Hewitson, Capt. M.

Bottomley, A. G.

Ede, Rt. Hon. J. C.

Hobson, C. R.

Bowden, H. W.

Edelman, M.

Holman, P.

Bowies, F. G. (Nuneaton)

Edwards, John (Brighouse)

Holmes, Horace (Hemsworth)

Braddock, Mrs. Elizabeth

Edwards, Rt. Hon. Ness (Caerphilly)

Houghton, D.

Brook, Dryden (Halifax)

Edwards, W. J. (Stepney)

Hoy, J.

Brooks, T. J. (Normanton)

Evans, Albert (Islington, S. W.)

Hubbard, T.

Broughton, Dr. A. D. D.

Evans, Edward (Lowestoft)

Hudson, James (Ealing, N.)

Brown, Rt. Hon. George (Belper)

Evans, Stanley (Wednesbury)

Hughes, Emrys (S. Ayrshire)

Brown, Thomas (Ince)

Ewart, R.

Hughes, Hector (Aberdeen, N.)

Burke, W. A.

Fernyhough, E.

Hughes, Moelwyn (Islington, N.)

Burton, Miss E.

Field, Capt. W. J.

Hynd, H. (Accrington)

Butler, Herbert (Hackney, S.)

Finch, H. J.

Hynd, J. B. (Attercliffe)

Callaghan, L. J.

Fletcher, Eric (Islington, E.)

Irvine, A. J. (Edge Hill)

Carmichael, J.

Follick, M.

Irving, W. J. (Wood Green)

Castle, Mrs. B. A.

Foot, M. M.

Isaacs, Rt. Hon. G. A.

Champion, A. J.

Forman, J. C.

Janner, B.

Chetwynd, G. R.

Fraser, Thomas (Hamilton)

Jay, D. P. T.

Clunie, J.

Freeman, John (Watford)

Jeger, George (Goole)

Cocks, F. S.

Freeman, Peter (Newport)

Jeger, Dr. Santo (St. Paneras, S.)

Coldrick, W.

Gaitskell, Rt. Hon. H. T. N.

Jenkins, R. H.

Collick, P.

Ganley, Mrs. C. S.

Johnson, James (Rugby)

1816

1817

Johnston, Douglas (Paisley)

Mulley, F. W.

Strauss, Rt. Hon. George (Vauxhall)

Jones, David (Hartlepool)

Murray, J. D.

Stress, Dr. Barnett

Jones, Frederick Elwyn (W. Ham, S.)

Nally, W.

Summerskill, Rt. Hon. Edith

Jones, Jack (Rotherham)

Neal, Harold (Bolsover)

Sylvester, G. O.

Jones, William Elwyn (Conway)

Noel-Baker, Rt. Hon. P. J.

Taylor, Bernard (Mansfield)

Keenan, W.

O'Brien, T.

Taylor, Robert (Morpeth)

Kenyan, C.

Oldfield, W. H.

Thomas, David (Aberdare)

Key, Rt. Hon. C. W.

Oliver, G. H.

Thomas, George (Cardiff)

King, Dr. H. M.

Orbach, M.

Thomas, Iorwerth (Rhondda, W.)

Kinghorn, Sqn. Ldr. E.

Padley, W. E

Thomas, Ivor Owen (Wrekin)

Kinley, J.

Paget, R. T.

Thorneycroft, Harry (Clayton)

Lang, Gordon

Paling, Rt. Hon. W. (Dearne Valley)

Lee, Frederick (Newton)

Paling, Will T. (Dewsbury)

Thurtle, Ernest

Lee, Miss Jennie (Cannock)

Pannell, T. C.

Timmons, J.

Lever, Harold (Cheetham)

Pergiter, G. A.

Tomney, F.

Lever, Leslie (Ardwick)

Parker, J.

Turner-Samuels, M.

Lewis, Arthur (West Ham, N.)

Paton, J.

Ungoed-Thomas, Sir Lynn

Lewis, John (Bolton, W.)

Pearson, A.

Usborne, H.

Lindgren, G. S.

Peart, T. F.

Vernon, W. F.

Lipton, Lt.-Col. M.

Porter, G.

Viant, S. P.

Logan, D. G.

Price, Philips (Gloucestershire, W.)

Wallace, H. W.

Longden, Fred (Small Heath)

Proctor, W. T.

Watkins, T. E.

McAllister, G.

Pryde, D. J.

Webb, Rt. Hon. M. (Bradford, C.)

MacColl, J. E.

Pursey, Cmdr. H.

Weitzman, D.

McGhee, H. G.

Rankin, J.

Wells, Percy (Faversham)

McGovern, J.

Rees, Mrs. D.

Wells, William (Walsall)

McInnes, J.

Reeves, J.

West, D. G.

Mack, J. D.

Reid, Thomas (Swindon)

Wheatley, Rt. Hon. John (Edinb'gh E.)

McKay, John (Wallsend)

Reid, William (Camlachie)

White, Mrs. Eirene (E. Flint)

Mackay, R. W. G. (Reading, N.)

Rhodes, H.

White, Henry (Derbyshire, N. E.)

McLeavy, F.

Richards, R.

Whiteley, Rt. Hon. W.

MacMillan, Malcolm (Western Isles)

Robens, Rt. Hon. A.

Wigg, G.

McNeil, Rt. Hon. H.

Roberts, Goronwy (Caernarvonshire)

Wilcock, Group Capt. C. A. B.

MacPherson, Malcolm (Stirling)

Robertson, J. J. (Berwick)

Wilkes, L.

Mainwaring, W. H.

Robinson, Kenneth (St. Pancras, N.)

Wilkins, W. A.

Mallalieu, E. L. (Brigg)

Rogers, George (Kensington, N.)

Willey, Frederick (Sunderland)

Mallalieu, J. P. W. (Huddersfield, E.)

Ross, William

Willey, Octavius (Cleveland)

Mann, Mrs. Jean

Royle, C.

Williams, David (Neath)

Manuel, A. C.

Shawcross, Rt. Hon. Sir Hartley

Williams, Rev. Llywelyn (Abertillery)

Marquand, Rt. Hon. H. A.

Shinwell, Rt. Hon. E.

Williams, Ronald (Wigan)

Mathers, Rt. Hon. G.

Shurmer, P. L. E.

Williams, Rt. Hon. Thomas (Don V'lly)

Mellish, R. J.

Silverman, Julius (Erdington)

Williams, W. T. (Hammersmith, S.)

Messer, F.

Silverman, Sydney (Nelson)

Wilson, Rt. Hon. Harold (Huyton)

Middleton, Mrs. L.

Simmons, C. J.

Winterbottom, Ian (Nottingham, C.)

Mikardo, Ian.

Slater, J.

Winterbottom, Richard (Brightside)

Mitchison, G. R.

Smith, Ellis (Stoke, S.)

Wise, F. J.

Moeran, E. W.

Smith, Norman (Nottingham. S.)

Woodburn, Rt. Hon. A.

Monslow, W.

Snow, J. W.

Woods, Rev. G. S.

Moody, A. S.

Sorensen, R. W.

Wyatt, W. L.

Morgan, Dr. H. B.

Soskice, Rt. Hon. Sir Frank

Yates, V. F.

Morley, R.

Sparks, J. A.

Younger, Hon. K

Morris, Percy (Swansea, W.)

Steele, T.

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

Stewart, Michael (Fulham, E.)

TELLERS FOR THE NOES:

Mort, D. L.

Stokes, Rt. Hon. R. R.

Mr. Collindridge and Mr. Popplewell.

Moyle, A.

Strachey, Rt. Hon. J.

Clause 25.—(PUBLIC UTILITY UNDER TAKERS TO BE LIABLE TO THE PROFITS TAX.)
10.45 p.m.
Mr. Geoffrey Hutchinson: I beg to move, in page 16, line 38, after "businesses" to insert:
"other than any water undertaking carried on by a statutory water undertaker as defined by the Water Acts, 1945 and 1948."
The statutory water undertakings, to which this Amendment relates, have hitherto been immune from the payment of Profits Tax, and the purpose of this Amendment is to ensure that that immunity shall continue. On examination of the nature of these public undertakings and the methods by which their finances are arranged, it becomes perfectly
1818
clear that the application of Profits Tax to public undertakings of this character is wholly inappropriate. I hope to show that astonishing anomalies result from the attempt to bring these undertakings within the scope of Profits Tax—anomalies, I think, so striking that the right hon. Gentleman could not have been aware of them when he first proposed that the Profits Tax should be extended in this way.
These undertakings are all statutory undertakings carrying on their business in accordance with the provisions of various Acts of Parliament. They are not trading undertakings in the usual commercial sense. In the first place they are all supplying an essential public commodity; and in the second place

1819
their business is regulated by a variety of Acts of Parliament and Orders made by different Government Departments. They are controlled by the Minister of Local Government and Planning in relation to their charges, which cannot be varied without his Order. Furthermore, the Minister exercises complete control over the sums which they are permitted to place to reserve or to their contingency funds. Therefore, these undertakings carry on their business under conditions which are altogether different from the conditions of an ordinary commercial undertaking.
About two-thirds of these water undertakings are either local authorities or joint boards. In normal circumstances they are undertakings which are not conducted so as to produce any surplus. Their charges are balanced against operating costs. It is the usual practice, when their reserve funds and contingency funds have reached the statutory limits, for them to aim at adjusting their charges so as to meet their operating expenses. It is true that in recent years many of these undertakings have produced a taxable surplus. The reason for that has been the difficulty which every undertaking has experienced in carrying out normal maintenance work.
Those taxable surpluses out of which the Profits Tax will have to be paid represent deferred maintenance, and the surpluses, if the Chancellor of the Exchequer does not take them, will eventually be used for carrying out that deferred maintenance, which the undertakings are not able to do at present. If the taxable surplus which a local authority or joint board undertaking has at this time is absorbed in payment of Profits Tax, it will be necessary, when the time comes for the maintenance work to be done, to raise additional funds. Eventually it will mean that the charges of these undertakings will have to be increased or a deficiency precept levied on their constituent local authorities when that maintenance work can be done.
The application of this tax to undertakings of this character produces the most surprising anomalies. Take the case of the rural authorities. In many cases, the rural water authorities are today receiving or are promised a subsidy under
1820
the Rural Water and Sewerage Act, 1944. That is paid to them by the Government to enable them to extend their mains to those parts of their areas where there is no piped supply. I suppose that few hon. Members of this Committee do not appreciate keenly the feelings of the rural population regarding this subject of rural water supplies. Surely it is a most anomalous situation that an undertaking should, with one hand, be receiving from the Government a subsidy and, with the other, should be handing back Profits Tax, as it will have to do under the Chancellor's proposal. That is the most obvious anomaly.
But when one looks into the manner in which these local authority undertakings are financed, the anomalies become even more striking. Certain authorities have the power, which in most cases they have taken by special Private Acts, to levy a general water rate. By that I do not mean the ordinary water rate which is levied upon premises connected with the mains supply. These authorities have power to levy a general rate upon the whole of the hereditaments in their area to supplement the cost of operating their water undertakings. That power has been given to them for the very obvious reason of enabling them to obtain contributions, for what is regarded as a public service, from the owners of premises which, in fact, are not connected with the supply from the mains but which benefit indirectly from an efficient water supply.
Most of the local authorities in Scotland have this power of levying what I have called a general water rate. Some of the larger cities in England have a similar power. The proceeds of these general water rates and of the precepts which the joint boards are entitled to levy on the local authorities are not subject to tax; and therefore a water undertaking which has this right to levy a general water rate will enjoy a revenue which will not in any circumstances be subject to tax. In other words, a substantial part of the revenue of the undertaking is not taxable. Now those authorities may escape Profits Tax altogether.
But it is not every undertaking which has this special power. Most of the undertakings in England have no power to levy a general water rate on properties not connected to the mains. Their position will be altogether different. There

1821
will be no part of their revenue which is not taxable, while the water rate levied on their consumers may provide a surplus subject to tax. That is a completely anomalous position as between these two classes of local authority, one having the power to raise revenue which is not taxable, the other having no such power. One type of authority will not pay tax, and another class, not having the same statutory powers, will have to pay. It is a most complete anomaly.
Those local authorities without power to levy a general water rate may, of course, allow their operating costs gradually to rise and not to apply to the Minister for any increase in their scale of charges, thereby producing a deficit instead of a surplus on the undertaking. Such a deficiency could be charged to the general district rate levied over the whole of their area. I do not suppose that many local authorities want to conduct their water undertakings on these lines, but it may well happen that they will do so. I might remind the Committee that it is easy to get the consent of the Minister of Local Government and Planning to an increased scale of charges. In both classes of undertaking the deficiency which would eventually be charged upon the general body of ratepayers.
Of course, all the undertakings affected by this are not local authority undertakings. About one-third are statutory companies, whose undertakings are conducted subject to exactly the same control as the undertakings of the local authorities. They are not commercial trading concerns in the accepted sense. The companies, of course, have no power to charge any deficiency in the working of their undertakings on the general rate, nor have they any power to raise a general water rate. So the companies will have no alternative at all except to raise their charges. If their taxable surplus is taken in the form of Profits Tax and the undertakings begin to make a deficiency, they will have no choice except to apply for an increase of charges.
11.0 p.m.
The point I am making is that here one has these three different classes of undertakings, each of which is going to be affected by this tax in quite a different way. A tax which has such a different
1822
incidence as this tax will have in relation to these undertakings is, I submit to the Committee, a bad tax. We ought to be sure that a tax falls equally upon every class of person who will be called upon to pay it.
The Chancellor, in his Budget speech, dealt with this matter. He gave one reason, but only one reason, why he desired to extend this tax to these public undertakings. There is no revenue in this, or very little revenue—something less than £1 million. I think the right hon. Gentleman estimated that the yield of Profits Tax, extended to the water undertakings and to bus undertakings, which are the only two statutory undertakings affected, would be about £1 million, so that the effect of excluding water undertakings would cost the Treasury something less than £1 million. Whatever it is, it will eventually go on the water rate, so it really is a choice between one pocket and another.
The reason the Chancellor gave for this proposal was that it would bring the water undertakings into line with the nationalised gas and electricity undertakings. He gave no other reason than that. I submit that that reason, when one examines it, is really fallacious. Gas and electricity undertakings are trading undertakings in the ordinary sense of the term. They are selling a commodity and their profits depend upon the success with which they sell it and the price which they obtain for it. People pay for their gas and for their electricity according to the quantity which they consume. That is not the case with water. The ordinary domestic consumer does not pay for water according to the quantity of water he consumes. If he consumes no water at all, he still has to pay the water rate.
There is no escape from payment for water by a reduction in one's consumption. If electricity get too expensive, one switches off the electric fire, puts on one's overcoat—if one has one—and reflects on the advantages of a planned economy. But one cannot do that with water. One has to pay for water, so long as one remains connected to the supply, if one takes only a basinful every day.
Mr. Ellis Smith: Very cheap!
Mr. Hutchinson: Yes, the cheapest of all commodities, because it is still in the hands of private enterprise.
Mr. Ellis Smith: Municipal.
Mr. Hutchinson: Municipal and private enterprise. There is all the difference in the world between gas and electricity on the one hand and water on the other, because gas and electricity are ordinary trading commodities sold to people who can refuse to buy them if they wish, and the success of the companies selling them depends on the amount of the commodity they sell. That is not so with water, and if the right hon. Gentleman had reflected a little longer about that argument, he would have refrained from using it.
No doubt the Government anticipate that they will attract certain applause for increasing the Profits Tax. I am sure they will not attract any applause from anybody for imposing this tax upon these undertakings, since it must eventually be passed on either to the consumers or to the general ratepayers. I warn the right hon. Gentleman that sooner or later he will have to answer for increasing the local rates and for increasing the local water rates. I am sure that is not a result to which the right hon. Gentleman looks forward.
In these days when rates play an important part in the cost of living, as I said the other night when we were dealing with initial allowances, nobody wants to be regarded as responsible for putting up the rates. In the eventual result, that is exactly what this proposal will do, and for that reason, if for no other, I say it is a proposal in which every hon. Member is interested, perhaps I ought to say, in which the constituents of every hon. Member are interested. I say it is a bad proposal, and it is one about which I hope the right hon. Gentleman will think again.
Mr. Arthur Colegate: I am extraordinarily surprised that the Chancellor of the Exchequer should think of taxing one of the elementary necessities of life, water. The Government have always treated profits as being rather rakish, as something that ought to be treated as being almost immoral, and at a time when inflation is rampant—I shall not give the reasons why it is rampant—it is felt that they must increase the Profits Tax not merely to get revenue but to see that the progress of inflation is checked. How could that possibly apply to water undertakings? These undertakings which give
1824
the most modest return to the investor cannot, as my hon. and learned Friend pointed out, profiteer. It is impossible, because they are controlled at every turn, both with regard to their prices and activities, their service conditions, and so on.
Here we can see once more that this Budget has been framed without using any imagination as to the effects of the different Clauses of which it is made up. I have already complained that the suspension of the initial allowances will hit the rural water supplies and make them much more expensive. Yet one of the inducements held out by the party opposite to people to vote for them was that they would see that there was a supply of piped water to every village in the land. We all know that they have failed largely in that. The money set aside for it has not yet been spent and here, in two places in this Budget, they are deliberately, as they must know, making the supply of piped water to the rural areas definitely more expensive.
There can be no question that rates must go up if part of the money available for repairs and maintenance is to be taken away in tax. As my hon. and learned Friend has pointed out, it means merely taking money from one pocket to put it into another. I think the Chancellor is making practically no concession, but he should for a moment forget a little of his arithmetic and show a little more heart and imagination. I have no doubt arithmetic is very good for bookkeepers and booking offices, and I have no doubt that his Budget is quite sound, but it is not sound in any respect as regards the effects that will be created by this Clause which has thoughtlessly been put in.
I appeal to the Financial Secretary to look at this matter again. The Chancellor will get a miserable revenue from it, and in the long run he will get no revenue at all. In the meantime, one of the most elementary services in any civilised community is to be taxed for the first time on this Profits Tax basis. It has been pointed out that it cannot possibly profiteer in any sense whatever. I do not know what size of dividend is paid by a water company, but it is something very small and the conditions which in certain industries do lead to immensely enhanced paper profits that could be taxed do not lead to enhanced

1825
profits of any sort in the water undertakings. I appeal to the Financial Secretary to look to this Clause, to try to imagine what it would mean, and then to drop it.
Mr. John Cooper: I wish to take advantage of this Amendment to ask the Financial Secretary to take into consideration the very special case in regard to the Metropolitan Water Board, which I think are the largest suppliers of water in this country. They are in a very special position, and I wish to put forward their special position in the hope that the Financial Secretary will give the matter some consideration. There is still time for them to be excluded from the effects of this Clause.
The short, yet peculiar, point that affects the Metropolitan Water Board is that, under Statute, as distinct even from municipalities and private companies, they are not allowed to set aside any money at all for the purpose of reserves. The method of operating the water board financially, which has proved very successful over many years, is to make the following provisions: that, after a year's working, if there is a financial surplus of more than £250,000, then the Board are automatically obliged to reduce the water rate. On the other hand, if there is a deficit in excess of £250,000, then the Board are empowered to increase the rate.
They have to undertake very large capital projects, which run into £6 million, £7 million or £8 million, and sometimes more than that, and they are not allowed to put any money on one side to reserve, even in preparation for these large capital ventures. They have to raise the whole of the amount by way of loan. Therefore, to use the word "profit" in regard to such special arrangements, defined by Statute, which affect the Board as they affect no other water supplier in the whole of the country, is, I suggest—
11.15 p.m.
Mr. Hutchinson: I suppose that the hon. Gentleman appreciates that every water undertaking is restricted by Statute as to the amount which it can place to general reserve fund and contingency fund?
Mr. Cooper: I am drawing the distinction that we are not even allowed to have a reserve fund at all, and in that respect
1826
I think the Financial Secretary will agree with me, because he understands the position of the Metropolitan Water Board. In that respect the Board are distinct from other suppliers. This peculiarity does, at least, create a prima facie case for the exemption of the Metropolitan Water Board from this Clause. Therefore, I ask, without labouring the point—the facts are quite clear—that the Minister should give this matter consideration in the hope that the position might be met by special provision.
Mr. Walker-Smith: I should like to return from the special problem of the Metropolitan Water Board to the general position put forward by my hon. and learned Friend. He expounded his case with all that persuasive authority that comes from his great experience and knowledge of these matters, but I cannot help recalling that he put forward an equally convincing case the other day in regard to initial allowances, and in spite of that no concession was forthcoming from the Treasury Bench. On that occasion we had the Economic Secretary to the Treasury, who brought with him a prefabricated brief, prepared in advance, which clearly shut out the possibility of his making any adaptation of his argument in response to the views put forward. This time we have the Financial Secretary to the Treasury, and I cannot really discern whether, amid the mass of documents he has brought in, there is a prefabricated reply or not.
Mr. Douglas Houghton: Are the hon. Gentleman's own briefs prefabricated?
Mr. Walker-Smith: The hon. Member should understand that the briefs in which I deal are different from the briefs in which the Treasury Bench deal, but I would remind the hon. Member, as he should well know, that if anybody practising in my profession made his case without regard to the case put against him, he would not go very far.
After that rather unhelpful interruption, which illustrates, as I hope the Leader of the House will note, that one reason these debates take some little time is that hon. Members put these rather unhelpful points, may I say that what the Committee want to be told is on what principle Profits Tax can conceivably be

1827
attached to water companies. The whole burden of the case made by the Chancellor of the Exchequer on the previous Clause was that Profits Tax was a means of curbing the excesses of unbridled private enterprise.
But with water companies we are in an entirely different sphere. Water undertakings are a perfect example of the planned economy. Their reserves, the amount of their distribution, and the amount of their charges are all regulated by Statute. How, then, can there be any justification for applying the principle of Profits Tax on the basis put forward by the Chancellor of the Exchequer in his speech on the last Clause?
As my hon. and learned Friend pointed out, there would in the ordinary way probably not be a taxable surplus. The fact that a taxable surplus exists in many undertakings now is due to what might be called the deferred maintenance that they have been unable to carry out. Why have they not been able to carry it out? Because conditions have not allowed them to do so, and, as we on this side have been saying in debate over and over again for the last five years, the Government have not enabled sufficient progress to be made in these vital matters of water supply. Time and time again, as the OFFICIAL REPORT would show, we have criticised the Government in regard to their starving water undertakings, especially in rural areas, of the pipes necessary for their purposes.
I do not want to repeat the anomalies catalogued by my hon. and learned Friend. If it were merely a question of having one law for the private enterprise water companies and another for the local authority, no doubt that could be defended by the Government as part of the peculiar mission of Socialism; but there is the further anomaly that there is different treatment for local authority water undertakings. I cannot see how this can be defended on any principle at all. I maintain that there is no justification for this Profits Tax on water companies. This Government were the first in the history of the country to put a tax on bread. Now, as my hon. Friend has said, they are the first to put a tax on water. That will be the epitaph of this Government.
The Financial Secretary to the Treasury (Mr. Douglas Jay): The hon. and learned Gentleman the Member for Ilford (Mr. Hutchinson) put a persuasive and detailed case for exempting these statutory undertakings from the Profits Tax. He did not convince me that he advanced strong enough reasons for making an exception as against all the other public utilities. His arguments seemed cogent when seen simply in relation to water undertakings, but we must consider them against the background of the structure of this tax.
The general principle of the Profits Tax, in its present form, is that where you are dealing with private companies who have a substantially unlimited power of paying dividends to private shareholders, the tax should be levied at the higher rate of 50 per cent. of distributed profits; but where we are concerned with nationalised industries or undertakings such as these public utilities, which are subject to one form or another of limitation on the rate of dividend, or the rate of charge, or other limitations of that kind, the tax should fall on them at the much lower rate of 10 per cent. When one considers into which of these categories these undertakings should fall, I think there is no doubt that broadly they should go into the class liable to tax at 10 per cent.
Mr. Hutchinson: The hon. Gentleman mentioned an unlimited right to pay dividends, but does he appreciate that the ordinary capital of the water companies is almost invariably fixed dividend capital?
Mr. Jay: Yes, I was saying that where there was an unlimited right to pay dividends the tax fell at the higher rate.
Mr. Hutchinson: I was pointing out to the hon. Gentleman that in my experience it is almost invariably the case that there is no unlimited right of paying dividends.
Mr. Jay: I was referring to the general run of privately-owned companies outside the water industry, and pointing out that the tax falls at the heavy rate. The hon. and learned Gentleman said that these concerns were not trading organisations, and therefore ought not to be liable to tax. However, they make profits in the relevant sense of profits for this tax. If they do not make profits in this sense, clearly they would not pay tax. Therefore,

1829
there would be no argument between us.
The hon. and learned Gentleman explained how the consumer pays a charge not in accordance with the amount of water he consumes. That is true, but he did not seem to me to establish the conclusion that therefore the water concerns should be exempt from Profits Tax. I do not think the conclusion follows from his argument. The hon. and learned Gentleman also said that water undertakings were different from ordinary commercial undertakings, and by that I understood him to mean commercial undertakings not in the water industry. We recognise that important distinction by imposing a Profits Tax of only 10 per cent. on water undertakings, coupling them with nationalised industries rather than with ordinary companies.
Finally, the hon. and learned Gentleman explained that there were certain detailed anomalies which would arise between one water company and another. No doubt it is true that with this tax, as with any tax, there are bound to be detailed anomalies, however elaborate the system; but it is clear that there would be a more glaring anomaly if we were to select one class of public utility—the statutory water undertakings—for exemption from this 10 per cent. tax, while levying it on bus companies and other utility concerns. For these reasons, I cannot advise the Committee to accept this Amendment.
Captain Crookshank: I have been looking round to see whether the hon. Member for Ealing, North (Mr. J. Hudson) was here. I do not know what has happened to him. We have had an hour's debate on water. It speaks well for the Committee that at this late hour we have been discussing this matter at all, and with such passionate speeches from all sides on a subject upon which the Financial Secretary poured a cold douche.
I do not understand the Financial Secretary's attitude. It seems to me that the arguments of my hon. and learned Friend were conclusive. He pointed out that two-thirds of the water undertakings were local authorities or joint boards, that the rural water supplies had to be subsidised, and therefore taxing any profits
1830
was only taking money out of one pocket into which it had been put and putting it into the other, and that we paid for water by rate irrespective of whether we used it or not—whether we had a bath or not, whether we washed our teeth or not, or took it with whisky or not.
The hon. Member for Deptford (Mr. J. Cooper) pointed out the extremely difficult position of the Metropolitan Water Board, which from the number of their customers must be one of the largest water undertakings in the world. The Metropolitan Water Board can never make profits, because as soon as their surplus reaches a certain figure, it has to go in reduction of the water rate, and they never have profit in the meaning employed in the rest of this Clause. That seemed to me a valid argument, which the Financial Secretary never touched on at all.
11.30 p.m.
The use of the word "profits" is confusing. We understand what it means in dealing with ordinary commercial undertakings, but when one comes to something in the region of a statutory undertaking like this, particularly in the case of the Metropolitan Water Board, whose statute, so tightly drawn, prevents it from making what would commercially be considered to be a profit, the Government decide to consider it in the same category as an ordinary business, which frankly exists to make profits for the benefit of the community, its shareholders and its employees. The two are not relevant, yet the same word is used in that connection.
But the Financial Secretary says that one must look at the background to the tax and at its structure. I do not think it is a very exciting thing to look at any way. Apart from that, he says it is reasonable that statutory undertakings should be based on the same rate as are nationalised undertakings. It is all right just to say that, and that is all that happens; but the hon. Gentleman did not argue that there is any particular reason why they should be, nor is there any, except that it is convenient. Nationalised industries have been nationalised by Statute, and by some strange strain of thought they are joined together with statutory undertakings.

1831
I suppose it is a good explanation. He could have given reasons if he wanted to do so, but he did not: nor did he intend to argue the case that these statutory undertakings should be coupled with nationalised undertakings. It may be that some day the Socialist Party are going to nationalise water—it was included in one or other of their election manifestos, but is now in suspended animation, if water could be. Therefore, in order to clear the way against that eventuality, the Government now place it on the same basis as nationalised industries.
We on this side do not begin to accept any of his arguments, which do not make any sense at all. We are moved not only by the arguments of the hon. and learned Gentleman, who is perhaps one of the greatest experts on this question in this country, but who has a pellucid description
in argument, as anyone must know who heard his finer points, but by the hon. Member for Deptford, who speaks as a member of the great undertaking which provides this capital with its needs in water.
The Financial Secretary chooses to ignore all arguments, and merely says that water equals coal, gas and electricity which have already been nationalised because presumably the Government hope to nationalise water one day. That is not a good enough argument, and, although there is much more work to do, if my hon. Friend cares to press his Amendment to a Division, I will gladly follow him into the Lobby.
Question put, "That those words be there inserted."
The Committee divided: Ayes, 285; Noes, 293.

Division No. 111.]

AYES

[11.34 p.m

Aitken, W. T.

Conant, Maj. R. J. E.

Grimston, Robert (Westbury)

Alport, C. J. M.

Cooper, Sqn. Ldr. Albert (Ilford, S)

Harden, J. R. E.

Amery, Julian (Preston, N.)

Cooper-Key, E. M.

Hare, Hon. J. H. (Woodbridge)

Amory, Heathcoat (Tiverton)

Corbett, Lt.-Col. Uvedale (Ludlow)

Harris, Frederic (Croydon, N.)

Arbuthnot, John

Craddock, Beresford (Spelthorne)

Harris, Reader (Heston)

Ashton, H. (Chelmsford)

Cranborne, Viscount

Harvey, Air-Codre. A. V. (Macclesfield)

Assheton, Rt. Hon. R. (Blackburn, W.)

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

Harvey, Ian (Harrow, E.)

Astor, Hon. M. L.

Crosthwaite-Eyre, Col. O. E.

Harvie-Watt, Sir George

Baker, P. A. D.

Crouch, R. F.

Hay, John

Baldock, Lt.-Cmdr. J. M.

Crowder, Capt. John (Finchley)

Head, Brig. A. H.

Baldwin, A. E.

Crowder, Petre (Rulslip—Northwood)

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

Banks, Col. C.

Cundiff, F. W.

Heald, Lionel

Baxter, A. B.

Cuthbert, W. N.

Henderson, John (Cathcart)

Beamish, Maj. Tufton

Davidson, Viscountess

Hicks-Beach, Maj. W. W.

Bell, R. M.

Davies, Rt. Hon. C. (Montgomery)

Higgs, J. M. C.

Bennett, Dr. Reginald (Gosport)

Davies, Nigel (Epping)

Hill, Dr. Charles (Luton)

Bennett, William (Woodside)

de Chair, Somerset

Hill, Mrs. E. (Wythenshawe)

Bevins, J. R- (Liverpool, Toxteth)

De la Bère, R.

Hinchingbrooke, Viscount

Birch. Nigel

Deedes, W. F.

Hirst, Geoffrey

Bishop, F. P

Digby, S. Wingfield

Hollis, M. G.

Black, C. W.

Dodds-Parker, A. D.

Holmes, Sir Stanley (Harwich)

Boles, Lt.-Col. D. C. (Wells)

Donner, P. W.

Hope, Lord John

Boothby, R.

Douglas-Hamilton, Lord Malcolm

Hopkinson, Henry

Bossom, A. C.

Drayson, G. B.

Hornsby-Smith, Miss P.

Bowen, E. R. (Cardigan)

Drewe, C.

Horsbrugh, Rt. Hon. Florence

Boyd-Carpenter, J. A

Dugdale, Maj. Sir Thomas (Richmond)

Howard, Gerald (Cambridgeshire)

Boyle, Sir Edward

Duncan, Capt. J. A. L.

Howard, Greville (St. Ives)

Bracken, Rt. Hon. B.

Dunglass, Lord

Hudson, Sir Austin (Lewisham, N.)

Braine, B. R.

Duthie, W. S.

Hudson, Rt. Hon. Robert (Southport)

Braithwaite, Sir Albert (Harrow, W.)

Eccles, D. M.

Hudson, W. R. A. (Hull, N.)

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Eden, Rt. Hon. A.

Hurd, A. R.

Bromley-Davenport, Lt.-Col. W.

Elliot, Rt. Hon. W. E

Hutchinson, Geoffrey (Ilford, N.)

Brooke, Henry (Hampstead)

Erroll, F. J.

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Browne, Jack (Govan)

Fisher, Nigel

Hutchison, Colonel James (Glasgow)

Buchan-Hepburn, P. G. T.

Fort, R.

Hyde, Lt.-Col. H. M.

Bullock, Capt. M.

Foster, John

Hylton-Foster, H. B.

Bullus, Wing Commander E. E.

Fraser, Hon. Hugh (Stone)

Jennings, R.

Burden, F. A.

Fraser, Sir I. (Morecambe & Lonsdale)

Johnson, Howard (Kemptown)

Butcher, H. W

Fyfe, Rt. Hon. Sir David Maxwell

Jones, A. (Hall Green)

Butler, Rt. Hn. R. A. (Saffron Walden)

Gage, C. H.

Joynson-Hicks, Hon. L. W.

Carr, Robert (Mitcham)

Galbraith, Cmdr. T. D. (Pollok)

Kaberry, D.

Carson, Hon. E.

Gammans, L.D.

Kerr, H. W. (Cambridge)

Channon, H.

Garner-Evans, E. H. (Denbigh)

Kingsmill, Lt.-Col. W. H.

Churchill, Rt. Hon. W. S.

Gates, Maj. E. E.

Lambert, Hon. G.

Clarke, Col. Ralph (East Grinstead)

Gomme-Duncan, Col. A.

Lancaster, Col. C. G.

Clarke, Brig. Terence (Portsmouth. W.)

Granville, Edgar (Eye)

Langford-Holt, J.

Clyde, J. L.

Gridley, Sir Arnold

Law, Rt. Hon. R. K.

Colegate, A.

Grimston, Hon. John (St. Albans)

Leather, E. H. C.

Legge-Bourke, Maj. E. A. H

Noble, Cmdr. A. H. P.

Stevens, G. P.

Lennox-Boyd, A. T

Nugent, G. R. H.

Steward, W. A. (Woolwich, W.)

Lindsay, Martin

Nutting, Anthony

Stewart, Henderson (Fife, E.)

Linstead, H. N.

Oakshott, H. D.

Stoddart-Scott, Col. M.

Llewellyn, D.

Odey, G. W.

Storey, S.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

O'Neill, Rt. Hon. Sir Hugh

Strauss, Henry (Norwich, S.)

Lloyd, Maj. Guy (Renfrew, E.)

Ormsby-Gore, Hon. W. D.

Stuart, Rt. Hon. James (Moray)

Lloyd, Selwyn (Wirral)

Orr, Capt. L. P. S.

Studholme, H. G.

Leckwood, Lt.-Col. J. C.

Orr-Ewing, Charles Ian (Hendon, N.)

Summers, G. S.

Longden, Gilbert (Herts, S. W.)

Orr-Ewing, Ian L. (Weston-supar-Mare)

Sutcliffe, H.

Low, A. R. W.

Osborne, C.

Taylor, Charles (Eastbourne)

Lucas, Sir Jocelyn (Portsmouth, S.)

Peake, Rt. Hon. O.

Taylor, William (Bradford, N.)

Lucas, P. B. (Brentford)

Perkins, W. R. D.

Teeling, W.

Lucas-Tooth, Sir Hugh

Peto, Brig. C. H. M.

Teevan, T. L

Lyttelton, Rt. Hon. O.

Pickthorn, K.

Thomas, J. P. L. (Hereford)

McAdden, S. J.

Pitman, I. J.

Thompson, Kenneth Pugh (Walton)

McCorquodale, Rt. Hon. M. S.

Powell, J. Enoch

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Macdonald, A. J. F. (Roxburgh)

Price, Henry (Lewisham, W.)

Thorneycroft, Peter (Monmouth)

Macdonald, Sir Peter (I. of Wight)

Prior-Palmer, Brig. O.

Thornton-Kemsley, Col. C. N.

Mackeson, Brig. H. R.

Profumo, J. D.

Thorp, Brig. R. A. F.

McKibbin, A.

Raikes, H. V.

Tilney, John

McKie, J. H. (Galloway)

Rayner, Brig. R.

Turner, H. F. L.

Maclay, Hon. John

Redmayne, M.

Turton, R. H.

Maclean, Fitzroy

Remnant, Hon. P.

Tweedsmuir, Lady

MacLeod, Iain (Enfield, W.)

Renton, D. L. M.

Vane, W. M. F.

MacLeod, John (Ross and Cromarty)

Roberts, Emrys (Merioneth)

Vaughar-Morgan, J. K.

Macmillan, Rt. Hon. Harold (Bromley)

Roberts, Maj. Peter (Heeley)

Vosper, D. F.

Macpherson, Major Niall (Dumfries)

Robertson, Sir David (Caithness)

Wakefield, Edward (Derbyshire, W.)

Maitland, Cmdr. J. W.

Robinson, Roland (Blackpool, S.)

Wakefield, Sir Wavell (Marylebone)

Manningham-Buller, R. E.

Robson-Brown, W.

Walker-Smith, D. C.

Marlowe, A. A. H.

Rodgers, John (Sevenoaks)

Ward, Hon. George (Worcester)

Marshall, Douglas (Bodmin)

Roper, Sir Harold

Ward, Miss I. (Tynemouth)

Marshall, Sidney (Sutton)

Ropner, Col. L.

Waterhouse, Capt. Rt. Hon. C.

Maude, Angus (Ealing, S.)

Russell, R. S.

Watkinson, H.

Maude, John (Exeter)

Ryder, Capt. R. E. O.

Webbe, Sir H. (London & Westminster)

Maudling, R.

Salter, Rt. Hon. Sir Arthur

Wheatley, Maj. M. J. (Poole)

Medlicott, Brig. F

Sandys, Rt. Hon. D.

White, Baker (Canterbury)

Mellor, Sir John

Shepherd, William

Williams, Charles (Torquay)

Molson, A. H. E.

Smiles, Lt.-Col. Sir Walter

Williams, Gerald (Tonbridge)

Monokton, Sir Walter

Smithers, Peter (Winchester)

Williams, Sir Herbert (Croydon, E.)

Moore, Lt.-Col. Sir Thomas

Smithers, Sir Waldron (Orpington)

Wills, G.

Morrison, John (Salisbury)

Smyth, Brig. J. G. (Norwood)

Wilson, Geoffrey (Truro)

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

Snadden, W. McN.

Winterton, Rt. Hon. Earl

Mott-Radclyffe, C. E.

Soames, Capt. C.

Wood, Hon. R.

Nabarro, G.

Spearman, A. C. M.

York, C.

Nicholls, Harmar

Spence, H. R. (Aberdeenshire, W.)

Nicholson, G.

Spent, Sir Patrick (Kensington, S.)

TELLERS FOR THE AYES:

Nield, Basil (Chester)

Stanley, Capt. Hon. Richard (N. Fylde)

Mr. Popplewell and Mr. Delargy

NOES

Acland, Sir Richard

Brown, Thomas (Ince)

Donnelly, D.

Adams, Richard

Burke, W. A.

Driberg, T. E. N.

Albu, A. H.

Burton, Miss E.

Dugdale, Rt. Hon. John (W. Bromwich)

Allen, Arthur (Bosworth)

Butler, Herbert (Hackney S.)

Dye, S.

Allen, Scholefield (Crewe)

Callaghan, L. J.

Ede, Rt. Hon. J. C.

Anderson, Alexander (Motherwell)

Carmichael, J.

Edelman, M.

Anderson, Frank (Whitehaven)

Castle, Mrs. B. A

Edwards, John (Brighouse)

Attlee, Rt. Hon. C. R

Champion, A. J

Edwards, Rt. Hon. Ness (Caerphilly)

Awbery, S. S

Chetwynd, G. R

Edwards, W. J. (Stepney)

Ayles, W. H.

Clunie, J.

Evans, Albert (Islington, S. W.)

Bacon, Miss Alice

Cocks, F. S.

Evans, Edward (Lowestoft)

Baird, J.

Coldrick, W.

Evans, Stanley (Wodnesbury)

Balfour, A.

Collick, P.

Ewart, R.

Barnes, Rt. Hon. A. J.

Collindridge, F

Feryhough, E.

Bartley. P

Cook, T. F.

Field, Capt. W. J.

Bellenger, Rt. Hon. F. J.

Cooper, Geoffrey (Middlesbrough, W.)

Finch, H. J.

Bonn, Wedgwood

Cooper, John (Deptford)

Fletcher, Eric (Islington, E.)

Benson, G.

Corbet, Mrs. Freda (Peckham)

Follick, M.

Beswick, F.

Cove, W. G.

Foot, M. M.

Bevan, Rt. Hon. A. (Ebbw Vale)

Craddock, George (Bradford, S.)

Forman, J. C.

Bing, G. H. C.

Crawley, A.

Fraser, Thomas (Hamilton)

Blenkinsop, A.

Crosland, C. A. R.

Freeman, John (Watford)

Blyton, W. R.

Crossman, R. H. S.

Freeman, Peter (Newport)

Boardman, H.

Cullen, Mrs. A.

Gaitskell, Rt. Hon. H. T. N

Booth, A.

Daines, P.

Ganley, Mrs. C. S.

Bottomley, A. G.

Dalton, Rt. Hon. H.

Gibson, C. W.

Bowden, H. W.

Darling, George (Hillsborough)

Gilzean, A.

Bowles, F. G. (Nuneaton)

Davies, A. Edward (Stoke, N.)

Glanville, James (Consett)

Braddock, Mrs. Elizabeth

Davies, Harold (Leek)

Gooch, E. G.

Brook, Dryden (Halifax)

Davies, Stephen (Merthyr)

Gordon-Walker, Rt. Hon. P. C.

Brooks, T. J. (Normanton)

de Freitas, Geoffrey

Greenwood, Anthony (Rossendale)

Broughton, Dr. A. D. D.

Deer, G.

Greenwood, Rt. Hon. Arthur (Wakefield)

Brown, Rt. Hon. George (Belper)

Dodds, N. N.

Grenfell, D. R.

1834

1835

Grey, C. F.

Mackay. R. W. G. (Reading, N.)

Silverman, Julius (Erdington)

Griffiths, David (Rother Valley)

McLeavy, F.

Silverman, Sydney (Nelson)

Griffiths, Rt. Hon. James (Llanelly)

MacMillan, Malcolm (Western Isles)

Simmons, G. J.

Griffiths, William (Exchange)

McNeil, Rt. Hon. H.

Slater, J.

Guttler, R. J.

MacPherson, Malcolm (Stirling)

Smith, Ellis (Stoke, S.)

Hale, Joseph (Rochdale)

Mainwaring, W. H.

Smith, Norman (Nottingham, S.)

Hall, John (Gateshead, W.)

Mallalieu, E. L. (Brigg)

Snow, J. W.

Hall, Rt. Hon. Glenvil (Colne Valley)

Mallalieu, J. P. W. (Huddersfield, E.)

Sorensen, R. W.

Hamilton, W. W.

Mann, Mrs. Jean

Soskice, Rt. Hon. Sir Frank

Hannan, W.

Manuel, A. C.

Sparks, J. A.

Hardman, D. R

Marquand, Rt. Hon. H. A

Steele, T.

Hargreaves, A

Mathers, Rt. Hon. G.

Stewart, Michael (Fulham, E.)

Hastings, S.

Mellish, R. J.

Stokes, Rt. Hon. R. R.

Hayman, F. H

Messer, F.

Strachey, Rt. Hon. J.

Henderson, Rt. Hon. Arthur (Tipton)

Middleton, Mrs. L

Strauss, Rt. Hon. George (Vauxhall)

Herbison, Miss M

Mikardo, Ian.

Stross, Dr. Barnett

Hewitson, Capt. M

Mitchison, G. R

Summerskill, Rt. Hon. Edith

Hobson, C. R.

Moeran, E. W.

Sylvester, G. O.

Holman, P.

Monslow, W

Taylor, Bernard (Mansfield)

Holmes, Horace (Hemsworth)

Moody, A. S.

Taylor, Robert (Morpeth)

Houghton, D.

Morgan, Dr. H. B.

Thomas, David (Aberdare)

Hoy, J.

Morley, R.

Thomas, George (Cardiff)

Hubbard, T.

Morris, Percy (Swansea, W.)

Thomas, Iorwerth (Rhondda, W.)

Hudson, James (Ealing, N.)

Mort, D. L.

Thomas, Ivor Owen (Wrekin)

Hughes, Emrys (S. Ayrshire)

Moyle, A.

Thorneycroft, Harry (Clayton)

Hughes, Hector (Aberdeen, N.)

Mulley, F. W

Thurtle, Ernest

Hynd, H. (Accrington)

Murray, J. D

Timmons, J

Hynd, J. B. (Attercliffe)

Nally, W.

Tomney, F.

Irvine, A. J. (Edge Hill)

Neal, Harold (Bolsover)

Turner-Samuels, M.

Irving, W. J. (Wood Green)

Noel-Baker, Rt. Hon. P. J.

Ungoed-Thomas, Sir Lyn

Isaacs, Rt. Hon. G. A.

O'Brien, T.

Usborne, H.

Janner, B.

Oldfield, W. H

Vernon, W. F.

Jay, D. P. T.

Oliver, G. H

Viant, S. P.

Jeger, George (Goole)

Orbach, M.

Wallace, H. W

Jeger, Dr. Santo (St. Pancras, S.)

Padley, W. E

Watkins, T. E.

Jenkins, R. H.

Paget, R. T.

Webb, Rt. Hon. M. (Bradford. C.)

Johnson, James (Rugby)

Paling, Rt. Hon. Wilfred (Dearns Vy)

Weitzman, D.

Johnston, Douglas (Paisley)

Paling, Will T. (Dewsbury)

Wells, Percy (Faversham)

Jones, David (Hartlepool)

Pannell, T. C.

Wells, William (Walsall)

Jones, Frederick Elwyn (W. Ham, S.)

Pargiter, G. A.

West, D. G.

Jones, Jack (Rotherham)

Parker, J.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Jones, William Elwyn (Conway)

Paton, J.

White, Mrs. Eirene (E. Flint)

Keenan, W.

Pearson, A.

White, Henry (Derbyshire, N. E.)

Kenyon, C.

Peart, T. F.

Whiteley, Rt. Hon. W.

Key, Rt. Hon. C. W.

Perter, G.

Wilcock, Group Capt. C. A. B.

King, Dr. H. M.

Price, Philips (Gloucestershire, W.)

Wilkes, L.

Kinghorn, Sqn. Ldr. E.

Proctor, W. T.

Wilkins, W. A.

Kinley, J.

Pryde, D. J.

Willey, Frederick (Sunderland)

Lang, Gordon

Pursey, Cmdr. H.

Willey, Octavius (Cleveland)

Lee, Frederick (Newton)

Rankin, J.

Williams, David (Neath)

Lee, Miss Jennie (Cannock)

Rees, Mrs. D.

Williams, Rev. Llywelyn (Abertillery)

Lever, Harold (Cheetham)

Reeves, J.

Williams. Ronald (Wigan)

Lever, Leslie (Ardwick)

Reid, Thomas (Swindon)

Williams, Rt. Hon. Thomas (Don V'lly)

Lewis, Arthur (West Ham, N.)

Reid, William (Camlachie)

Williams, W. T. (Hammersmith, S.)

Lewis, John (Bolton, W.)

Rhodes, H.

Wilson, Rt. Hon. Harold (Huyton)

Lindgren, G. S.

Richards, R.

Winterbottom, Ian (Nottingham, C.)

Lipton, Lt.-Col. M.

Robens, Rt. Hon. A.

Winterbottom, Richard (Brightside)

Logan, D. G.

Roberts, Goronwy (Caernarvonshire)

Wise, F. J.

Longden, Fred (Small Heath)

Robertson, J. J. (Berwick)

Woodburn, Rt. Hon. A.

McAllister, G.

Robinson, Kenneth (St. Pancras, N.)

Wyatt, W. L.

MacColl, J. E.

Rogers, George (Kensington, N.)

Yates, V. F.

McGhee, H. G.

Ross, William

Younger, Hon. K.

McGovern, J.

Royle, C.

McInnes, J.

Shawcross, Rt. Hon. Sir Hartley

TELLERS FOR THE NOES:

Mack, J. D.

Shinwell, Rt. Hon. E.

Mr. T. G. D. Galbraith and

McKay, John (Wallsend)

Shurmer, P. L. E.

Mr. Heath

Question put, and agreed to.

11.45 p.m.
Colonel J. R. H. Hutchison: I beg to move, in page 17, line 6, at the end, to insert:
(b) in computing the profits from any such trade or business a deduction shall be made equal to the total amount which is required by or by virtue of an Act of Parliament to be raised by such statutory undertakers for sinking fund purposes in connection with that trade or business in respect of the accounting period if the following conditions are fulfilled—
1836

(i) the statutory undertakers have no share capital:

(ii) the interest on all the stock and other loan capital of the statutory undertakers is calculated at a fixed rate.

The last Amendment we discussed sought to remove from the effect of Profits Tax all the activities of the water undertakings. I am not so ambitious in this Amendment, the purpose of which is to exempt statutory undertakings, public utilities, which have no share

1837
capital, and whose interest payments are calculated at fixed rates, from Profits Tax on the amounts which they have to set aside for sinking funds. In his reply, the Financial Secretary to the Treasury, in speaking on the last Amendment, said that the water undertakings were profit makers at times, and so had to pay Profits Tax on the profits they made. But this Amendment seeks only to remove from the effect of Profits Tax those statutory sinking fund payments which the public utilities are obliged, by their statutes, to set aside each year.
Earlier on, the Chancellor of the Exchequer said that he wanted to put the public utility undertakings on the same basis as nationalised industries. I should like to trace for a moment how previous Chancellors dealt with this same problem. Under the 1937 Act, these statutory undertakings were exempt from the National Defence Contribution, which was the precursor of Profits Tax, and the then Chancellor of the Exchequer, when he was allowing this concession, said that public utility undertakings were subject to statutory restrictions in regard to prices charged, or dividends payable, and he thought they should be exempt. That, I think, is a reasonable attitude. Then we move on to 1940, and again similar representations were made, and a similar concession was granted. I will not trouble the Committee by reading the terms of that concession; but they are, broadly speaking, what we are asking for.
Now let us look at nationalised industry itself, the pattern of which the Chancellor of the Exchequer said he wanted to follow in respect of these public utilities. It is true that when the nationalisation Bills were under discussion, we on this side of the Committee asked that these industries should bear the same taxation as would apply to private enterprise concerns in the same circumstances. Broadly speaking, that is the pattern which has been set up. But an industrial concern is allowed its depreciation before striking its profits and its fixed-interest-bearing debenture stock is also exempt.
In order to check the exact position of a nationalised industry in operation, and the tax it must pay, I looked at the accounts of the Scottish Gas Board for its first accounting period, and in those accounts, which ended in March, 1950. I found the following entries. In the
1838
revenue account, item 28, there is a figure to cover amortisation of capital expenditure, and which covers renewal of assets, depreciation and debt redemption, of £583,690. That left, after deduction of this sum, a surplus of £169,780, which was carried to the net revenue account.
Then, if we look at the net revenue account, we find that, starting with a surplus, it ends with a deficit; but in the item which provides for taxation there is no provision for taxation at all—neither for Income Tax nor for Profits Tax. If we were to add back the amortisation and debt redemption figure of £583,000, we should ultimately get the figure liable to Profits Tax under the provision which the Chancellor of the Exchequer says ought to apply to public utility concerns.
So I contend that the public utility concerns are put in a worse position than industrial concerns, and in a worse position than the nationalised industries; and it will not have escaped the Financial Secretary's attention that nationalised industries complained to the Millard Tucker Committee of the incidence on profits for similar payments. So if it is considered that, where a concern is bound by so many restrictions and is not a profit-making concern, it should be liable in this way, then we think it a most unfair provision. It is only fair that these payments to its sinking fund should not be liable to Profits Tax.
Mr. Maudling: The case for this Amendment is very strong. Repayments of loans are normally deductions for Profits Tax purposes and we think that principle should apply in this case. The principle for which we plead was recognised in the Excess Profits Tax legislation, which was very analogous to this. There was an explicit provision for sinking fund payments of local authorities to be exempt from Excess Profits Tax, and Section 33 of the 1939 or 1940 Finance Act extended this to statutory undertakings. The wording here is, I believe, exactly the same as that used on the earlier occasion, and I commend the adoption of this principle, which has both logic and justice on its side.
Mr. Jay: The objection to this Amendment, which seems to us to be conclusive, can be stated quite briefly. The hon. and gallant Member who moved it suggested that loan repayments should be allowed as

1839
a deduction for Profits Tax purposes in the case of these statutory undertakers. The Committee is aware that loan repayments have always been regarded for tax purposes as an allocation from profits and not something included in the deduction of profits before computation; and that is a rule which applies for all companies of all kinds which pay Profits Tax.
The hon. and gallant Member referred to depreciation as being deducted before profits were computed; but depreciation is, of course, a deduction before computing profits, and that is in the whole structure of Income Tax and Profits Tax. Repayment of debt, as I see it, is not such a deduction, and since that is the general rule, I do not think we can make an exception for this one class of undertaking.
The hon. Member for Barnet (Mr. Maudling) advanced a very ingenious argument based on the Excess Profits Tax provisions in the Finance Acts of 1939 and 1940; but I remind him that there was a special reason because that Excess Profits Tax was based on a "base period" and if different provisions for loan repayments had been made in the base period on the one hand, and in the chargeable period on the other, there would have been unfairness. But that is not a substantial parallel with the present Profits Tax, which does not depend on any base period at all. Therefore, for that reason I think we are bound not to accept this Amendment.
Mr. Bell: Before the hon. Gentleman sits down, if the depreciation provision takes the form of a sinking fund, does he say nevertheless that it should then be treated as repayment of a loan and not depreciation, and should not be treated as an expense for Profits Tax?
Mr. Jay: Genuine depreciation will, of course, be counted as a deduction for Profits Tax or Income Tax purposes.
Sir H. Williams: I do not understand the Financial Secretary's explanation. I rather wonder whether he understands it. I am not entirely unintelligent and I have listened to his explanation and I understand that this Clause might apply to institutions like the Port of London Authority, the Mersey Docks and Harbour Board, the Clyde Navigation, and a
1840
whole lot of these people. They have no share capital and
"the interest on all the stock and other loan capital of the statutory undertakers is calculated at a fixed rate."
I think that is true. These people have a sinking fund which in effect is to a large extent a depreciation. That was very true of the municipal electricity undertakings. When the Government nationalised them, they bought them at the written-down value. Many of them thought the Government cheated them, and I think they were right, because the Government were working on this principle. I was not in the House at the time but I think that when the Government nationalised that part which was already municipalised, they robbed them in this way.
If I am right—and I think I am right about this—here are sums placed on one side, in effect, to provide for a depreciation charge. In the ordinary business, depreciation charges are quite properly charged against profits. It seems that these sinking funds are also in the same category. It is a different way of dealing with the same problem. I used to have some connection with the electricity supply industry under private enterprise, which was more efficient than when it was under the municipal authorities. One worked on the depreciation basis and the other on the sinking fund basis.
This Amendment is very reasonable indeed and the Financial Secretary has given an explanation which does not seem to make any sense at all, but we do not expect any sense from the Government Front Bench in these days. [Interruption.] Of course we do not.
Mr. Manuel: The hon. Gentleman should know.
Mr. Jack Jones: Do not be saucy.
Sir H. Williams: Of course, we do not expect any sense from the Government Front Bench. I think the Financial Secretary's explanation is profoundly unsatisfactory, and I hope that before we go to a Division, we shall have a better explanation.
12 midnight
Mr. Erroll: I hope we shall get a proper explanation, because it is wrong that depreciation

1841
should be a charge against Profits Tax but sinking fund should not be, because they are technically one and the same thing. Either one can put aside money for depreciation so that when the asset is worn out one has the equivalent sum of money available to buy a new asset to maintain the business in being or, alternatively, if the original lenders of the money prefer it, one should put aside a sum of money each year out of the working of the business so that, at the end of the life of the asset, one could repay the money with which one bought it in the first place. In one case money is put aside and allowed as a charge against the business; in the other it is not, and is subject to Profits Tax. It is a situation which is entirely anomalous, and I am sorry we have not had a satisfactory explanation so far.
Mr. G. Hutchinson: The reply which the Financial Secretary has given on this Amendment illustrates the fallacy of attempting to apply the Profits Tax to these non-profit-earning undertakings. There is all the difference in the world between an undertaking which earns its money by selling something to the public and being paid for what it sells, and an undertaking whose revenues are derived from providing a service for which they are remunerated according to a fixed scale.
The difference between those two classes of undertakings is that if we impose Profits Tax upon the class of undertaking which is not selling anything but is providing a service in return for a fixed charge, the Profits Tax must eventually be added to the charge which the undertaking makes to the public. That will happen in the case of the dock authorities to which my hon. and gallant Friend referred. Eventually the Profits Tax will be charged to the public in the form of the rates which they pay for the service.
In the case of the nationalised gas or electricity industries, the position is entirely different. Those industries are selling something to the public. True it is that they are selling it in return for a fixed price. The difference is that in some years they may sell more and in some years they may sell less. In the years when they sell more they make a profit in the true sense of the term and it can no doubt be subjected fairly to Profits Tax. In the years when they do not
1842
sell so much, they do not make the profit and there is no tax. It does not necessarily follow that in the case of those undertakings the Profits Tax is passed on to the public in the form of increased charges.
That is the fallacy which lies behind the proposals of the right hon. Gentleman in this Budget. He does not recognise that the essential difference between an undertaking which is truly a trading one and one which is truly a public service undertaking. The result will be that this Profits Tax will be passed on in the case of the water undertakers to the consumers; in the case of the dock undertakings, to the public who, indirectly, make use of the docks.
Mr. Peter Roberts: There is one point on which I wonder whether the Financial Secretary can help us. I am a little worried about the question of depreciation or sinking fund. To my mind the argument would be valid to exempt this from Profits Tax if the sinking fund takes the place of depreciation. Can the Financial Secretary tell the Committee whether these authorities are entitled to deduct depreciation in arriving at their figures? If they are entitled to do so, that would weigh with me in considering this argument, because I feel that they could not deduct depreciation and sinking fund at the same time.
Mr. Jay: They are entitled to deduct depreciation in just the same way as other taxpayers.
Commander Galbraith: Can the hon. Gentleman say whether they do so or not? Can he tell the Committee now that these undertakings year by year write down their assets by some fixed sum? Do they write them down and take that into then-accounts?
Mr. Jay: I do not know the details in regard to each undertaking, but quite clearly, since they own a large amount of plant and machinery, there must be an adequate depreciation.
Mr. Bell: I hope the Financial Secretary will give a better answer than that to the question of my hon. and gallant Friend the Member for Pollok (Commander

1843
Galbraith). As I understand it, these public statutory undertakings either borrow money from the Public Works Loan Board or raise it from the public, and the terms on which it is to be repaid are set forth in the Act of Parliament establishing the undertaking. Everybody knows that the period over which the amortisation takes place is related to the estimated life of the equipment. That being so, it is a statutory pre-estimate of the depreciation.
I believe it is correct that in a great many cases the provision for depreciation is through that statutory sinking fund, which is itself the estimate of the life of the plant. The Financial Secretary's comparison of this to paying off a loan is not correct if by that he means the paying off of a loan by a private company, because that company makes a separate provision for depreciation, and if it pays off a loan, it is of course, in doing so, allocating its profits. But that is entirely a different position from what we have here when we are dealing with the statutory sinking fund of a public undertaking.
Colonel J. R. H. Hutchison: I noticed that the Financial Secretary was about to answer some of the questions we put to him.
Mr. Jay: Perhaps I may make a brief reply to the hon. Gentleman the Member for Buckinghamshire, South (Mr. Bell). I think he will agree that there is a plain distinction between depreciation and loan repayment. It is perfectly clear that these undertakings have the right to claim an allowance from their profits for depreciation. In whatever detailed way they make provision for depreciation, they are entitled to claim that.
Mr. Bell: Let us suppose no provision was made for depreciation laid down to the sinking fund, and let us suppose that the Treasury, in its wisdom superior to that of the legislature, decided it is an excessive sinking fund and more than the depreciation of all the assets. Are we to understand in that case that the Treasury would make some apportionment of the sinking fund and say that so much of this was depreciation and so much was profit, or would they sweep it aside in one broad gesture and say that it was all allocation of profit?
Mr. Jay: The undertaking would have to make its case to the Inland Revenue in the ordinary way, and they would decide what was justified.
Sir H. Williams: Surely the Financial Secretary is wrong. I have been a member of two local authorities. [Interruption.] I am not infallible, but I do read the documents and I do not think hon. Members opposite either read or listen. I say that sanction has been granted for a loan to this local authority or that on the basis that it has got to be repaid over a period of years. In other words, in that period they have to pay into the sinking fund enough money to wipe out the assets. Surely, that is exactly the same thing as the depreciation allowance an ordinary company makes.
I do not understand, and I do not think the Financial Secretary understands in the least degree, what is the difference between depreciation and a sinking fund. At the end of the period the asset is wiped out and the undertaking will be assessed by the Inland Revenue for the whole cost of the wiped-out asset. Certain organisations do not do it that way. They have to provide a sinking fund so that by the time the asset is finished the money is all in the fund. Therefore, the sinking fund is, in certain ways, similar to depreciation. When the Financial Secretary says they are allotting depreciation as well as the sinking fund, I do not believe him, and I think he should inform himself better.
Colonel J. R. H. Hutchison: In asking leave to withdraw this Amendment, it seems to me that the situation is still very obscure and that the obscurity is deepened for me in the words that I quoted to the Financial Secretary of the treatment of the accounts of the Scottish Gas Board. I ask him whether he will have this examined. There, it appears, they are allowed a deduction for renewal of assets, depreciation, and debt redemption—all three. If that is so, his previous statement seems to be misleading; indeed, the whole situation is obscure. Therefore, I beg to ask leave to withdraw the Amendment at this stage, so that we can return to the charge when more is known about it.
Amendment, by leave, withdrawn.
Colonel J. R. H. Hutchison: I beg to move, in page 17, line 7, to leave out from beginning, to "no," in line 9.

1845
Here I hope for better luck. The position is much clearer and I feel that the Financial Secretary will be much more inclined to show sympathy in what I am asking. The Amendment again concerns public utility undertakings. Another new burden has been developed in this Finance Bill against them in what looks like a blitzkrieg by the Treasury against these public utilities.
When Profits Tax was first introdued, relief to commercial concerns in respect of losses which they had incurred in the six years prior to the introduction of the tax was allowed. They were allowed to carry forward these losses before they were asked to meet their Profits Tax liability. Here, however, when Profits Tax is now for the first time made applicable to these public utility concerns, no such sympathy is shown to them and they are denied the facilities which were allowed to commercial concerns at the time of the introduction of the tax.
I am speaking particularly in support, or consideration, of dock and harbour authorities, but I have no doubt that many other public utility concerns are hit in the same way. Dock and harbour authorities have incurred in recent years very heavy expenses in relation to operating and replacement costs. They have been anticipating the future at a time when perhaps the income was not coming in as rapidly or extensively as they hoped, and they have gone in for development schemes. They now find that the losses which they have incurred for these years are not allowed and they are very badly prejudiced by this Bill.
I had not realised the Treasury were so antipathetic to public utility concerns, which, after all, come half way between private enterprise and nationalised undertakings. I suggest that this Amendment represents only a simple, straightforward act of common justice, to which the Financial Secretary ought to agree to.
12.15 a.m.
Mr. Jay: I am glad to say that I can on this occasion be rather more sympathetic to the hon. and gallant Gentleman, though not so far as to go the whole way that he asks. His Amendment would allow the undertakings in question to deduct losses going back for six years from the profits on which they would be liable to tax. That, as he quite
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rightly said, was the original provision included in the Profits Tax when it was introduced in 1937.
The reason given at the time was that the Profits Tax was imposed at the beginning of the re-armament period, and was meant to fall mainly on the profits it was thought were likely to be made as a result of the re-armament programme; and it was thought reasonable—and this is where the circumstances are rather different from today—that losses should be counted against those profits since in the previous six years of rather acute depression some concerns might have been making large losses.
That last item hardly applies today. It can be argued that these public utility undertakings have been rather lucky to escape Profits Tax, if not Excess Profits Tax, throughout the last 14 years, and therefore there is no good case for giving them further relief of this kind. Indeed, when the nationalised industries were brought under Profits Tax in 1947, they were taken as if they had started business in that year and were not allowed any deduction for previous losses. It does seem, however, that a case can be made, not for going back over six years, but for going back to the year 1947, when the Profits Tax was established in its present form and the war-time Excess Profits Tax abolished.
Sir H. Williams: The nationalised industries have been very successful in exempting themselves from Profits Tax by making losses.
Mr. Maudling: I understood the hon. Gentleman to say that Profits Tax was imposed in 1937, and losses were allowed to be set off over six years back because substantial losses had been incurred in that period. He says that the same does not apply now because no substantial losses have been incurred in the six-year period before the present proposal. If there have not been large losses, surely the loss to the Treasury by accepting this Amendment would be very small.
Sir H. Williams: I gather that when I referred to the losses of the nationalised industries, certain hon. Members opposite suggested it was because they were paying interest. [HON. MEMBERS: "Compensation."] Very well, compensation. Is it now the policy of the party opposite to

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repudiate every kind of obligation, including savings?
Colonel J. R. H. Hutchison: Half a loaf is obviously better than no bread, but in asking leave to withdraw this Amendment may I point out how quickly matters do go when the hon. Gentleman is agreeable?
Amendment, by leave, withdrawn.
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. G. Hutchinson: I am very disappointed at the manner in which the Financial Secretary has dealt with this Clause. The difficulty was that he was endeavouring to defend a case which was really indefensible. Take the instance of the hon. Gentleman opposite who referred to the Metropolitan Water Board. I ventured to interrupt the hon. Gentleman and point out that every water undertaking is in the same position as the Metropolitan Water Board when the statutory limit on its reserve fund has been reached. The surplus then becomes taxable at once. The Metropolitan Water Board, although they do not enjoy the advantage of having a statutory reserve, are really in no different position from any other local authority in relation to this charge.
I imagine that what is going to happen to the Metropolitan Water Board is that as the operating costs increase they will not make any application for increased charges but will go to the local authorities in London and, as they are entitled to do, levy on them a deficiency payment. The deficiency will, in fact, be added to the London rates. That happened for many years. The Metropolitan Water Board year by year made a deficiency and the deficiency was charged on the London rates. It was only in comparatively recent times that the charges were readjusted and the deficiency rate on the local authorities disappeared. Exactly the same thing is going to happen in the case of other local authorities, the effect being that the deficiency will be passed on to the ratepayers.
The position of local authorities varies considerably in this matter. In the case of some they have the right to supplement
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their revenue from rates, and that supplementary revenue is not liable to tax; therefore, they may escape Profits Tax altogether. In the case of other authorities, they have to pay Profits Tax on the whole of their taxable revenue. The hon. Gentleman never attempted to deal with this. I suspect that the Treasury were unaware of the existence of this difference in the financing of local authority water undertakings. I hope it is not too late for the hon. Gentleman to look at this again before Report stage to see whether there is any justification for imposing this tax in circumstances in which it must inevitably be passed on to the public.
Mr. Pitman: In discussing the taxing of a new class of taxpayer, I should like to go into the general principles of the tax. The Financial Secretary said that Profits Tax was started in 1937, but I would remind him that it was not a Profits Tax but the National Defence Contribution. It is part of my theme that "Profits Tax" is a misnomer for the tax, which is now to be applied to this new class of taxpayer. We have been told by the Chancellor of the Exchequer the principles to which he attaches importance for imposing this so-called Profits Tax on enterprise. He said it is an antidote to inflation and a means of keeping down high dividends. I do not see how these arguments, which the Chancellor says are general to Profits Tax, are applicable in this case.
The right hon. Gentleman highly commended the speeches of various hon. Members on his own side who had spoken in favour of the principles of this tax. If I remember rightly, the chief point made by the hon. Gentleman the Member for Stoke-on-Trent, South (Mr. Ellis Smith), was that we in this Committee do wish to know that there would be some guarantee that if these companies were let off this proposed new imposition, they would put the money to reserve and would spend it in developing higher technical facilities within that unit.
I think it was my hon. Friend the Member for Barnet (Mr. Maudling) who answered him intelligently and to this effect: We are being asked what guarantee there is that we will kiss the girl if the girl is there, and we are saying how can we kiss her if she is not there.

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If there are not going to be these resources in a company to be spent on development and improvement, then obviously that development and improvement cannot take place.
I should like hon. Gentlemen opposite not to assume always that the people running business of this kind are not just as anxious to run and equip them and to expand their services to the public as they ought to be; but if the party opposite are to proceed on the basis of taxing more and more the reserves by which the companies are able to expand and develop their businesses, it is hardly surprising—as has been pointed out—that there is criticism that the amount of the horse-power per man employed is lower here than it is in America.
The hon. Member for Wednesbury (Mr. S. N. Evans) made a point that something had to be done in regard to higher rates of profit, but does that arise in the case of these companies? It seems to me that clearly it does not. Most of them are statutory undertakings, and the rate of distribution which they are allowed to make is severely limited by the Statute which set them up. Even if that was so, is it a sound thing to impose a tax of this kind on a company, basing it on the supposition that all of them are making profits when we have heard from the Financial Secretary that one of his difficulties in accepting an Amendment moved by one of my hon. Friends was that there have been losses, even if not very great losses?
At any rate there have been losses, and it seems to me that in imposing a tax on a company to stop high profits and to base and levy that tax on companies irrespective of whether they are making more profit or not is palpably and obviously absurd. It is like locking up everyone because there are some criminals, but locking up the criminals for a longer time than those who have done no wrong.
Let us face the fact that even with these new and increased rates of Profits Tax there can be companies making no more profit than they were before who will have to pay the tax. It seems to me that it must be wrong in a situation of this kind to seek to impose additional taxation and to reduce reserves, as they
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must, of companies that are so subjected to tax.
12.30 a.m.
The whole question of this tax arises because of fundamental mis-thinking in regard to Profits Tax. The great merit of the taxation system of this nation is that it is based on income, and I submit to the Committee that the principle of a tax on profits is a departure from the former sound principle and a departure which is certain to get this Committee—as in this Clause and all other Clauses dealing with Profits Tax—into considerable trouble. Income is something which is quite clearly understood and which is quite properly taxable. If one has a greater income one has a greater ability to bear tax. But "profit" is a term of art within the Companies Act and has nothing whatever to do with the ability to bear tax. It has, per contra, to do with the priority rating as between the sundry creditors of that company and those who receive a prior or a subordinate share of the total receipts. If they receive an income by way of interest on debenture, they rank before the sundry creditors, but if they receive it by way of dividend on a share they rank after the sundry creditors.
We are here applying to the practice of taxation a discrimination based on something which is not a reality in the field of ability to pay but which is a term of art in quite a different field of activity—namely, what happens in the event of a winding-up of a company. The hon. Member for Wednesbury, to whom we listen with great attention, has had experience inside a chartered accountant's office and he will know quite well that the revenue of any corporation is not its profit but its gross profit—the difference between what it receives and what it pays out for its primary activity. There is within that field of gross profit a sub-division of those payments which are in respect of capital borrowed and those which are not. Depending entirely on how the capital of that company has been categorized, those who are responsible for seeing that the sundry creditors are properly treated segregate that part of the gross profit which is to rank below the creditors in such priority and call it profit.

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If I might take an example, let us suppose that one of these big corporations has a gross profit of £50,000. Let us suppose that £10,000 of that is remuneration on the capital employed. That capital employed may rank vis-à-vis the sundry creditors in one extreme way or the other extreme way. In one extreme way we might have the very maximum of debentures, we might have notes, the landlord who puts up the premises which the docks or railway, or whatever it is, might supply the capital for all the premises and even for the plant; and we might have only a small fraction of the whole capital put up in the form of ordinary shares or ordinary stock.
On the other hand, we might have the opposite extreme of no money borrowed on debentures, nothing on notes, the company owning all its own property; and in that case we have the whole capital structure of that company put up in the form of ordinary shares or ordinary stock. In the first case the so-called profit is very small, in the second the whole £10,000 is called profit. In point of fact, that difference is a legal reality solely in terms of priorities in winding-up and in payments out in relation to what are the rights of the people who trade with the company and who make advances and afford credit.
It is here sought to base the taxation system on something which palpably has nothing to do with income. In other words, the capital in both these things is exactly the same and the revenue is exactly the same, but in one case we tax them scarcely at all while in the second case we impose a tax very, very much higher than in the other, and only because those who founded the second company happen to have subordinated all their claims for capital to the people with whom they do their trading; in other words, they are more enterprising, whereas the other has taken very little risk and has raised almost all its capital in the form of debentures, notes, etc.
I regard it as a very great error to extend a principle of taxation which, in itself, is bad to a whole host of new taxable corporations, as is done in this Clause. The situation will always, and inevitably, be wrong if the Government try in this way to tax on an
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irrelevancy which has nothing to do with taxation at all.
Mr. Arthur Lewis: What about Clause 25?
Mr. Pitman: That is the Clause we are discussing at the moment, and it is the one on which we are debating the application of the Profits Tax. Profits Tax is, from now onwards, to be applied to a whole host of new companies to whom it has hitherto never been applicable. Clearly, if it is wrong to apply that tax to the companies to which it has hitherto been applied, it is equally wrong to apply it to these new ones, and this is the chance for this Committee to look into the principles on which this tax is levied and to see whether it is right or wrong so to extend the application of this tax.
The Financial Secretary has not replied on the general principle of Profits Tax in so far as it is applied to these new companies, and I think the Committee should ask him sincerely to consider this question of principle: Does he really intend to extend to these new fields of taxpayers a tax which is in essence wrong, because it is based, not on the income and capacity of the taxpayer to pay it, but is based solely on the fortuitous circumstance of how, in relation to the sundry creditors, the various providers of capital stand in order of priority.
Mr. Joynson-Hicks: I wish to support what my hon. Friend the Member for Bath (Mr. Pitman) has just said. It really has thrown a considerable light upon our discussion, because I confess that before this debate on Clause 25 began I had very little knowledge indeed of what the Clause purported to do. Since then I have listened with the greatest attention to the advice which has been given to the Committee from both sides and have unhesitatingly come to the conclusion, upon the arguments which have been addressed to the Committee, and upon the advice which we have received, that this proposal is a bad tax, and I do not think we ought to go on with it.
It seems to me that we want to know more about the objects and the anticipated results of this tax than the Government have so far told us. If these companies make a loss, it is the loss of statutory

1853
undertakings, and the loss will be met by the taxpayers or ratepayers in one form or another. If they make any sort of profit it goes back to the Treasury again, so that in either case the public will be hit, and it will not get any benefit from being hit in this way.
Therefore, the first question I ask the Financial Secretary is: How much does he expect to get out of this tax? The second question is whether the Financial Secretary has taken into account the ramifications of administration which the tax will involve. It is clear that this is not going to be a simple tax to collect. It will not be a simple tax to calculate. For the net benefit which is likely to accrue from this tax to the Treasury, it seems to me that the Treasury is going to become involved, both itself and with the various statutory undertakings concerned, in a vast multiplicity of bureaucracy which is going to eat up the benefit of the tax.
We are dealing with Section 19 (5) of the Finance Act, 1937, and the trades and businesses which are exempted by that subsection are now being made liable to Profits Tax. That is the proposal. May I remind the Committee that by subsection (5), the statutory undertakings are specifically defined as being undertakings, and the various public utilities are precluded by virtue of an enactment from charging any higher price for their services than that authorised by, or by virtue of, the enactment. Therefore, they are already entirely controlled with regard to the profits which they can make, and what is the object, or the benefit, to be gained by following any of the lines of argument which have been addressed to us from the Treasury bench with regard to withdrawing surplus money to resist inflation, or any of the other Budgetary arguments? What is the object, and what is the value of this tax?
Clause ordered to stand part of the Bill.

Clause 26.—(INCREASE, IN CERTAIN CASES, OF DEDUCTIONS ALLOWABLE FOR DIRECTORS' REMUNERATION.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Selwyn Lloyd: There are one or two points I wish to raise, and I am glad
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that the Leader of the House is here to listen to them. I could have put down Amendments to cover these points, but I thought that I could save time by raising them on this Motion. I am also glad that the Leader of the House is here, because this is a complicated Clause which it is difficult to discuss at this late hour.
The Clause contains a welcome concession. The Chancellor of the Exchequer, in his Budget speech, outlined the reasons for that concession. The Clause affects the computation of profits for tax in the case of director-controlled companies. At present—I hope I am right in this—Profits Tax is payable on the distributed profits and on the amount by which the total fees and salaries paid to directors, other than whole-time service directors owning 5 per cent. of the shares, exceeds £2,500, or 15 per cent. of the shares up to £15,000. That seems to be a rather arbitrary rule. The Chancellor of the Exchequer did concede that in view of the large increase, which we deem excessive, in the Profits Tax, this rule is not altogether fair to small businesses. So from 1951 the limit of £2,500 is to be increased, in accordance with this Clause, to a maximum of £4,500 or 15 per cent. of the profits, whichever is the greater figure.
I have three points to raise on the Clause. The first is that the limitation of £2,500 was fixed in 1947. It has been increased, in 1951, to £4,500. But the limit of £15,000 was fixed in 1947. It would seem that, in accordance with the depreciation in the value of money, it would be reasonable to increase that limit. A modest increase to £20,000 would have been in accord with the Chancellor's policy of assisting small businesses in this connection. This is my first question—whether the Financial Secretary will consider that matter with a view to action on the Report stage.
12.45 a.m.
The second matter is rather smaller, and is with regard to sub-paragraph (1, c). That contains reference to the amount calculated only where, for more than half a period, there have been two or more directors to whom the considerations apply—that is, for five months and three weeks the benefit of the Clause does not apply, but if the period is six months and one week, the benefit does apply. Why

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cannot this be on a pro rata basis related to the length of service? If there are two or more directors for four months of the year, there could be one ruling, with a pro rata basis worked out if the period was eight months. I say this especially since sub-paragraph (3), which deals with the chargeable accounting period, accepts the pro rata principle. It has been represented to me, and probably quite correctly, that it would be practicable to have worked this out on a pro rata basis, and that would certainly have been more equitable than is this arbitrary fixing of a three months' limit.
My third point is one of more substance than the last. Is not the whole calculation very complicated? According to sub-paragraph (1) the amount to be deducted shall be either 15 per cent. up to £15,000, or £2,500, whichever is the greater; or where there are two or more directors to whom sub-paragraph (2) applies, the amount specified in sub-paragraph (2). When we look at subsection (2), we find a definition of directors, to which I do not think one can take much exception, and then it states that the amount referred to in sub-paragraph (1, c) shall be £3,500; and where there are more than two directors, it shall be increased by £1,000 or the aggregate remuneration for the chargeable accounting period of all but two of the directors to whom the paragraph applies—the directors whose remuneration is taken into account being those with the smallest remuneration for the chargeable accounting period. Why that is so, I do not understand.
Then there are certain provisos about the additional £1,000, or all the payments taken into consideration. I have had representations made to me on this point, and I ask the Financial Secretary why the Clause does not simply indicate £2,500 to be deducted if there is one director, and, if two, that the amount should not exceed £3,500, and not more than £4,500 if three or more directors. That seems a very much more simple way of putting it; there could be the three figures according to the number of directors, and then everybody would know where they were. It seems to me that that would have been very much easier to comprehend than this mass of verbiage. If the
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Financial Secretary agrees that what I am saying is not what the Clause says, then that simply emphasises the lack of clarity in the Clause itself.
Mr. Jay: The hon. and learned Gentleman rightly said that some parts of this Clause are rather complicated. He asked for elucidation on three points, raising first the issue of why we wanted to increase the lower limit of £2,500 while we were not at the same time raising the higher limit of £15,000, which was put at that figure many years ago. The principal answer to that is that the cost of this concession is, as I think the hon. and learned Gentleman knows, quite considerable already and will amount to something like £4 million in a full year, and that, in relation to the various other parts of its object, is a rather surprisingly large sum to spring from this particular concession. If we were to raise the £15,000 limit, of course, the cost would be even higher.
Secondly, the hon. Gentleman asked why, in sub-paragraph (1, c) we had formulated the Clause in such a way that
"where, for more than half that period, there are two or more directors. …"
and why we had not made it pro rata according to the length of the period. There is no particular reason why one should make it pro rata and it is reasonable as a general definition to take half the period as a dividing line. As a matter of fact, a similar rule was incorporated in the wartime Excess Profits Tax and that, I think, is the main reason that criterion was used here.
The hon. and learned Gentleman asked about the rather complicated provision in the proviso at the end of the Clause for calculating the exact sum. I agree with the hon. Gentleman that the arithmetic itself is complicated, and I would not like to explain it all in full detail at this time of the morning, but the purpose of that complication is to provide against two possible forms of evasion: first, bringing in the remuneration of part-time directors under the new limiting figure, and secondly—this was the main point—the possibility of avoidance by appointing dummy full-time working directors, who might be members of the family of the controlling directors, at a small remuneration so as to qualify for an increase in the allowable remuneration of the real controlling

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directors. I think it is a pity, perhaps, that the provision could not have been less complicated.
Mr. G. P. Stevens: There is one point I would put very quickly to the Financial Secretary because I think he would be able to give an answer equally quickly. The first three lines in sub-paragraph (2) limits the sub-paragraph to directors who are required to devote substantially the whole of their time to the service of the company. There are many men who have formed or have bought small businesses and have retained them as separate entities legally for the purpose of retaining goodwill, perhaps, or the premises of the business concerned, but who for practical purposes run them as a single unit. For other tax purposes a director in such a position can elect to one particular company, and I want to ask whether such right of election can also apply in this case or is the subsection to be applied so that the man who is whole-time working for a small group is none the less to be treated as if he were not working whole-time for any.
Mr. Jay: It would surely be a question of fact as to whether the director worked substantially the whole of his time for one company.
Lieut.-Commander Braithwaite: Although there are no Amendments down on the Order Paper on this Clause, I had intended at this stage, when we are discussing the Motion, "That the Clause stand part of the Bill," to ask, purely as a layman, one or two questions as to the meanings of this provision, which the Financial Secretary himself confessed to be complicated. When I found that my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was also in doubt, with all his legal knowledge, I felt that perhaps there might be other hon. Members in the Committee who would like some clarification, too.
While my hon. and learned Friend addressed himself to the Financial Secretary, I confess I had intended to ask the right hon. and learned Gentleman the Attorney-General whether he could give us the main purport of this Clause. He has been with us all day, I have not had the pleasure of hearing him yet, and we always look forward to his interventions on the Finance Bill, particularly when we are told by the Minister—I thought in
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rather revealing words—that he thought the arithmetic of this Clause was such as should not be considered even, let alone calculated, at such an hour.
I am surprised, knowing that this Clause would be taken if the Motion to report Progress was defeated, that the Financial Secretary did not come with us into the Lobby. Surely he has given an argument, which no one can gainsay, in favour of the Committee now reporting Progress, first in order that we may have an opportunity of following the mathematics of this Clause—although I will give this point to the Government, that I should find it difficult to follow it at any hour, even were we fresh. With all that, we have little but the marginal note to help us which, as we know, is not part of the Bill in the strict sense of the word. It simply says:
"Increase, in certain cases, of deductions allowable for directors' remuneration."
Without that, most of us would have been ploughed before reaching the end of the first paragraph.
We have with us not only the Attorney-General himself, but also the hon. and learned Member for Gloucester (Mr. Turner-Samuels), whom we always lean upon in times of difficulty on these Bills and who frequently volunteers explanations of them which cause the greatest embarrassment to the Law Officers of the Crown. With both these luminaries present, I feel that the moment is appropriate for the right hon. and learned Gentleman now to rise and give us the main purport of this Clause.
If he is unable to do that owing to fatigue, over-work or any other cause, there seems to me to be this alternative. Either to leave it to the hon. and learned Gentleman the Member for Gloucester, to whom the Committee will be willing to listen, or, a better procedure still—and perhaps the right hon. and learned Gentleman could indicate merely by some motion of his cranium whether this is acceptable or not—would it not be at least possible to have the Clause drafted in language which can be understood not only by hon. Members who, after all, are important, but by those who have to interpret these Clauses when they become Sections of the Finance Act, people for whom one must have the greatest possible sympathy?

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After all, I am quite certain that the Attorney-General would not emulate the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) who used to brush everything aside with the remark, "That will be a matter for the courts." Surely the duty of the House of Commons is to see that as little as possible is a matter for the courts? We have to avoid litigation if we can.
Mr. Fernyhough: Think of the lawyers.
Lieut.-Commander Braithwaite: I thought the hon. Member for Jarrow (Mr. Fernyhough) would show his sympathies with the legal profession. He will agree with me, I am sure, that his constituents would prefer—
Mr. Fernyhough: None of them is affected by this.
Lieut.-Commander Braithwaite: I hope the hon. Member will not take too constricted a view of his duties. Here he sits, and we are very pleased to see him, at one o'clock in the morning, taking part in the Committee stage of the Finance Bill, which we are now shaping. As he is with us. I think he should try to see that the Clause is made as workable as possible. Now that he has come in, however temporarily, I hope he will see the point of what I am saying, that it is important that this Clause should be worded far less obscurely than is the case at present.
Therefore, I hope the Attorney-General, if he cannot do so at this moment—and we shall quite understand if that is the case—will be prepared to have a look at this Clause before the Report stage with a view to drafting it in much clearer language than it is at the moment.
1.0 a.m.
Mr. Joynson-Hicks: I should like to add my appeal to that of my hon. Friends, because it is really a most difficult Clause to understand. I have tried very seriously for a very long time, and I still feel I have not a very much greater or more accurate grasp of it than the hon. Member for Jarrow (Mr. Fernyhough) apparently had himself.
The first point I should like to ask is why, by Clause 26, we are substituting a new paragraph 11 in the Schedule to
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the Finance Act, 1937. To what else does the Schedule to the Finance Act, 1937, now apply? I think the right hon. and learned Gentleman will see my point. If we are changing this Schedule of 1937 and that Schedule still applies at the present time to something other than Profits Tax, to which it was made relevant by the 1946 Act, we are by this particular Clause of the present Bill making a change that is going to affect something about which we have no knowledge at all.
It is important that the Committee should be told whether, by changing this particular Schedule of the 1937 Act, we are affecting anything other than Profits Tax. If the answer is that we are not, then that Schedule to the 1937 Act no longer applies to anything except Profits Tax, and it is time we did away with all this indirect legislation by reference from one Act to another and having put in a new Clause 26, kept it there instead of putting into Clause 26 a new paragraph 11 of the Fourth Schedule to the 1937 Act. This is making it even more complicated than is necessary unless, of course, there is something still left in the 1937 Act to which this provision is going to apply, about which we have been told nothing.
The next thing about which I am particularly anxious is what exactly is the effect of the new class of directors we are introducing into this matter. In 1937 Act there were two classes of directors, the whole-time working director and other directors. Now, as I understand it, we are introducing a third class to complicate the matter, and they are directors who are substantially whole-time in a managerial or technical capacity, but who are not whole-time service directors. I do not see the benefit or advantage of having a separate classification for this particular type of person.
I appreciate the general advantage of increasing the allowance which the Clause effects. I hoped we might gain some evidence from what the Financial Secretary said with regard to the reasons the limit of £15,000—I do not quite understand why he called it an upper limit—is not being increased. As I understand the implication of his remarks, we are to leave that figure where it is, although it is admittedly inequitable. Everything else having risen, it is only equitable that

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the limit of £15,000 should also rise, but for reasons of expediency, the Government feel they are unable to allow a further reduction in the budgetary receipts which would follow from any increase in that limit of expenses. The hon. Gentleman should tell the Committee what it would cost if, say, the limit were increased from £15,000 to £20,000. I cannot see how that figure could possibly be of any appreciable size. I hope we shall have further enlightenment on these points before we pass this Clause.
Mr. Selwyn Lloyd: As I raised these points originally, I should like to ask the hon. Gentleman whether we cannot get together on these matters. So far as the £15,000 figure is concerned, I agree with what the hon. Gentleman has said, and I would ask what would be the cost if the figure were increased to £20,000.
It is a substantial concession, we agree, and it will help the smaller type of business. There have been representations by the hon. Member for Edmonton (Mr. Albu) and other Members on the other side of the Committee, pointing out that these are precisely the sort of businesses to which the anti-profit vendetta should not be applied, and we suggest that this is a convenient method of assisting them.
My second point is with regard to the wording of sub-paragraph (1, c). I thought the hon. Gentleman's reply quite unsatisfactory, and that it would be more equitable to do it on the pro rata basis I suggested. Where I became even more confused was over the question of the drafting of this Clause so as to prevent certain types of tax evasion. I should have thought that sub-paragraph (2, c) was an invitation to tax evasion in itself. It is an invitation to directors so to arrange their remuneration as to obtain the maximum possible amount of benefit from this particular Clause. So far from its being a means of preventing evasion, it is an invitation to an artificial arrangement of salaries.
But the Financial Secretary did refer to one interesting individual. My hon. Friend referred to varying types of directors mentioned, and I think I heard the Financial Secretary say it would give scope to the use of a whole-time dummy director. It would be very interesting if he would tell the Committee what is a whole-time dummy director.
Mr. Joynson-Hicks: May I ask the Financial Secretary whether he was just going to rise and give us further information?
Mr. Jay: The main new point raised by the hon. Member for Chichester (Mr. Joynson-Hicks) was whether the alteration in the Schedule to the 1937 Act we are making will make any difference to the 1937 Act, other than the concession we are here giving to the full-time directors. The answer is, no. We are making no change here in the 1937 Act, other than the concession on Profits Tax which we are discussing.
Mr. Joynson-Hicks: My point was whether this change that we are making in the 1937 Act would be applicable to any other matter than the Profits Tax—which is rather a different matter—and, if not, why? I also asked why we have this indirect legislation by reference from one Act to another instead of putting it into the Bill we are discussing.
Colonel Gomme-Duncan: May I ask one question? I have heard my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) speaking, and also the hon. Member for Chichester (Mr. Joynson-Hicks) who is also in the legal profession, and both of them have said, as most of us not learned in the law would agree, that this is a most unnecessarily complicated Clause. Is it not possible before the Report stage to put this into plain English that people can understand? If the learned people of the law do not understand it, what hope is there for the ordinary individual? I have asked before that these things should be put into simple English that ordinary people can understand.
All my life I have been brought up and trained very carefully to understand one thing: that if you issue an order which to the recipient is unintelligible, it is a thoroughly bad order. That applies not only to military matters, but also to matters connected with the Finance Bill. I cannot understand why we should put up year after year with this drivel, when it could be put into plain English which not only lawyers but the people to whom it is to apply could understand. Will the Attorney-General or the Financial Secretary see that this Clause is put into simpler terms before the Report stage, so that people can understand it?
Mr. Jay: I fully sympathise with the desire to see this put into simpler language, but I am assured by those who are more expert in these matters that the greatest possible effort has been made to put the Clause into the simplest language possible, and that it is not practicable to put it into plainer language. I regret that I cannot hold out any hope of doing what the hon. and gallant Member desires.
Clause ordered to stand part of the Bill.

Clause 27.—(EFFECT OF CAPITALISATION OF PROFITS ON RATE OF PROFITS TAX.)
Colonel J. R. H. Hutchison: I beg to move, in page 20, line 22, to leave out from "consideration" to the end of line 23.
This is rather a complicated question, and I should have preferred to try to put the story across at a more reasonable time of day or night, but since we are condemned to this sort of marathon race, however tired the brain of the explainer or the listener, I must do what I can to make it clear.
The object of the Clause is to prevent the avoidance of Profits Tax at the time of a repayment of capital—that is, a capitalisation of reserves, a subsequent reduction of capital, and the distribution of that reduced part of the capital in the form of cash. No objection is taken to this manoeuvre, that is tax levying, in the case of equity capital, or to the principles of the Clause; but an anomaly arises when we are dealing with loan capital or debenture repayment because no Profits Tax is levied on that repayment if at the time of issue it was issued for full cash consideration.
We think that this is anomalous, and that it can be unfair. It need not necessarily be cash that a company receives as a result of issuing loan capital; it may be plant, or a ship, or goodwill. It seems to us unfair that the issue of debentures resulting from the acquiring of the plant, ship, or goodwill should, when it is repaid, suffer Profits Tax, whereas if that same issue had been made in respect of the receipt of cash, it is not.
1.15 a.m.
Further, let me show how it could be easily circumvented. Let us assume that the owner of a ship offers to sell it for
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£100,000 to a company which wants to buy it. The company says it is sorry, but it has not the money to pay. "All right," says the owner. "I will lend you £100,000, and you will issue 5 per cent. debentures to that amount. You will then have the money which will allow you to buy this vessel and you will buy it." When that debenture issue which has been made in return for the loan to buy the ship is repaid, it will not be liable to Profits Tax under the Clause, because the issue was made in respect of a cash consideration. But if the same owner had gone to the company and said, "Let me have the ship for 100,000 five per cent. debentures," when these were repaid, they would have been liable for tax.
It is easy for anybody considering the issue of debentures, to get round this provision and make the issue not liable for Profits Tax, when it comes to be repaid. The hon. Gentleman might say that much loan capital of this sort has already been issued and it would be extremely difficult to check whether full consideration had been received by a company in respect of its assets. My answer to that objection is that there was no impulse, need or advantage in the past, when taxation was more reasonable, to issue debentures for other than the full consideration. On balance, we will find that in the past debentures were not issued except when the company received value for their money.
As it stands, this is an anomalous Clause. It is nonsense to subject an issue of debentures to treatment of one kind when made in respect of cash and to treatment of another kind when made in respect of the full consideration. These words, "full consideration" are all important. The Clause is anomalous, unfair and easy to circumvent.
The Attorney-General (Sir Frank Soskice): We limit the words in the last part of subsection (5) for the reason that we think that, if loan capital subscribed for any consideration were on repayment not to count as reduction, there would be a fairly easy way to get round the provisions of the Clause. For example, let us take the case where there were preference shares with considerable arrears of dividend. Suppose we omitted the words which the hon. Gentleman desires to be omitted, it would be easy to issue notes to the shareholders to whom

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the arrears of preference dividends were owed and in that way to cancel out the arrears in return for the notes. Clearly, if paid-up, preference dividend should rank as distribution. If these words were left out, the scope for evasion on the lines of which I have given one example would be made possible.
I agree that there are a number of perfectly bona fide cases which we should try to take outside the Clause. I agree with the hon. and gallant Gentleman's example of the sale of a ship. That kind of case ought to be taken outside the scope of the Clause. I agree with him when he says it is anomalous to have the transaction done by an exchange of cheques and not be within the Clause, but to do it merely by selling the ship and to have it within the scope of the Clause.
That I agree is an anomaly, and if the hon. and gallant Gentleman would be good enough to ask the leave of the Committee to withdraw the Amendment, I would undertake to put down, I hope by the Report stage, an Amendment which would take out of the Clause what can be regarded as a genuine case of the kind that he has instanced. I am sure that he will agree, however, that the Clause should not be so worded as to make evasion easy, but I agree there are a number of perfectly genuine cases which, as the Clause is at present worded, may come within its scope.
Mr. Lyttelton: May I ask the right hon. and learned Gentleman what he means when he says that he hopes to do it by the Report stage? If he does not do so by then, there is no other stage.
The Attorney-General: I am anxious to be careful in my wording of an undertaking, but I have every confidence we shall have thought it out by the Report stage.
Mr. Lyttelton: I do not want to be rude, but we do not share the right hon. and learned Gentleman's confidence that he will have thought everything out by the Report stage. What we want is an undertaking that he will deal with the matter on the Report stage, and I gather that he is giving that undertaking. Is that so?
The Attorney-General The Attorney-General indicated assent.
Mr. Pitman: It seems to me that we are singling out for particularly harsh treatment for taxation under this Clause those companies which are least able to bear the tax, which is worse than Income Tax and which is not going to produce the desired result. Let us take company "A" which has had a prosperous and excellent time in the last 20 years and paid its dividends regularly and does not pay any tax at all in consequence. Now I gather it is the view of the Attorney-General that company "B," which has been going through a very bad time in the last 20 years, should be taxed because of its misfortunes in the past, and when it comes in its time, as it is in duty bound to do, to pay nothing at all on its capital but to pay for the arrears of dividends in the past 20 years it is taxed on that, whereas the other company has distributed its dividends over the whole 20 years without tax.
That is an aspect on which the Committee might seek guidance, because it seems to be unfair and out of keeping with the principle that taxation should be borne on the shoulders of those best able to bear it. It is most unfair and a breach of the principles of taxation.
Mr. C. S. Taylor: Before my hon. Friend withdraws his Amendment, I should like to raise a question on this Clause so far as it affects redeemable preference shares.
The Temporary Chairman (Mr. Diamond): I take it that the hon. Gentleman is going to relate his remarks to the Amendment and not the Clause?
Mr. Taylor: I will do it later if it will be more convenient. I thought it might be convenient here, as it was a point similar to the one we were discussing on the Amendment.
The Temporary Chairman: It is not in order to deal with any matter other than that in the Amendment.
Mr. P. Roberts: What the right hon. and learned Gentleman has said goes some way to meet the point, but he said he did not want certain illegalities to take place. I draw his attention to the next Clause, which contains very wide powers—I hope they will not be so wide in a few hours' time—so I hope he will not tie himself too much in this Clause.
Colonel J. R. H. Hutchison: I am obliged to the right hon. and learned Gentleman for going some way to meet us in the point with which I have confronted him. I should like to study more carefully, in the light of normal day, the illustrations which he gave. If this particular preference share were repaid, I should have thought that was not "full consideration." In view of the right hon. and learned Gentleman's explanation, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Maudling: I beg to move, in page 20, line 28, at the end, to add:
(6) Section thirty-six of the Finance Act, 1947, shall have effect as if for the proviso to subsection (1) of that section there were substituted the following proviso:
"Provided that no sum applied in repaying in whole or in part a loan or in paying off in whole or in part by way of either reduction, redemption or in liquidation or otherwise, the share capital of the person carrying on the trade or business shall be treated as a distribution except to the extent that the sum so applied shall exceed—

(a) a sum equivalent to the amount of such loan or the amount paid up or credited as paid up on the account of the nominal value of the capital so paid off, together with any premium paid to such person as a condition of the making of such loan, or the issue of such capital, or any premium not exceeding fifteen per cent. of the amount of such loan or the nominal value of such capital which such person was obligated by the terms of such loan or the payment off of such capital, whichever is the greater; and

(b) a sum equivalent to the amount of cash or the nominal amount of any securities received by such person under or by virtue of any Act of Parliament in respect of the acquisition of the whole or any part of the assets of that person trade or business.

I think I should apologise for the complexity of the drafting of the Amendment which possibly matches the complexity of the drafting of the Clause itself. I hope my hon. and gallant Friend the Member for Perth and East Perthshire (Colonel Gomme-Duncan) will not be too vigorous in his criticism of our drafting. I shall do my best to explain the purpose of the Amendment, which is to extend the provisions of a proviso to Section 36 of the Finance Act of 1947. That Section describes "distribution" for Profits Tax purposes and sets out a wide range of payments, including the distribution of assets, and the payment of dividends or
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bonuses, which are treated as a distribution. The proviso says:
"Provided that no sum applied in repaying a loan or in reducing the share capital of the person carrying on the trade or business shall be treated as a distribution."
In other words, that proviso says that no sum used to repay a loan or reduce the share capital of the business shall be regarded as a distribution for Profits Tax purposes.
Our contention is that the proviso does not go far enough, and this Amendment is designed to widen it in four particular regards. In the first place, it does not appear by any means certain that the provisions of the proviso would apply in the case of a liquidation. I know that Section 35 (1, c) applies to a liquidation, but I am not sure that it applies to every case of a liquidation, e.g., in the case of a share premium issued for other than cash. The right hon. and learned Gentleman should enlighten us on the point.
The second objection is that the proviso does not appear to cover the case of redeemable preference shares because the redemption of a preference share is not a reduction of capital. I think the right hon. and learned Gentleman will be able to deal with the point. While I am on the subject of redeemable preference shares and Profits Tax, perhaps I may call his attention to a point which is worrying many people at present—namely, the situation of the Section 21 companies in relation to Profits Tax. People are somewhat concerned to know the extent or length of redemption which the Treasury regard as the appropriate length of redemption in the issue of a security of this kind which is not regarded as an avoidance device. I think an answer to that question is widely required.
The third objection to the proviso is that it does not appear to cover the position when there is a premium on a share when the share capital is being reduced, and our Amendment is designed to include the premium element in share capital within the phrase "reduction of share capital" and so exclude the repayment of such premium from being treated as a distribution. The issue of shares at a premium is, of course, a common occurrence nowadays—and I think it is recognised by Section 56 of the Companies Act, 1948—and any premiums involved in an issue of shares are incorporated in

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the capital structure of the company. Therefore, it seems to me reasonable that any premium on an issue should be included in the issue of share capital for the purposes of this proviso of Section 36 of the 1947 Finance Act.
1.30 a.m.
Similar, but not entirely similar, considerations apply where there is a premium on paying off a security, not a premium on issue, and in our Amendment, in order to avoid possibly opening the door to certain avoidances, we have limited the amount of premium on paying off which should be allowed to a maximum of 15 per cent. of the nominal value of the security, which seems to me in ordinary circumstances a reasonable amount. Those are the first three ways in which we wish to extend the proviso of Section 36 of the 1947 Finance Act.
The fourth and final way is that covered by paragraph (b) of the Amendment, namely, the position which arises when a company which received Government stock under a nationalisation Act wishes to distribute that stock to its shareholders. Take for example, the case of a company which had a substantial interest in the iron and steel industry, which has now been nationalised. If the company hived off its steel-making assets, the company would remain in being and in exchange for the subsidiary company which it had created to take over its steel-making assets would have received Iron and Steel Stock, so the company would be holding Iron and Steel Stock.
Under present legislation, as I understand it, if the company which has received this compensation stock were to distribute it to its shareholders, that distribution becomes liable to Profits Tax. On the other hand, where the company, instead of hiving off, is totally taken over, the individual shareholders are entitled to receive the nationalisation stock in respect of their steel-making assets without any deduction whatever for Profits Tax.
There seems to be a complete anomaly, dependent upon whether the company concerned has or has not exercised the option to which it is entitled of hiving off its steel-making assets. It seems clear that where the company which has received compensation stock of that kind seeks to distribute it to its shareholders, it is not carrying out a distribution of
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profits in any sense, but is carrying out a distribution of assets—assets which are no longer needed for the conduct of the business. It seems to me wrong that in those circumstances such distribution should be subject to Profits Tax.
Those are the four ways in which we wish to extend the proviso of the 1947 Finance Act. As the Attorney-General has been moderately accommodating so far in his reaction to Amendments moved from this side of the Committee, I hope he will be prepared to be equally accommodating on the points I have submitted for his consideration, which I think are backed with arguments of equity which deserve consideration.
Mr. P. Roberts: There is another aspect of the nationalisation point, so eloquently put by my hon. Friend, which I should like the Attorney-General to consider, and that is under the Coal Industry (Nationalisation) Act. As both he and the Chancellor know, partial satisfaction payments of a capital sum are being made to the collieries concerned, if they apply, up to between 50 per cent. and 80 per cent. of the value of their undertakings. As I understand it, those colliery companies have recently, quite properly, paid out that money, amounting to large sums in some cases, as a reduction of capital. It is clearly a question of capital compensation which has been received into the hands of the company.
It appears to me that, under this Clause as drafted, any future payments of partial satisfaction will be very severely penalised. I asked a question of the Minister of Fuel and Power a little while ago, and the figure which he gave in reply was that approximately 25 per cent. to 28 per cent. had been paid out. Therefore, if this partial satisfaction arrangement is to continue, there may be many millions of pounds which will come into the hands of the companies. These companies could then pay the actual compensation, and would have paid the money out. I should therefore like to ask the Attorney-General whether this point has been considered.
The Attorney-General: I am sorry to say that I feel that we cannot accept this Amendment. What it seeks to do is to substitute for the present Section of the Finance Act, 1947, which describes what are to be regarded as distributions,

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a new provision widening the present one. As the matter stands at present, redemptions of capital and repayments of loan do not count as distributions. In the case of a liquidation, not only does that not count as a distribution, but even the payment of a premium subscribed for the issue of the shares does not. What the Amendment seeks to do is, in effect, to say in the first place that if capital is reduced by premiums on the issue of the shares which were originally subscribed for, not on liquidation but during the life of the company, that payment of premium is itself not to rank as a distribution.
There is, I should have thought, no reason for that. Where the original shares were not subscribed for at a premium, and where the reduction is sought as a kind of gratuitous premium, that is a distribution of the profits as is any ordinary dividend. There is no real distinction in principle but only in form. If when shares were orginally issued no premium was paid out on the issue of the shares, there can be no possible argument for saying that the premium is not a kind of distribution. The hon. Gentleman says that that should not be the case when the premium is paid back upon the reduction of capital, and that when the original shares were paid up that premium was paid on the issue.
It is said that in circumstances of that sort, at any rate, the premium ought not to rank as a distribution. In point of fact, the situation could rarely arise because of the provision of Section 56 of the Companies Act, 1948, which the hon. Member mentioned when moving the Amendment, because, under the provisions of the Section, the premiums paid on the issue of the shares can only be used for certain purposes. They have to be carried in a share premium account. They can be used for making a bonus issue of unissued shares, and can be used for repaying premium expenses of the company.
That kind of use could not count as a distribution. So, if the premiums originally subscribed are used for these purposes no question of distribution would arise. In ordinary cases there could not in any event, if premiums originally subscribed are paid back on a reduction of capital, be a distribution.
Sir Hugh Lucas-Tooth: These premiums may have been paid before 1948, and they would not be covered by the Act of that year. Will the Attorney-General deal with that point?
The Attorney-General: The answer is that a provision of Section 30 of the 1947 Act, to which I shall refer, puts an overall limitation on what is to be counted as a distribution.
If I may come back to the point with which I was dealing, under the terms of Section 56 there is only one use for which premiums subscribed upon the issue of shares can rank as a distribution, that is when they are used for paying the premium on the redemption of redeemable preference shares. That premium can rank as a distribution, and I submit that there is no reason why it should not. After all, there is the overall limitation to the amount which can be charged to the distribution charge. I will come back to that, because it is also the answer with regard to the nationalisation stock.
I shall deal with the question of limitation, which is not only my answer for nationalisation stock, but also for premiums originally subscribed and used for paying premiums for redeemable preference shares. Under Section 30 of the 1947 Act, setting up this Profits Tax structure, one can only be charged in the aggregate and the higher charge, to the extent that, since 1947, one has made profits. Section 30 limits the over-all charge to that, so that when one pays in respect of any particular amount, that part must represent that part of the profits which the company has made since 1947.
I urge upon the Committee that this is a most important consideration. One cannot treat as a distribution attracting the higher charge anything in excess of profits which the company has made since 1947. Inasmuch as that is the over-all limitation, it does not matter on what that charge falls, whether it is nationalisation stock being distributed, or some other profits. That being so, the whole argument advanced in favour of the view that one should exempt this nationalisation stock, or premiums paid up on preference shares, must go.
Mr. P. Roberts: The right hon. and learned Gentleman referred to the distribution of nationalisation stock or some

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other profits, but our argument is that nationalisation stock represents assets, and not profits.
The Attorney-General: It is something distributed, and the hon. Gentleman says that when that stock was distributed, one should not have that distribution charged at the higher charge. One can only be charged to the extent to which one made profits. So that, when one bears in mind that the whole amount on which one can pay distribution charge is limited to post-1947 activities, it does not matter on what portion of the profits the charge is drawn. To the extent that one distributes post-1947 profits, the charge falls thereon.
Let us suppose that one could be charged at a sum in excess of 1947 profits on any distribution at all; supposing one had a company which had been in existence, for example, for twenty years, and during that time had made half-a-million pounds out of profits, and that after 1947 one distributed the whole half-a-million profit. Then, there would be a case for saying that one must limit the charge to something which one earned after 1947 in the way of profits; but since the Act does limit the charge to post-1947 profits, there really can be no case for differentiating one distribution from another, so long as it is within the over-all limitation.
1.45 a.m.
The hon. Gentleman who moved the Amendment apologised to the Committee for the complexity of the problem he raised and I have done my best to try and explain the answer I desired to give in intelligible form. I agree it is a very difficult answer, and I hope I have made it at least not too obscure, but the basic consideration is this over-all limitation.
If I may resume the point I was making, it is only rarely that the case will arise in so far as the premiums are subscribed upon issue shares. It is in these rare cases where it can arise that repayment of the premiums can count as distribution and also in the case where a company distributes nationalisation stock. It is all subject to the limit, and therefore there is no case for making a distinction between one type of distribution and another so long as it is within the post-1947 limit. Therefore, I ask the Committee to reject the Amendment.
Mr. P. Roberts: I have tried to follow the Attorney-General and I would ask
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him if I have this correct. In the case of a steel company which is nationalised and has made a profit since 1947, let us assume the profit made was to the tune of £100 before 1947 and £100 after 1947, and that it makes a distribution to cover, not the £200, but £100. Can the company select and say, "I am paying the pre-1947 profits and retaining for business the post-1947 profits," or is it that any payment made must be allocated as to the profits?
The Attorney-General: A company makes before 1947 £100 profit and it makes after 1947 £100 profit—by a profit, I mean after deducting its outgoings and so on—and it then distributes £100, after 1947, to shareholders in the form of dividends or in any of the other forms described in Section 36. It would pay the higher distribution charge on £100. Supposing it distributes £150—in other words, it distributes £50 of £100 it made before 1947—it will still only pay the higher charge on £100.
Mr. Pitman: I, too, have tried very hard to understand this particular Clause. I hope that the right hon. and learned Gentleman the Attorney General, will help me over this question of profits, as to whether it is capital profit or revenue profit, and whether that distinction enters into the case in understanding this Clause properly. He used the word "Profits" indiscriminately in a context in which it might either have been a revenue profit during the period since 1947 or a capital profit as the result of some transaction which had taken place during that time.
Perhaps I could best bring the problem to a head by asking him what exactly is the case with a coal company which has entered the period with considerable distributable reserves, and which has since received its compensation stock as distributable capital and which, since 1947, has on revenue account been losing all the time? In other words, if there has been a capital profit since 1947 but there has been a revenue loss during that period, will this, since it counts as a distribution on capital profit rather than on revenue profit, attract the Profits Tax where there have in fact been no profits?
Sir H. Lucas-Tooth: I want to put this question to the Attorney-General: supposing a company makes a distribution of money which it has received by way of compensation under the nationalisation

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scheme, that it also pays a dividend in the ordinary way, and that it also sets part of its profits to reserve. As I understood the right hon. and learned Gentleman, he said that the amount of tax at the 50 per cent. rate would be limited to the amount of profits that the company has actually earned since 1947.
But if we take those considerations together, it seems to me that notwithstanding that the company is really putting a very substantial part of the profits it has earned since 1947 to reserve, the Revenue will be able to say, "Oh no, you are distributing these nationalisation moneys and we look to those in the first place. Therefore we are going to say that you are making a full distribution, and we shall charge you at the higher 50 per cent. rate on the full amount of profits you have earned." If that is so, it is quite unfair and the matter ought to be looked at again.
The Attorney-General: May I intervene again to deal with that one point, because it rather crystallises the argument? Certainly if the stock is distributed and the profit is put to reserve, the charge falls upon the stock. Conversely, supposing the stock were distributed and instead of putting the profit to reserve that were distributed, the charge would fall upon the distributed profit. But in either case it has to be limited to such a sum as represents profits earned by the company since 1947.
Mr. C. S. Taylor: I have tried to listen carefully to the right hon. and learned Gentleman in his explanation of this Clause, and I realise that the purpose of it is to prevent the avoidance of the higher rate of Profits Tax by the capitalisation of reserves and then subsequently, or immediately after, having a capital repayment, which up to now has not been regarded as a distribution of profits. The Clause provides for the repayment of loan capital and does not regard the repayment of loan capital as a reduction of capital under certain circumstances. But it does not deal in any way with the repayment of redeemable preference shares—which in many cases is absolutely analogous to the repayment of loan capital—and the repayment of those redeemable preference shares may have nothing whatever to do with any capitalisation of profits or reserves.
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I should like to give the Committee as simple an example as I can of what I have in mind. There may be a company with, say, 6 per cent. redeemable preference shares outstanding and which, under the terms of the issue, cannot be—
The Temporary Chairman: I am sorry to interrupt the hon. Gentleman again. Perhaps he would make it clear in his example how this is related to the Amendment as opposed to the Clause?
Mr. Taylor: I hate to admit this, Mr. Diamond, but I read the Amendment carefully and I thought it pretty well covered any reduction of capital which might be made under Clause 27. I submit that as the case of redeemable preference shares has already been raised, both by the mover of the Amendment and by the Attorney-General, I should be in order in bringing forward this matter.
The Temporary Chairman: I should be most grateful to the hon. Gentleman if he would show me how it is related to the Amendment, as I myself cannot follow this.
Mr. Taylor: Only, as I say, that I thought the Amendment covered any possible reductions in capital which might be made.
The Temporary Chairman: Then I imagine it would be more convenient for the hon. Member to make his speech on the Motion, "That the Clause stand part of the Bill."
Mr. Taylor: If I may, I will continue on that Motion, if I happen to catch your eye, Mr. Diamond.
Mr. Erroll: I think the Attorney-General has made himself most abundantly clear, and thereby only revealed how unsatisfactory this Clause is if it goes through unamended. He said that where a company had made a certain profit and had also distributed some stock received as a result of the nationalisation of one of its subsidiaries, the amount of Profits Tax payable is the amount relating to the amount of distributed profits, but if the profit was not distributed, the amount of tax payable would be the sum of what would be payable on nationalised stock distributed.
Surely this is most unsatisfactory, because such distribution is not distribution of profits at all. It is distributed as a

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result of nationalisation and if the company concerned had not taken the necessary steps to exclude this from the general nationalisation Measure, there would have been no distribution to make. It is not profit that is being distributed, but compensation for loss of part of the assets the company originally held.
It is utterly wrong and false to suggest these are in any way profits that should be taxed as distributed profits. If profits are not distributed there should be no distributed Profits Tax levied either on them or on compensation shares that happen to be distributed, quite apart from the financial prosperity or otherwise of the company. As the Clause stands, unamended, it is quite unsatisfactory.
Mr. P. Roberts: I ask the Attorney-General whether he will not reconsider this provision, because I think very unfair results may come from it. Many colliery companies, for instance, have continued in trade in other forms of business. I can think of one, with which I have no personal connection. It is Butterley, which, I understand, has continued in some other form of business, on which it made profits. This company is receiving, or may receive, partial compensation, and if that partial compensation is paid out, then the whole of the profits that colliery company has made in its other trading activities are going to be assessed as distributed profits. If I am wrong, I will give way at once.
The Attorney-General: Supposing, since 1947, it had made £1,000 and since 1947 or at any time it had received £1,000 of Government stock or anything else, and it distributed Government stock and paid out its profits; it has distributed £1,000 of stock and it has also paid out in dividends the £1,000 it has made since 1947. It will only pay the higher charge on £1,000.
Mr. Roberts: I appreciate that, but the point I am making is that, having made that £1,000 profit in making, say, boots and shoes, they have also received £1,000 compensation for the colliery that has disappeared from their books. They now wish to get that £1,000 profit on boots and shoes in order to build up their boots and shoes business. But they have to pay up the £1,000 they received in compensation, and they do not make their distribution on that £1,000; then they are going
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to be assessed on the whole of the £1,000 they pay out in compensation against the profits on, say, boots and shoes.
2.0 a.m.
The point I wish to put to the Attorney-General—and I hope he will reconsider it before the next stage—is that where a concern which has received money as compensation for nationalised assets goes into some other form of business and makes profits in that other form of business, and deals in a prudent way—in other words, making necessary reserves for continuation of business—that should be deemed to be separate from any distribution under the nationalisation stock. That is all I am asking and I think it is reasonable. A number of companies have gone into other businesses and if, in the next few years, when they pay out compensation stock, it is going to be treated as a dividend distribution, it is going to be very unfair. I am quite certain the Government could not have intended that. Therefore, I ask very confidently whether the learned Attorney will reconsider it.
Sir Patrick Spens: May I put it this way? The distribution of compensation stock which represents shares in a subsidiary or part of the assets one had has got to be done by a reduction of capital, and it is a payment back to shareholders of their capital. It is not a payment of profits at all. Of course, it is perfectly true that there can be reductions of capital by which a company indirectly pays back profits which have been capitalised and which were originally profits and not capital. The difficulty of the Government is that they want to say that every single distribution, whether in essence a distribution of capital or a distribution of profits, shall attract a tax if, in fact since 1947, the company has made no profits at all.
Take two companies—one which has made no profit at all since 1947 and one which has. Both of them receive compensation under one of the nationalisation Acts. Both return that compensation to their shareholders. The one will attract no duty at all, because it has made no profit since 1947. The other will attract duty to the extent to which it has made profits since 1947. That cannot be right. It is a capital distribution, a clear capital distribution going back as capital to its shareholders, and in these circumstances

1879
surely it is wrong that it should attract any duty of this sort, which relates to profit making and nothing else except profit. The matter ought to be reconsidered. Where the distribution is clearly a capital distribution, there clearly cannot be any justification for bringing a company under charge for tax.
Mr. Jennings: There must be some confusion. I cannot agree that the Attorney-General is right. I have always understood that this is a tax on trading profits, and now the Attorney-General is saying that because compensation is paid and it is distributed, the amount falls for taxation under this Clause. Surely compensation is a payment for capital assets and has nothing to do with trading profits. There must be some mistake, and I beg the Attorney-General to listen to the arguments put forward, because it cannot be fair or right that compensation should be subject to this tax. There will be a grave injustice done if this is not put right.
Mr. Erroll: There is a very real feeling on this side of the Committee that an injustice is going to be done if the matter is not remedied. Surely the object of this Clause is to prevent avoidance of Profits Tax by two devices—either by capitalising reserves and subsequently reducing the capital, or by the reverse process. There are two stages which must be gone through before avoidance can occur.
In the cases which have been described we are dealing essentially with only one stage in the process, and apparently that stage is going to attract Profits Tax; but it is the second stage which should attract tax, not the first. If the Attorney-General would bear that in mind, and show by some Amendment that it is only on the completion of the second stage that tax is attracted, we should avoid the difficulty in which we find ourselves and distribution of compensation could be avoided. Surely it is only if there is a subsequent capitalisation of accumulated reserves that distribution should attract tax.
Mr. Selwyn Lloyd: The hon. and learned Member for Kensington, South (Sir P. Spens) gave the example of two companies, in both cases entitled to compensation, but in one case the profit is made after 1947 and in the other case it is not. Does that mean that a company which has made a profit after 1947 is
1880
liable to pay this tax on compensation and a company which has not made a profit escapes tax? If so, how does the Attorney-General justify that on grounds of equity?
The Attorney-General: Section 36 clearly provides what are to be distributions, and one is assets. Supposing Government stock has been given to a company and it distributes that stock to its members. That is a distribution in kind. Having ascertained that there is a distribution, which is just as much a distribution as an ordinary payment of dividend by the company, and—[HON. MEMBERS: "No."] That is plainly what Section 36 says:
"(1) Subject to the provisions of the next succeeding subsection, wherever

(a) any amount is distributed directly or indirectly by way of dividend or cash bonus to any person; or

(b) assets are distributed in kind to any person."

Those are two categories of what in Section 36 of the 1947 Act are regarded as distributions. To go back to the example given by the hon. and learned Gentleman, it makes all the difference whether the company has made profits since 1947 or not. It is only being taxed on its 1947 profits to the extent that it makes a distribution. Whether it pays a dividend after 1947, or whether it distributes in kind stock that it has received is immaterial. Both are distributions.
When there is a distribution one has to ask to what extent the distribution involves payment of the higher charge. It is then one applies the limitation. One has to say, "How much has this company made since 1947 in the way of profits?" When one has discovered that, one knows the limit, one can tax the distribution, whether in kind or the ordinary payment of dividends. In the case of a company which did not distribute stock but paid dividends out of profits earned before 1947, it would not have to pay distribution charge on those dividends except to the extent that since 1947 it had made profits. Therefore, the distinction between the two exists whether the distribution is of stock or payment of dividends.
Sir P. Spens: I understand perfectly what the right hon. and learned Gentleman is saying, but the second distribution he referred to is clearly a distribution

1881
by way of capital, whereas the first is a payment by way of dividend. A company cannot distribute its capital assets—at least it used not to be able to do, and I do not believe directors can do that today. They have to go through a strict process to do it. While I appreciate that this Clause has been drafted for taxation purposes, there is a great difference between making a distribution of earned profits and making a distribution of capital assets. I submit that it is wrong and it ought to be stopped, and we shall stop it if we can.
Mr. Pitman: The hon. and learned Member for Kensington, South (Sir P. Spens) is drawing attention to the fact that this Committee do not think that the distribution of capital and the distribution of revenue profits are the same thing. Whatever the Act of 1947 may have done in Section 36 is not necessarily binding on us to make us do something again today which then was wrong and is now shown up to have been wrong.
May I give the right hon. and learned Gentleman the Attorney-General an example of the sort of thing he will be up against. Suppose a company receives compensation. According to its own books, it has no profit balance on the profit and loss account, but it has this compensation. It is perfectly entitled, if it goes through the proper legal formalities, to distribute that compensation as a capital distribution to its shareholders.
It is common knowledge that while one set of books are kept by the company and audited by their chartered accountants, the Inland Revenue can keep a separate set of accounts for their own purposes, so that while the company's books show no profits, the Inland Revenue may turn round and say they have £5,000 profit and that this distribution of compensation is not a capital distribution, but a distribution of revenue profit. Then the company are in a nice kettle of fish. There will be a debt due to the Inland Revenue for Profits Tax on that distribution and a breach of the Companies Act by the directors in having distributed what later turns out to have been not legally distributable. It is that sort of anomaly we are trying to remove before it is too late.
Mr. Maudling: When I heard the right hon. and learned Gentleman's answer to the first part of the Amendment, I thought he dealt very reasonably with the point made, but on the second half I find a considerable difference in principle on the matter. From the right hon. and learned Gentleman's speech, we know that the Government intend to continue to regard the distribution of capital assets as distribution of profits for the purposes of Profits Tax. If that is the effect of Section 36 of the 1947 Act, that only confirms the principle contained in my Amendment.
Question put, "That those words be there added."
The Committee divided: Ayes, 280; Noes, 291.

Division No. 112.]

AYES

[2.15 a.m.

Aitken, W. T.

Boyle, Sir Edward

Cranborne, Viscount

Alport, C. J. M.

Bracken, Rt. Hon. B.

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

Amery, Julian (Preston, N.)

Braine, B. R.

Crosthwaite-Eyre, Col. O. E.

Amory, Heathcoat (Tiverton)

Braithwaite, Sir Albert (Harrow, W.)

Crouch, R. F.

Arbuthnot, John

Braithwaite, Lt.-Cr. G. (Bristo N. W.)

Crowder, Capt. John (Finchley)

Ashton, H. (Chelmsford)

Bromley-Davenport, Lt.-Col. W.

Crowder, Petre (Ruislip—Northwood)

Assheton, Rt. Hon. R. (Blackburn, W.)

Brooke, Henry (Hamustead)

Cundiff, F. W.

Astor, Hon. M. L.

Browne, Jack (Govan)

Cuthbert, W. N.

Baker, P. A. D.

Buchan-Hepburn, P. G. T.

Davidson, Viscountess

Baldock, Lt.-Cmdr. J. M.

Bullock, Capt. M.

Davies, Nigel (Epping)

Baldwin, A. E.

Bullus, Wing Commander E. E.

de Chair, Somerset

Banks, Col. C.

Burden, F. A.

De la Bère, R.

Baxter, A. B.

Butcher, H. W.

Deedes, W. F.

Beamish, Maj. Tufton

Butler, Rt. Hn. R. A. (Saffron Walden)

Digby, S. Wingfield

Bell, R. M.

Carr, Robert (Mitcham)

Dodds-Parker, A. D.

Bennett, Dr. Reginald (Gosport)

Carson, Hon. E.

Donner, P. W.

Bennett, William (Woodside)

Channon, H.

Douglas-Hamilton, Lord Malcolm

Bevins, J. R. (Liverpool, Toxteth)

Clarke, Col. Ralph (East Grinstead)

Drayson, G. B.

Birch, Nigel

Clarke, Brig. Terence (Portsmouth, W.)

Drewe, C.

Bishop, F. P.

Clyde, J. L.

Dugdale, Maj. Sir Thomas (Richmond)

Black, C. W.

Colegate, A.

Duncan, Capt. J. A. L.

Boles, Lt.-Col. D. C. (Wells)

Conant, Maj. R. J. E.

Dunglass, Lord

Booth by, R.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Duthie, W. S.

Bossom, A. C.

Cooper-Key, E. M.

Eccles, D. M.

Bowen, E. R. (Cardigan)

Corbet, Lt.-Col. Uvedale (Ludlow)

Eden, Rt. Hon. A.

Boyd-Carpenter, J. A.

Craddock, Beresford (Spelthorne)

Elliot, Rt. Hon. W. E.

Erroll, F. J.

Lloyd, Maj. Guy (Renfrew, E.)

Robinson, Roland (Blackpool, S.)

Fisher, Nigel

Lloyd, Selwyn (Wirral)

Robson-Brown, W.

Fort, R.

Lockwood, Lt.-Col. J. C.

Rodgers, John (Sevenoaks)

Foster, John

Longden, Gilbert (Herts, S. W.)

Roper, Sir Harold

Fraser, Hon. Hugh (Stone)

Low, A. R. W.

Ropner, Col. L.

Fraser, Sir Ian (Morecambe & Lonsdale)

Lucas, Sir Jocelyn (Portsmouth, S.)

Russell, R. S.

Fyte, Rt. Hon. Sir David Maxwell

Lucas, P. B. (Brentford)

Ryder, Capt. R. E. D.

Gage, C. H.

Lucas-Tooth, Sir Hugh

Salter, Rt. Hon. Sir Arthur

Galbraith, Cmdr. T. D. (Pollok)

Lyttelton, Rt. Hon. O.

Sandys, Rt. Hon. D.

Gammans, L. D.

McAdden, S. J.

Shepherd, William

Garner-Evans, E. H. (Denbigh)

McCorquodale, Rt. Hon. M. S.

Smiles, Lt.-Col. Sir Walter

Gates, Maj. E. E.

Macdonald, Sir Peter (I. of Wight)

Smithers, Peter (Winchester)

Gomme-Duncan, Col. A.

Mackeson, Brig. H. R.

Smithers, Sir Waldron (Orpington)

Gridley, Sir Arnold

McKibbin, A.

Smyth, Brig. J. G. (Norwood)

Grimston, Hon. John (St. Albans)

McKie, J. H. (Galloway)

Snadden, W. McN.

Grimston, Robert (Westbury)

Maclay, Hon. John

Soames, Capt. C.

Harden, J. R. E.

Maclean, Fitzroy

Spearman, A. C. M.

Hare, Hon. J. H. (Woodbridge)

MacLeod, Iain (Enfield, W.)

Spence, H. R. (Aberdeenshire, W.)

Harris, Frederic (Croydon, N.)

MacLeod, John (Ross and Cromarty)

Spens, Sir Patrick (Kensington, S.)

Harris, Reader (Heston)

Macmillan, Rt. Hon. Harold (Bromley)

Stanley, Capt. Hon. Richard (N. Fylde)

Harvey, Air Cdre. A. V. (Macclesfield)

Macpherson, Major Niall (Dumfries)

Stevens, G. P.

Harvey, Ian (Harrow, E.)

Maitland, Cmdr. J. W.

Steward, W. A. (Woolwich, W.)

Harvie-Watt, Sir George

Manningham-Buller, R. E.

Stewart, Henderson (Fife, E.)

Hay, John

Marlowe, A. A. H.

Stoddart-Scott, Col. M.

Head, Brig. A. H.

Marples, A. E.

Storey, S.

Heald, Lionel

Marshall, Douglas (Bodmin)

Strauss, Henry (Norwich, S.)

Heath, Edward

Marshall, Sidney (Sutton)

Stuart, Rt. Hon. James (Moray)

Henderson, John (Cathcart)

Maude, Angus (Ealing S.)

Studholme, H. G.

Hicks-Beach, Maj. W. W.

Maude, John (Exeter)

Summers, G. S.

Higgs, J. M. C.

Maudling, R.

Sutcliffe, H.

Hill, Dr. Charles (Luton)

Medlicott, Brig. F.

Taylor, Charles (Eastbourne)

Hill, Mrs. E. (Wythenshawe)

Mellor, Sir John

Taylor, William (Bradford, N.)

Hinchingbrooke, Viscount

Molson, A. H. E.

Teeling, W.

Hirst, Geoffrey

Monckton, Sir Walter

Teevan, T. L.

Hollis, M. C.

Moore, Lt.-Col. Sir Thomas

Thomas, J. P. L. (Hereford)

Holmes, Sir Stanley (Harwich)

Morrison, John (Salisbury)

Thompson, Kenneth Pugh (Walton)

Hope, Lord John

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

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Hopkinson, Henry

Mott-Radclyffe, C. E.

Thorneycroft, Peter (Monmouth)

Hornsby-Smith, Miss P.

Nabarro, G.

Thornton-Kemsley, Col. C. N.

Horsbrugh, Rt. Hon. Florence

Nicholls, Harmar

Thorp, Brig. R. A. F.

Howard, Gerald (Cambridgeshire)

Nicholson, G.

Tilney, John

Howard, Greville (St. Ives)

Nield, Basil (Chester)

Turner, H. F. L.

Hudson, Sir Austin (Lewisham, N.)

Noble, Cmdr. A. H. P.

Turton, R. H.

Hudson, Rt. Hon. Robert (Southport)

Nugent, G. R. H.

Tweedsmuir, Lady

Hudson, W. R. A. (Hull, N.)

Nutting, Anthony

Vane, W. M. F.

Hurd, A. R.

Oakshott, H. D.

Vaughan-Morgan, J. K.

Hutchinson, Geoffrey (Ilford, N.)

Odey, G. W.

Vosper, D. F.

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

O'Neill, Rt. Hon. Sir Hugh

Wakefield, Edward (Derbyshire, W.)

Hutchison, Col. James (Glasgow)

Ormsby-Gore, Hon. W. D.

Wakefield, Sir Wavell (Marylebone)

Hyde, Lt.-Col. H. M.

Orr, Capt. L. P. S.

Walker-Smith, D. C.

Hylton-Foster, H. B.

Orr-Ewing, Charles Ian (Hendon, N.)

Ward, Hon. George (Worcester)

Jennings, R.

Orr-Ewing, Ian L. (Weston-super-Mare)

Ward, Miss I. (Tynemouth)

Johnson, Howard (Kemptown)

Osborne, C.

Waterhouse, Capt. Rt. Hon. C.

Jones, A. (Hall Green)

Peake, Rt. Hon. O.

Watkinson, H.

Joynson-Hicks, Hon. L. W.

Perkins, W. R. D.

Webbe, Sir H. (London & Westminster)

Kaberry, D.

Peto, Brig. C. H. M.

White, Baker (Canterbury)

Kerr, H. W. (Cambridge)

Pickthorn, K.

Williams, Charles (Torquay)

Kingsmill, Lt.-Col. W. H.

Pitman, I. J.

Williams, Gerald (Tonbridge)

Lambert, Hon. G.

Powell, J. Enoch

Williams, Sir Herbert (Croydon, E.)

Lancaster, Col. C. G.

Price, Henry (Lewisham, W.)

Wills, G.

Langford-Holt, J.

Prior-Palmer, Brig. O.

Wilson, Geoffrey (Truro)

Law, Rt. Hon. R. K.

Profumo, J. D.

Winterton, Rt. Hon. Earl

Leather, E. H. C.

Raikes, H. V.

Wood, Hon. R.

Legge-Bourke, Maj. E. A. H.

Rayner, Brig. R.

York, C.

Lennox-Boyd, A. T.

Redmayne, M.

Lindsay, Martin

Remnant, Hon. P.

TELLERS FOR THE AYES:

Linstead, H. N.

Renton, D. L. M.

Mr. Heath and

Llewellyn, D.

Roberts, Maj. Peter (Heeley)

Mr. T. G. D. Galbraith.

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Robertson, Sir David (Caithness)

NOES

Acland, Sir Richard

Barnes, Rt. Hon. A. J.

Bowden, H. W.

Adams, Richard

Bartley, P.

Bowles, F. G. (Nuneaton)

Albu, A. H.

Bellenger, Rt. Hon. F. J.

Braddock, Mrs. Elizabeth

Allen, Arthur (Bosworth)

Bonn, Wedgwood

Brook, Dryden (Halifax)

Allen, Scholefield (Crewe)

Benson, G.

Brooks, T. J. (Normanton)

Anderson, Alexander (Motherwell)

Beswick, F.

Broughton, Dr. A. D. D.

Anderson, Frank (Whitehaven)

Bevan, Rt. Hon. A. (Ebbw Vale)

Brown, At. Hon. George (Belper)

Attlee, Rt. Hon. C. R.

Bing, G. H. C.

Brown, Thomas (Ince)

Awbery, S. S.

Blenkinsop, A.

Burke, W. A.

Ayles, W. H.

Blyton, W. R.

Burton, Miss E.

Bacon, Miss Alice

Boardman, H.

Butler, Herbert (Hackney, S.)

Baird, J.

Booth, A.

Callaghan, L. J.

Balfour, A.

Bottomley, A. G.

Carmichael, J.

1884

1885

Castle, Mrs. B. A.

Hughes, Emrys (S. Ayrshire)

Popplewell, E.

Champion, A. J.

Hughes, Hector (Aberdeen, N.)

Porter, G.

Chetwynd, G. R.

Hynd, H. (Accrington)

Price, Philips (Gloucestershire, W.)

Clunie, J.

Hynd, J. B. (Attercliffe)

Proctor, W. T.

Cocks, F. S.

Irvine, A. J. (Edge Hill)

Pryde, D. J.

Coldrick, W.

Irving, W. J. (Wood Green)

Pursey, Cmdr. H.

Callick, P.

Isaacs, Rt. Hon. G. A.

Rankin, J.

Collindridge, F.

Janner, B.

Rees, Mrs. D.

Cook, T. F.

Jay, D. P. T.

Reeves, J.

Cooper, Geoffrey (Middlesbrough, W.)

Jeger, George (Goole)

Reid, Thomas (Swindon)

Cooper, John (Deptford)

Jenkins, R. H.

Reid, William (Camlachie)

Corbet, Mrs. Freda (Peckham)

Johnson, James (Rugby)

Rhodes, H.

Cove, W. G.

Johnston, Douglas (Paisley)

Richards, R.

Craddock, George (Bradford, S.)

Jones, David (Hartlepool)

Roberts, Goronwy (Caernarvonshire)

Crawley, A.

Jones, Frederick Elwyn (W. Ham, S.)

Robertson, J. J. (Berwick)

Crosland, C. A. R.

Jones, Jack (Rotherham)

Robinson, Kenneth (St. Pancras, N.)

Crossman, R. H. S.

Jones, William Elwyn (Conway)

Rogers, George (Kensington, N.)

Cullen, Mrs. A.

Keenan, W.

Ross, William

Daines, P.

Kenyon, C.

Shawcross, Rt. Hon. Sir Hartley

Gallon, Rt. Hon. H.

Key, Rt. Hon. C. W.

Shinwell, Rt. Hon. E.

Darling, George (Hillsborough)

King, Dr. H. M.

Shurmer, P. L. E.

Davies, A. Edward (Stoke, N.)

Kinghorn, Sqn. Ldr. E.

Silverman, Julius (Erdington)

Davies, Harold (Leek)

Kinley, J.

Silverman, Sydney (Nelson)

Davies, Stephen (Merthyr)

Lang, Gordon

Simmons, C. J.

de Freitas, Geoffrey

Lee, Frederick (Newton)

Slater, J.

Deer, G.

Lee, Miss Jennie (Carnnock)

Smith, Ellis (Stoke, S.)

Delargy, H. J.

Lever, Harold (Cheetham)

Smith, Norman (Nottingham, S.)

Dodds, N. N.

Lever, Leslie (Ardwick)

Snow, J. W.

Donnelly, D.

Lewis, Arthur (West Ham, N.)

Sorensen, R. W.

Driberg, T. E. N.

Lewis, John (Bolton, W.)

Soskice, Rt. Hon. Sir Frank

Dugdale, Rt. Hon. John (W. Bromwich)

Lindgren, G. S.

Sparks, J. A.

Dye, S.

Lipton, Lt.-Col. M.

Steele, T.

Ede, Rt. Hon. J. C.

Logan, D. G.

Stewart, Michael (Fulham, E.)

Edelman, M.

Longden, Fred (Small Heath)

Stokes, Rt. Hon. R. R.

Edwards, John (Brighouse)

McAllister, G.

Strachey, Rt. Hon. J.

Edwards, Rt. Hon. Ness (Caerphilly)

MacColl, J. E.

Strauss, Rt. Hon. George (Vauxhall)

Edwards, W. J. (Stepney)

McGhee, H. G.

Stross, Dr. Barnett

Evans, Albert (Islington, S. W.)

McGovern, J.

Summerskill, Rt. Hon. Edith

Evans, Edward (Lowestoft)

McInnes, J.

Sylvester, G. O.

Evans, Stanley (Wednesbury)

Mack, J. D.

Taylor, Bernard (Mansfield)

Ewart, R.

McKay, John (Wallsend)

Taylor, Robert (Morpeth)

Fernyhough, E.

Mackay, R. W. G. (Reading, N.)

Thomas, David (Aberdare)

Field, Capt. W. J.

McLeavy, F.

Thomas, George (Cardiff)

Finch, H. J.

MacMillan, Malcolm (Western Isles)

Thomas, Iorwerth (Rhondda, W.)

Fletcher, Eric (Islington, E.)

McNeil, Rt. Hon. H.

Thomas, Ivor Owen (Wrekin)

Follick, M.

MacPherson, Malcolm (Stirling)

Thorneycroft, Harry (Clayton)

Foot, M. M.

Mainwaring, W. H.

Thurtle, Ernest

Forman, J. C.

Mallalieu, E. L. (Brigg)

Timmons, J.

Fraser, Thomas (Hamilton)

Mallalieu, J. P. W. (Huddersfield, E.)

Tomney, F.

Freeman, John (Watford)

Mann, Mrs. Jean

Turner-Samuels, M.

Freeman, Peter (Newport)

Manuel, A. C.

Ungoed-Thomas, Sir Lynn

Gaitskell, Rt. Hon. H. T. N.

Marquand, Rt. Hon. H. A.

Usborne, H.

Ganley, Mrs. C. S.

Mathers, Rt. Hon. G.

Vernon, W. F.

Gibson, C. W.

Mellish, R. J.

Viant, S. P.

Gilzean, A.

Messer, F.

Wallace, H. W.

Glanville, James (Consett)

Middleton, Mrs. L.

Watkins, T. E.

Gooch, E. G.

Mikardo, Ian.

Webb, Rt. Hon. M. (Bradford, C.)

Gordon-Walker, Rt. Hon. P. C.

Mitchison, G. R.

Weitzman, D.

Greenwood, Anthony (Rossendale)

Moeran, E. W.

Wells, Percy (Faversham)

Greenwood, Rt. Hn. Arthur (Wakefield)

Monslow, W.

Wells, William (Walsall)

Grenfell, D. R.

Moody, A. S.

West, D. G.

Grey, C. F.

Morgan, Dr. H. B.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Griffiths, David (Rother Valley)

Morley, R.

White, Mrs. Eirene (E. Flint)

Griffiths, Rt. Hon. James (Llanelly)

Morris, Percy (Swansea, W.)

While, Henry (Derbyshire, N. E.)

Griffiths, William (Exchange)

Mort, D. L.

Whiteley, Rt. Hon. W.

Gunter, R. J.

Moyle, A.

Wilcock, Group Capt. C. A. B.

Hale, Joseph (Rochdale)

Mulley, F. W.

Wilkes, L.

Had, John (Gateshead, W.)

Murray, D.

Willey, Frederick (Sunderland)

Hall, Rt. Hon. Glenvil (Colne Valley)

Nally, W.

Willey, Octavius (Cleveland)

Hamilton, W. W.

Neal, Harold (Bolsover)

Williams, David (Neath)

Hannan, W.

Noel-Baker, Rt. Hon. P. J.

Williams, Rev. Llywelyn (Abertillery)

Hardman, D. R.

O'Brien, T.

Williams, Ronald (Wigan)

Hargreaves, A.

Oldfield, W. H.

Williams, Rt. Hon. Thomas (Don V'lly)

Hastings, S.

Oliver, G. H.

Williams, W. T. (Hammersmith, S.)

Mayman, F. H.

Orbach, M.

Wilson, Rt. Hon. Harold (Huyton)

Henderson, Rt. Hon. Arthur (Tipton)

Padley, W. E

Winterbottom, Ian (Nottingham, C.)

Herbison, Miss M.

Paget, R. T.

Winterbottom, Richard (Brightside)

Hewitson, Capt. M.

Paling, Rt. Hon. W. (Dearne Valley)

Wise, F. J.

Hobson, C. R.

Paling, Will T. (Dewsbury)

Woodburn, Rt. Hon. A.

Holman, P.

Pannell, T. C.

Wyatt, W. L.

Holmes, Horace (Hemsworth)

Pargiter, G. A.

Yates, V. F.

Houghton, D.

Parker, J.

Younger, Hon. K.

Hoy, J.

Paton, J.

Hubbard, T.

Pearson, A.

TELLERS FOR THE NOES:

Hudson, James (Ealing, N.)

Peart, T. F.

Mr. Wilkins and Mr. Royle.

Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. C. S. Taylor: I think it is a question of third time lucky, because I believe that anything I say now on the Question, "That the Clause stand part of the Bill" must be in order. I do not think it will be necessary for me to repeat what I said in my opening remarks when speaking to an Amendment. The Attorney-General will remember that I was dealing with the case of redeemable preference shares, and I said I thought that in many cases the repayment of loan capital was analogous to the repayment of redeemable preference shares, and that, although this Clause provided in certain cases for the repayment of loan capital to be considered hot as a reduction of capital, the repayment of redeemable preference shares is. At that moment I was about to give the Committee an example of what I had in mind.
Suppose a company which had outstanding, say, 6, 7 or 8 per cent. redeemable preference shares which, under the terms of the issue, could not be repaid until this year, and that company decided to pay off the redeemable preference shares out of the proceeds of, perhaps, a new issue from ordinary shares, or indeed the issue of preference shares, at a lower rate of interest—which, of course, would be extremely good business from the company's point of view—the company then finds itself in this position.
If it had capitalised any reserves after 6th April, 1949, or if at any time in the future it should capitalise those reserves, it would be penalised in that one or other of the amounts would be treated as subject to the higher rate of Profits Tax. The operation of the capitalisation of reserves, which may have taken place any time after 6th April, 1949, or at any time in the future, would have absolutely no connection with the operation of the repayment of the redeemable preference share capital. I submit that, as these two operations have absolutely no connection, it would be wrong to penalise the company placed in that position.
The Chancellor may have had representations on this matter. If he has, I am sure he has considered them. I am sure that the Clause goes further than he perhaps intended it should, and all I am asking today is that the matter should be further considered before the Report
1888
stage, and I hope that, if the Chancellor agrees with the submissions I have made, he will then be able to table an Amendment to cover the point.
2.30 a.m.
Lieut.-Commander Braithwaite: Before the Committee parts with this Clause, may I raise one matter arising out of the debate on the last Amendment, when the Attorney-General, despite considerable pressure, insisted that the nationalised industries profits rank for the purpose of this machinery. I feel, in view of that, that between now and the Report stage, the Government ought to insert a new definition of "a distributable sum." which appears in this Clause, because surely nationalised stock is the result of the purchase by the State of capital assets.
I should be glad if the right hon. Gentleman the Minister for Local Government and Planning could stay for just 30 seconds. I am sorry if I am interrupting his programme. He will recall that in an eloquent speech during the Second Reading of what afterwards became the Transport Act, he described the railways, which the State was about to purchase, as "a poor bag of assets." It may have been a poor bag, though that is a matter of opinion, but the previous Chancellor of the Exchequer who, after all, took through the Finance Act of 1947, did at least regard that as a purchase of assets. This evening we have been told from the Treasury Bench that it was nothing of the kind—that they are a poor bag of income, a poor bag of distribution.
The Minister of Local Government and Planning (Mr. Hugh Dalton): The hon. and gallant Member has a dim memory of what he describes as eloquent words used some years ago, and verified later.
Lieut.-Commander Braithwaite: Eloquent words, certainly, but on the record. I remember the emphasis with which they were delivered. They were the right hon. Gentleman's opinion at the time, and he was speaking as Chancellor of the Exchequer of the day on behalf of the Government of that time. That is the only point I want to establish. It is rather soon for us to have that definition upset by the Attorney-General. I would suggest that there is cause here for a new definition to be inserted on the Report stage, of what in fact constitutes a distributable sum. I thought that the hon.

1889
Gentleman was on the point of giving way. His amanuensis made so many journeys to the Official Gallery that I thought we were going to have a concession. But there is time between now and the Report stage to have full consultation.
Mr. Selwyn Lloyd: I have another question about this Clause. It is an exceedingly complicated Clause and I do not profess to understand what it means. After the last discussion I am not very much clearer. But I am told that, in the case of private companies which are caught by Sections 46 and 55 of the 1940 Finance Act—a series of provisions which, I think, most people agree at present are quite out of place having regard to the changed conditions which cause great hardship to small estates—it has been the practice to issue redeemable preference shares to enable a deceased director's estate to be provided with the money to pay Death Duties.
As the right hon. Gentleman is aware, under the provisions of these Sections of this Act the shares have to be valued on the estate basis, and not on the market value basis, because they have no market value. That has frequently the effect of meaning the complete insolvency of that estate. I am told that one method of getting around that is to issue redeemable preference shares; but if this is done in the future, in view of this Clause, such shares would be subject to the penalty of 40 per cent. Profits Tax. I should like an assurance as to truth of that, for if it be true, then how does the right hon. and learned Gentleman justify it?
Mr. P. Roberts: Before permitting this Clause to pass, I do make one final plea to the Attorney-General and to the Chancellor to reconsider this one particular point about distribution of compensation stock; because after the Clause goes through, it may be that those companies wishing to continue in business will have to put their present structure into liquidation. That will mean extra trouble for those companies which are trying to carry on and trying to help the prosperity of the country, and I do sincerely hope that the right hon. and learned Gentleman will reconsider this later, or will give an undertaking to make an amendment on the Report stage.
Mr. Pitman: One of the effects of this Clause will be that it is greatly to the advantage of the Government to defer, to the last possible moment, making compensation payments under the various Acts. It is, I suggest to the Committee, quite clear that if only the Government can wait until a company in its other activities has made a profit equal to the value of the compensation to be paid, then the whole of that compensation, when paid, will be treated as distribution of revenue under the terms of this Clause. It will then, of course, be subject to a taxation of 40 per cent. The effect of this will be that a company which got its compensation early will have had 100 per cent., and the other firm, having tried to carry on rendering a service to the community, will find its compensation deteriorating to the extent of 40 per cent.; and this is compensation which the House, as a deliberate act of justice, decided should be paid for the property taken over.
The Attorney-General: I cannot but help thinking that some apprehensions by hon. Members opposite are not very well founded. First, why should this Clause induce any company to change its structure? What we are really concerned with is the capitalising of profits, and then repaying in the form of bonus issues, or by some other means; there are processes having the same effect. It should not be permissible for a company, under the guise of an alteration in its capital structure, to distribute to its members something which really should be subject to the tax, and which would be subject if distributed as dividends in the ordinary way.
That is really all that this Clause seeks to do. Hon. Members expressed apprehension as to the effect of Section 36 when we discussed the last Amendment to this Clause, but I have already given such answer as I can to that, and I again impress on the Committee the importance of over-all limitation and the higher distribution charge. It cannot exceed by one penny the amount of profits which the company in question has made since 1947—[An HON. MEMBER: "Why should it?"]—Quite, why should it?—and it does not. That is the point—it does not. Therefore, when one is looking at a distribution such as is described by Section 36, a distribution of assets

1891
referred to in Section 36 or distribution in the form of payment of dividends referred to in Section 36, one is always looking at a distribution which has to be in the over-all limit I have described.
Mr. P. Roberts: Would the right hon. and learned Gentleman say that it was reasonable and prudent for a company to pay out every penny of profit it makes in one particular year, because that is what the result will be on the companies? Every penny of profit will have to be paid out and taxed at 40 per cent. The normal way, surely, is that a company would keep a certain amount back and pay at 10 per cent.? Instead of being paid at 10 per cent. it has all to be paid at 40 per cent.
The Attorney-General: I cannot agree to that. It need not distribute its Government stock; it can keep it. And it need not distribute its profits, but can place profits to reserve. Nothing in this Clause compels it to alter that course. It can do that just as much as it has ever done. The description or definition of what is to be a distribution is contained in Section 35 and Section 36 of the Act of 1947 and has been part of this Profits Tax system for many years past and has not given rise to any difficulty. It was sought to be amended in a number of respects and I have given the answer in reply to the proposals made by the hon. Gentleman who moved the Amendment.
May I deal with one or two specific points raised? The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) referred to the incidence of Death Duties in Section 46 of the Finance Act, 1940, and he said that in some cases, when it was found necessary to pay the Death Duty assessed under Section 46 of the Act by reference to the appropriate proportion of the company's income, preference—
Captain Duncan: On a point of order, Major Milner. Is it in order for an hon. Member to stand in the Gangway when the right hon. and learned Gentleman, the Attorney-General, is speaking?
The Chairman: It is not of course in order to remain in one position standing in the Gangway.
The Attorney-General: To get back to the point I was just answering, this Clause
1892
does not impose any charge for tax unless one has not only issue of capital but also its redemption. The mere issue of preference shares for any particular purpose does not of itself attract tax. One has to have the bipartite transaction by an issue and a redemption. Therefore, I should have thought that the mere fact that preference shares are issued could certainly not attract the tax. The hon. and learned Gentleman only gave a very sketchy account of the transaction he had in mind, but I do not see how any charge for tax could arise.
Mr. Selwyn Lloyd: I did it because we are trying to get on as quickly as we can. If one is challenged upon these matters, which are very complicated, it would be easy to discuss them to advantage for a very long time. I do not know whether the Leader of the House knows this, but we have discovered something which is a very substantial injustice and which would not have been discovered unless we had had this discussion. Of course the transactions I put forward sketchily involved the issue of preference shares and their redemption. I admit that I did not explain fully the second part of the transaction. Could the right hon. and learned Gentleman say whether there will be any discretion to the Treasury in deciding whether any such transaction would attract this added tax and, if there is to be no such discretion, what interval of time it is likely will have to lapse between issue and redemption?
2.45 a.m.
The Attorney-General: If there is an issue and redemption there is no lapse, and the Section operates automatically. Therefore, if the necessary conditions described in the Section are fulfilled by the transaction which the hon. and learned Gentleman has in mind, the tax is automatic.
In conclusion may I deal with the point made by the hon. Member for Eastbourne (Mr. C. S. Taylor). His point was that there was no logical distinction between preference shares issued for cash when they are redeemed and the repayment of a loan which had been made for cash.
Mr. Taylor: Redeemable preference shares.
The Attorney-General: Redeemable preference shares subscribed for cash, and

1893
a loan which had been made by the provision of cash. I should like to consider that further to see if some slight change could be made in view of the point brought to my notice by the hon. Gentleman.
Mr. Eccles: I do not see how we can accept the answer of the Attorney-General. It is curiously unsatisfactory because we are all agreed upon the main object of the Clause, which is that when reserves have been capitalised, and thereafter there is a reduction of capital made in the ordinary course of business, that should attract Profits Tax. But in the course of these discussions we have become seized of a great injustice in respect of this compensation stock. I do not think it matters much whether Section 36 of the 1947 Act definitely defines a distribution in such a way that that compensation stock is caught. If it is caught, and it seems to be unjust that it should be caught, then surely we ought to amend this Clause?
Whatever else may be the result of catching that stock, I think my hon. Friends must have made it abundantly clear that it will have an effect upon the decisions of the directors of those companies
whether they continue in active business with their old companies or not. I think it cannot be disputed that it is in the interests of the country that companies like that which was mentioned should go on trading and use their knowledge and skill in some other direction.
They may say it is not worth it because, if they make any profits, it will make it impossible for them to distribute the compensation stock which may not be needed in their new activities because that would attract Profits Tax. Surely the Attorney-General will agree this is not a distribution of past profits. It is a distribution of capital forced upon the company, not as a decision of that board of directors, but primarily because the Government took the step of nationalising the coal industry. Flowing from those decisions we ought to make an exception of this. I do not know what my hon. Friends will do, but I do not think we can let the Clause go unless we get some assurance.
Question put, "That the Clause stand part of the Bill."
The Committee divided: Ayes, 292; Noes, 280.

Division No. 113.]

AYES

[2.50 a.m.

Acland, Sir Richard

Callaghan, L. J.

Edwards, Rt. Hon. Ness (Caerphilly)

Adams, Richard

Carmichael, J.

Edwards, W. J. (Stepney)

Albu, A. H.

Castle, Mrs. B. A

Evans, Albert (Islington, S. W.)

Allen, Arthur (Bosworth)

Champion, A. J.

Evans, Edward (Lowestoft)

Allen, Scholefield (Crewe)

Chetwynd, G. R.

Evans, Stanley (Wednesbury)

Anderson, Alexander (Motherwell)

Clunie, J.

Ewart, R.

Anderson, Frank (Whitehaven)

Cocks, F. S.

Fernyhough, E.

Attlee, Rt. Hon. C. R.

Coldrick, W.

Field, Capt. W. J.

Awbery, S. S.

Collick, P.

Finch, H. J.

Ayles, W. H.

Collindridge, F.

Fletcher, Eric (Islington, E.)

Bacon, Miss Alice

Cook, T. F.

Follick, M.

Baird, J.

Cooper, Geoffrey (Middlesbrough, W.)

Foot, M. M.

Balfour, A.

Cooper, John (Deptford)

Forman, J. C.

Barnes, Rt. Hon. A. J.

Corbet, Mrs. Freda (Peckham)

Fraser, Thomas (Hamilton)

Hartley, P.

Cove, W. G.

Freeman, John (Watford)

Bellenger, Rt. Hon. F. J.

Craddock, George (Bradford, S.)

Freeman, Peter (Newport)

Benn, Wedgwood

Crawley, A.

Gaitskell, Rt. Hon. H. T. N.

Benson, G.

Crosland, C. A. R.

Ganley, Mrs. C. S.

Beswick, F.

Crossman, R. H. S.

Gibson, C. W.

Bevan, Rt. Hon. A. (Ebbw Vale)

Cullen, Mrs. A.

Gilzean, A.

Bing, G. H. C.

Daines, P.

Glanville, James (Consett)

Blenkinsop, A.

Dalton, Rt. Hon. H.

Gooch, E. G

Blyton, W. R.

Darling, George (Hillsborough)

Gordon-Walker, Rt. Hon. P. C.

Boardman, H.

Davies, A. Edward (Stoke, N.)

Greenwood, Anthony (Rossendale)

Booth, A.

Davies, Harold (Leek)

Greenwood, Rt. Hn. Arthur (Wakefield)

Bottomley, A. G.

Davies, Stephen (Merthyr)

Grenfell, D. R.

Bowden, H. W.

de Freitas, Geoffrey

Grey, C. F.

Bowles, F. G. (Nuneaton)

Deer, G.

Griffiths, David (Rother Valley)

Braddock, Mrs. Elizabeth

Delargy, H. J.

Griffiths, Rt. Hon. James (Llanelly)

Brook, Dryden (Halifax)

Dodds, N. N.

Griffiths, William (Exchange)

Brooks, T. J. (Normanton)

Donnelly, D.

Gunter, R. J.

Broughton, Dr. A. D. D.

Driberg, T. E. N.

Hale, Joseph (Rochdale)

Brown, Rt. Hon. George (Belper)

Dugdale, Rt. Hon. John (W. Bromwich)

Hall, John (Gateshead, W.)

Brown, Thomas (Ince)

Dye, S.

Hall, Rt. Hon. Glenvil (Colne Valley)

Burke, W. A.

Ede, Rt. Hon. J. C.

Hamilton, W. W.

Burton, Miss E.

Edelman, M.

Hannan, W.

Butler, Herbert (Hackney, S.)

Edwards, John (Brighouse)

Hardman, D. R.

Hargreaves, A

Mann, Mrs. Jean

Smith, Ellis (Stoke, S.)

Hastings, S.

Manuel, A. C.

Smith, Norman (Nottingham, S.)

Hayman, F. H.

Marquand, Rt. Hon. H. A.

Snow, J. W.

Henderson, Rt. Hon. Arthur (Tipton)

Mathers, Rt. Hon. G.

Sorensen, R. W.

Herbison, Miss M.

Mellish, R. J.

Soskice, Rt. Hon. Sir Frank

Hewitson, Capt. M.

Messer, F.

Sparks, J. A.

Hobson, C. R.

Middleton, Mrs.

Steele, T.

Holman, P.

Mikardo, Ian.

Stewart, Michael (Fulham, E.)

Holmes, Horace (Hemsworth)

Mitchison, G. R.

Stokes, Rt. Hon. R. R.

Houghton, D.

Moeran, E. W.

Strachey, Rt. Hon. J.

Hoy, J.

Monslow, W.

Strauss, Rt. Hon. George (Vauxhall)

Hubbard, T.

Moody, A. S.

Stross, Dr. Barnett

Hudson, James (Ealing, N.)

Morgan, Dr. H. B

Summerskill, Rt. Hon. Edith

Hughes, Emrys (S. Ayrshire)

Morley, R.

Sylvester, G. O.

Hughes, Hector (Aberdeen, N.)

Morris, Percy (Swansea, W.)

Taylor, Bernard (Mansfield)

Hynd, H. (Accrington)

Mort, D. L.

Taylor, Robert (Morpeth)

Hynd, J. B. (Attercliffe)

Moyle, A.

Thomas, David (Aberdare)

Irvine, A. J. (Edge Hill)

Mulley, F. W.

Thomas, George (Cardiff)

Irving, W. J. (Wood Green)

Murray, J. D.

Thomas, Iorwerth (Rhondda, W.)

Isaacs, Rt. Hon. G. A.

Nally, W.

Thomas, Ivor Owen (Wrekin)

Janner, B.

Neal, Harold (Bolsover)

Thorneycroft, Harry (Clayton)

Jay, D. P. T.

Noel-Baker, Rt. Hon. P.

Thurtle, Ernest

Jeger, George (Goole)

O'Brien, T.

Timmons, J.

Jenkins, R. H.

Oldfield, W. H.

Tomney, F.

Johnson, James (Rugby)

Oliver, G. H.

Turner-Samuels, M.

Johnston, Douglas (Paisley)

Orbach, M.

Ungoed-Thomas, Sir Lynn

Jones, David (Hartlepool)

Padley, W. E.

Usborne, H.

Jones, Frederick Elwyn (West Ham, S.)

Paget, R. T.

Vernon, W. F.

Jones, Jack (Rotherham)

Paling, Rt. Hon. W. (Dearne Valley)

Viant, S. P.

Jones, William Elwyn (Conway)

Paling, Will T. (Dewsbury)

Wallace, H. W.

Keenan, W.

Pannell, T. C.

Watkins, T. E.

Kenyan, C.

Pargiter, G. A.

Webb, Rt. Hon. M. (Bradford. C.)

Key, Rt. Hon. C. W.

Parker, J.

Weitzman, D.

King, Dr. H. M.

Paton, J.

Wells, Percy (Faversham)

Kinghorn, Sqn. Ldr. E.

Pearson, A.

Wells, William (Warsall)

Kinley, J.

Peart, T. F.

West, D. G.

Lang, Gordon

Popplewell, E.

Wheatley, Rt. Hon. John (Edinb'gh, E.)

Lee, Frederick (Newton)

Porter, G.

White, Mrs. Eirene (E. Flint)

Lee, Miss Jennie (Cannock)

Price, Philips (Gloucestershire, W.)

While, Henry (Derbyshire, N. E.)

Lever, Harold (Cheetham)

Proctor, W. T.

Whiteley, Rt. Hon. W.

Lever, Leslie (Ardwick)

Pryde, D. J.

Wilcock, Group Capt. C. A. B.

Lewis, Arthur (West Ham, N.)

Pursey, Cmdr. H.

Wilkes, L.

Lewis, John (Bolton, W.)

Rankin, J.

Willey, Frederick (Sunderland)

Lindgren, G. S.

Rees, Mrs. D.

Willey, Octavius (Cleveland)

Lipton, Lt.-Col. M.

Reeves, J.

Williams, David (Neath)

Logan, D. G.

Reid, Thomas (Swindon)

Williams, Rev. Llywelyn (Abertillery)

Longden, Fred (Small Heath)

Reid, William (Camlachie)

Williams, Ronald (Wigan)

McAllister, G.

Rhodes, H.

Williams, Rt. Hon. Thomas (Don V'lly)

MacColl, J. E.

Richards, R.

Williams, W. T. (Hammersmith, S.)

McGhee, H. G

Roberts, Rt. Hon. A.

Wilson, Rt. Hon. Harold (Huyton)

McGovern, J.

Roberts, Goronwy (Caernarvonshire)

Winterbottom, Ian (Nottingham, C.)

McInnes, J.

Robertson, J. J. (Berwick)

Winterbottom, Richard (Brightside)

Mack, J. D.

Rogers, George (Kensington, N.)

Wise, F. J.

McKay, John (Wallsend)

Ross, William

Woodburn, Rt. Hon. A.

Mackay. R. W. G. (Reading, N.)

Royle, C.

Wyatt, W. L.

McLeavy, F.

Shawcross, Rt. Hon. Sir Hartley

Yates, V. F.

MacMillan, Malcolm (Western Islet)

Shinwell, Rt. Hon. E.

Younger, Hon. K.

McNeil, Rt. Hon. H.

Shurmer, P. L. E.

MacPherson, Malcolm (Stirling)

Silverman, Julius (Erdington)

TELLERS FOR THE AYES:

Mainwaring, W. H.

Silverman, Sydney (Nelson)

Mr. Wilkins and Mr. Kenneth

Mallalieu, E. L. (Brigg)

Simmons, C. J.

Robinson.

Mallalieu, J. P. W. (Huddersfield, E.)

Slater, J.

NOES

Aitken, W. T.

Black, C. W.

Carson, Hon. E.

Alport, C. J. M.

Boles, Lt.-Col. D. C. (Wells)

Channon, H.

Amery, Julian (Preston, N.)

Boothby, R.

Churchill, Rt. Hon. W. S.

Amory, Heathcoat (Tiverton)

Bossom, A. C.

Clarke, Col. Ralph (East Grinstead)

Arbuthnol, John

Boyd-Carpenter, J. A.

Clarke, Brig. Terence (Portsmouth, W.)

Ashton, H. (Chelmsford)

Boyle, Sir Edward

Clyde, J. L.

Assheton, Rt. Hon. R. (Blackburn, W.)

Bracken, Rt. Hon. B.

Colegate, A.

Astor, Hon. M. L.

Braine, B. R.

Conant, Maj. R. J. E.

Baker, P. A. D.

Braithwaite, Sir Albert (Harrow, W.)

Cooper, Son. Ldr. Albert (Ilford, S.)

Baldock, Lt.-Cmdr. J. M.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Cooper-Key, E. M.

Baldwin, A. E.

Bromley-Davenport, Lt.-Col. W

Corbett, Lt.-Col. Uvedale (Ludlow)

Banks, Col. C.

Brooke, Henry (Hampstead)

Craddock, Beresford (Spelthorne)

Baxter, A. B.

Browne, Jack (Govan)

Cranborne, Viscount

Beamish, Major Tufton

Buchan-Hepburn, P. G. T.

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

Bell, R. M.

Bullock, Capt. M.

Crosthwaite-Eyre, Col. O. E.

Bennett, Dr. Reginald (Gosport)

Bullus, Wing Commander E. E.

Crouch, R. F.

Bennett, William (Woodside)

Burden, F. A.

Crowder, Capt. John (Finchley)

Bevins, J. R. (Liverpool, Toxteth)

Butcher, H. W.

Crowder, Petre (Ruislip—Northwood)

Birch, Nigel

Butler, Rt. Hn. R. A. (Saffron Walden)

Cundiff, F. W.

Bishop, F. P.

Carr, Robert (Mitcham)

Cuthbert, W. N.

1896

1897

Davidson, Viscountess

Kerr, H. W. (Cambridge)

Raikes, H. V.

Davies, Nigel (Epping)

Kingsmill, Lt.-Col. W. H.

Rayner, Brig. R.

de Chair, Somerset

Lambert, Hon. G.

Redmayne, M.

De la Bère, R.

Lancaster, Col. C. G.

Remnant, Hon. P.

Deedes, W. F.

Langford-Holt, J.

Renton, D. L. M.

Digby, S. Wingfield

Law, Rt. Hon. R. K.

Roberts, Major Peter (Heeley)

Dodds-Parker, A. D.

Leather, E. H. C.

Robertson, Sir David (Caithness)

Donner, P. W.

Legge-Bourke, Maj E. A. H.

Robinson, Roland (Blackpool, S.)

Douglas-Hamilton, Lord Malcolm

Lennox-Boyd, A. T.

Robsorr-Srown, W.

Drayson, G. B.

Lindsay, Martin

Rodgers, John (Sevenoaks)

Dugdale, Maj. Sir Thomas (Richmond)

Linstead, H. N.

Roper, Sir Harold

Duncan, Capt. J. A. L.

Llewellyn, D.

Ropner, Col. L.

Dunglass, Lord

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Russell, R. S.

Duthie, W. S.

Lloyd, Maj. Guy (Renfrew, E.)

Ryder, Capt. R. E. D.

Eccles, D. M.

Lloyd, Selwyn (Wirral)

Salter, Rt. Hon. Sir Arthur

Eden, Rt. Hon. A.

Lockwood, Lt.-Col. J. C.

Sandys, Rt. Hon. D.

Elliot, Rt. Hon. W. E.

Longden, Gilbert (Herts, S. W.)

Shepherd, William

Erroll, F. J.

Low, A. R. W.

Smiles, Lt.-Col. Sir Walter

Fisher, Nigel

Lucas, Sir Jocelyn (Portsmouth, S.)

Smithers, Peter (Winchester)

Fort, R.

Lucas, P. B. (Brentford)

Smithers, Sir Waldron (Orpington)

Foster, John

Lucas-Tooth, Sir Hugh

Smyth, Brig. J. G. (Norwood)

Fraser, Hon. Hugh (Stone)

Lyttelton, Rt. Hon. O

Snadden, W. McN.

Fraser, Sir I. (Morecambe & Lonsdale)

McAdden, S. J.

Soames, Capt. C.

Fyfe, Rt. Hon. Sir David Maxwell

McCorquodale, Rt. Hon. M. S.

Spearman, A. C. M.

Gage, C. H.

Macdonald, Sir Peter (I. of Wight)

Spence, H. R. (Aberdeenshire, W.)

Galbraith, Cmdr. T. D. (Pollok)

Mackeson, Brig. H. R.

Spens, Sir Patrick (Kensington, S.)

Galbraith, T. G. D. (Hillhead)

McKibbin, A.

Stanley, Capt. Hon. Richard (N. Fylde)

Gammans, L. D.

McKie, J. H. (Galloway)

Stevens, G. P.

Garner-Evans, E. H. (Denbigh)

Maclay, Hon. John

Steward, W. A. (Woolwich, W.)

Gates, Maj. E. E.

Maclean, Fitzroy

Stewart, Henderson (Fife, E.)

Gomme-Duncan, Col. A.

MacLeod, Iain (Enfield, W.)

Stoddart-Scott, Col. M.

Gridley, Sir Arnold

MacLeod, John (Ross and Cromarty)

Storey, S.

Grimston, Hon. John (St. Albans)

Macmillan, Rt. Hon. Harold (Bromley)

Strauss, Henry (Norwich, S.)

Grimston, Robert (Westbury)

Macpherson, Major Niall (Dumfries)

Stuart, Rt. Hon. James (Moray)

Harden, J. R. E.

Maitland, Cmdr. J. W.

Summers, G. S.

Hare, Hon. J. H. (Woodbridge)

Manningham-Buller, R. E.

Sutcliffe, H.

Harris, Frederic (Croydon, N.)

Marlowe, A. A. H.

Taylor, Charles (Eastbourne)

Harris, Reader (Heston)

Marples, A. E.

Taylor, William (Bradford, N.)

Harvey, Air-Codre. A. V. (Macclesfield)

Marshall, Douglas (Bodmin)

Teeling, W.

Harvey, Ian (Harrow, E.)

Marshall, Sidney (Sutton)

Teevan, T. L.

Harvie-Watt, Sir George

Maude, Angus (Ealing S.)

Thomas, J. P. L. (Hereford)

Hay, John

Maude, John (Exeter)

Thompson, Kenneth Pugh (Walton)

Head, Brig. A. H.

Maudling, R.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Heald, Lionel

Medlicott, Brig. F.

Thorneycroft, Peter (Monmouth)

Heath, Edward

Mellor, Sir John

Thornton-Kemsley, Col. C. N.

Henderson, John (Cathcart)

Molson, A. H. E.

Thorp, Brig. R. A. F.

Hicks-Beach, Maj. W. W.

Monckton, Sir Walter

Tilney, John

Higgs, J. M. C.

Moore, Lt.-Col. Sir Thomas

Turner, H. F. I.

Hill, Dr. Charles (Lutort)

Morrison, John (Salisbury)

Turton, R. H.

Hill, Mrs. E. (Wythenshawe)

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

Tweedsmuir, Lady

Hinchingbrooke, Viscount

Mott-Radclyffe, C. E.

Vane, W. M. F.

Hirst, Geoffrey

Nabarro, G.

Vaughan-Morgan, J. K.

Hollis, M. C.

Nicholls, Harmar

Vosper, D. F.

Holmes, Sir Stanley (Harwich)

Nicholson, G.

Wakefield, Edward (Derbyshire, W.)

Hope, Lord John

Nield, Basil (Chester)

Wakefield, Sir Wavell (Marylebone)

Hopkinson, Henry

Noble, Cmdr. A. H. P.

Walker-Smith, D. C.

Hornsby-Smith, Miss P.

Nugent, G. R. H.

Ward, Hon. George (Worcester)

Horsbrugh, Rt. Hen Florence

Nutting, Anthony

Ward, Miss I. (Tynemouth)

Howard, Gerald (Cambridgeshire)

Oakshott, H. D.

Waterhouse, Capt. Rt. Hon. C.

Howard, Greville (St. Ives)

Odey, G. W.

Watkinson, H.

Hudson, Sir Austin (Lewisham, N.)

O'Neill, Rt. Hon. Sir Hugh

Webbe, Sir Harold

Hudson, Rt. Hon. Robert (Southport)

Ormsby-Gore, Hon. W. D.

Wheatley, Maj. M. J. (Poole)

Hudson, W. R. A (Hull, N.)

Orr, Capt. L. P. S.

While, Baker (Canterbury)

Kurd, A. R.

Orr-Ewing, Charles Ian (Hendon, N.)

Williams, Charles (Torquay)

Hutchinson, Geoffrey (Ilford, N.)

Orr-Ewing, Ian L. (Weston-super-Mare)

Williams, Gerald (Tonbridge)

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Osborne, C.

Williams, Sir Herbert (Croydon, E.)

Hutchison, Colonel James (Glasgow)

Peake, Rt. Hon. O

Wills, G.

Hyde, Lt.-Col. H. M.

Perkins, W. R. D.

Wilson, Geoffrey (Truro)

Hylton-Foster, H. B.

Peto, Brig. C. H. M

Winterton, Rt. Hon. Earl

Jennings, R.

Pickthorn, K.

Wood, Hon. R.

Johnson, Howard (Kemptown)

Pitman, I. J.

York, C.

Jones, A. (Hall Green)

Powell, J. Enoch

Joynson-Hicks, Hon. L. W.

Price, Henry (Lewisham, W.)

TELLERS FOR THE NOES:

Kaberry, D.

Prior-Palmer, Brig. O.

Mr. Drewe and Mr. Studholme

Profumo, J. D.

3.0 a.m.
Mr. Lyttelton: I beg to move, "That the Chairman do report Progress and ask leave to sit again."
My object in doing so is to draw attention to the fact that we have now
1898
reached Clause 28, which is extremely complicated and contains wide interference with the liberty of the subject in peace time. There appears to be no valid reason why this Clause should be discussed at this hour, there is plenty of Parliamentary

1899
time, and there is no pressing legislation.
Mr. Nally: The hearts and minds of all of us must support the Motion, and the poignant speech about the desirability of finishing at this hour, but there is still Government business to be accomplished. The overwhelming majority of hon. Members had made up their minds that we were going to be reasonably late tonight. I am hoping that we shall have from the Government Front Bench a short and frank answer. If we are not going to have an answer, but simply a Division, those of us who have been kept to this hour purely to fulfil the purposes of a political stunt—[Interruption]—by an Opposition Front Bench whose attendance at all-night Divisions since 1945 will not bear analysis—[Interruption]—I see no reason at all why we should not continue. [HON. MEMBERS: "Divide."] I and a number of my hon. Friends intend—[Interruption.]
The Chairman: I would request hon. Members to permit the hon. Gentleman to continue his speech.
Sir T. Moore: On a point of order. Surely one is allowed to applaud the hon. Member's speech?
Mr. Nally: I was not a Member of the House at the time, but I can remember being present when the hon. and gallant Member who made that interjection was being applauded from the other side for informing the House that Hitler was a statesman to be trusted.
Sir T. Moore: That is a lie.
The Chairman: I ask the hon. Gentleman to withdraw that remark.
Sir T. Moore: I will do anything you ask, Major Milner, but will you kindly tell me what redress I have when an hon. Member does tell a lie?
The Chairman: The hon. Member must withdraw his expression. There are other expressions which may indicate what he wishes to convey.
Sir T. Moore: As I said before, I am willing to do anything you ask, but would you kindly suggest an appropriate expression?
Mr. Nally: Perhaps some of the observations have escaped me. I did not hear
1900
a withdrawal, but I assume it has been made. We have Government business still to do, and hon. Members are reasonably alert. So far as my hon. Friends and I are concerned, within the limits of our powers as back benchers, we shall insist upon the Government carrying out what they have already announced to be their programme for today and tomorrow.
Mr. Churchill: This frivolous performance gave me the strange impression, perhaps not altogether inappropriate to the hour at which we are sitting, that we were listening to a sleep-talker. I would ask the Leader of the House to reply to the request that has been formally made to him by my right hon. Friend the Member for Aldershot (Mr. Lyttelton).
Little though I like His Majesty's Government or their composition—[Interruption]—my life has not been spent in endeavouring to win the love of the Minister of Defence—little though I like the composition or appearance of the present Government, I think it would be a definite setback if the present Leader of the House, the Home Secretary, or even the Prime Minister, who I see in his place, were to be replaced by the hon. Gentleman the Member for Bilston (Mr. Nally), who is taking advantage of this opportunity to act with a measure of independent authority which his Parliamentary stature in no way warrants.
Before we embark on this most important Clause, which we are sure it is impossible to take in view of the programme proposed to us this afternoon, I would ask the Leader of the House to consider carefully whether the progress made by the Government does not constitute a considerable harvest reaped during the hours we have sat.
It is now only 3 o'clock, and we could quite easily return to our dwellings—[HON. MEMBERS: "How?"] I think there is very little to be said for the argument about transport. After all, the political levy gives to Government supporters the means of acquiring an ample fund to make the necessary arrangements for vehicles. I had never seen in all my life such a crowd of vehicles at the House of Commons until I reached the days when the Socialist Government held power, and in that bygone period of which the hon. Gentleman spoke with so much force there used to be a handful of hansoms, four wheelers and a few carriages. In

1901
that respect it has not turned out so bad after all. I hope my suggestion about the use of the political levy will be carefully considered.
I am anxious that an answer should be given by the Home Secretary to the definite request which was made to the Government. What the Government proposed earlier in the day was so utterly absurd in this important debate and discussion. The right hon. Gentleman wanted to crush in Clauses 25, 26 and 27 before a quarter to 12. In addition, there were to be Clauses 29, 30 and 31. Obviously, so far from being generous, that was generous only in the sense that it reached such a low level of absurdity that it made it easy for the Opposition to take their decision, and in that respect we must be thankful to the right hon. Gentleman. I hope that he is going to respond to the request with his customary urbanity and that no frivolity or levity will be allowed to creep in by introducing topics that are no concern of our Parliamentary life.
Mr. Ede: I think it is quite obvious that the only answer that can be given to this motion is that the Government are unable to accept it. It is not the Government's intention to ask the House to rise at the hour we have now reached.
Hon. Members: Why not?
Mr. Kenyon: Because we cannot get home.
Mr. Ede: Having said this, and as long as it is so, we must consider Clause 28, much as I regret that we should have to take it at this time of the day.
3.15 a.m.
Mr. Joynson-Hicks: I submit that the new thesis propounded by the right hon. Gentleman is a matter of the most serious import. It seems that the Government are seeking to establish a precedent that if the Committee or the House sits after 11.45 p.m., it might as well continue to sit until 6 o'clock in the morning. This is a matter of importance, not only in connection with tonight's Business but beyond it, for it is laying down a timetable for the curtailment of Members' privileges and the arrangement of their Business. The whole purpose of the Committee is not to sanction the raising of taxes from the pockets of the people
1902
of this country until their representatives have had an opportunity of having their grievances redressed. Far from being able to discharge this duty in a free and proper manner, we are having our arrangements programmed for us through the middle of the night and are being subjected to a Guillotine as to the hours within which we may or may not conduct our debates. I submit that, quite apart from the arrangements for tonight's debate, this is a precedent which the Committee ought not to accept.
Mr. H. Strauss: In proceedings of the House in the 15 years or more during which I have been a Member it has been customary for the Government, in making their decision on a case of this kind, at least to purport to connect that decision with the public interest. It is something of a novelty for the Home Secretary to abandon the principle which he announced on previous occasions—that it was not desirable to take a Clause of the kind to which we shall now proceed—unless this Motion is accepted—except at the beginning of a day. He is now saying, not that it is in the public interest that we should continue, but that he has decided to disregard the public interest altogether for the personal and private convenience of Members, and to say that because a certain hour has been passed we shall therefore continue to some very much later hour, again fixed quite regardless of any consideration of public interest.
I do not pretend to be taken by surprise by this decision on the part of the Government. Their obvious interest is to discuss a Clause such as Clause 28 at a time when it is virtually certain that the proceedings of the Committee will not be reported. [HON. MEMBERS: "What about HANSARD?"] I mean, when they will not be reported in the Press; the proceedings will certainly be reported in HANSARD. [HON. MEMBERS: "What are you worried about?"] I am asked what I am worried about; I will gladly explain. I am worried that this House should so far lose its reputation that the Leader of the House can announce an important decision and can say, "I make this announcement on an arbitrary decision of the Socialist Party and without the slightest regard for any consideration of the public interest." That is a perfectly fair paraphrase of what he said.

1903
Not one single argument based on the public interest has been advanced for continuing this discussion now. The Government have no legislation announced which would prevent the whole of this Finance Bill from being properly and adequately discussed within reasonable hours. I thought it was characteristic, and perhaps even desirable, that the hon. Member for Bilston (Mr. Nally) should have given a command to the Government Front Bench, which, I am bound to say, he judged well, because they eagerly accepted his leadership. Whether that is a matter which will fill hon. Gentlemen opposite with pride when they read the hon. Gentleman's remarks in HANSARD tomorrow, or when they see that the Leader of the House has produced no argument for the course which he says he will follow. I rather doubt.
It is a rather serious matter that we should proceed, in all-night sitting following all-night sitting, to discuss the one important Measure of the Session, when economic matters of vast concern to the country have to be discussed, and that hon. Gentlemen opposite, for no reason that can be stated or suggested in debate, should say that they prefer those matters to be discussed, if at all, at an hour when they will not and cannot be reported in the public Press, the sole motive for the Government's decision being the personal, private convenience of hon. Gentlemen opposite.
Mr. Watkinson: When this Motion was previously before the Committee I thought I heard the Leader of the House say that if the Committee sat beyond roughly 12 o'clock it would continue to sit until the first public transport was available. I therefore thought that I should like to give him the opportunity of correcting that statement, because I am sure he did not intend to imply that the convenience of Members or the availability of public transport had established a new constitutional precedent in the Committee.
Mr. Boyd-Carpenter: I think that the only thing that was worse than the Home Secretary's decision was the reason he gave for it. I am perfectly certain that hon. Members on both sides of the Committee would, as they have in the past, have been prepared to debate important matters
1904
throughout the night had there been no reasonable alternative in the public interest to so doing. But the right hon. Gentleman did not, and indeed could not, pretend that there was any such public reason.
He knows perfectly well that there is adequate time available before the necessary termination of the Session to discuss at leisure, and to give proper analysis to, all the provisions of this Bill during the hours of daylight. He knows that perfectly well, but what he said was that it was his decision, founded, I understand, on some principle of personal convenience of some of his followers, that in no circumstances could the Committee, or I suppose the House, rise at the sort of hour at which we now are. That is an astonishing proposition.
In the past it has always been assumed that this House regulated its proceedings and its sittings for the sake of efficiently performing its public business. We have now had, for the first time, from the Leader of the House, the proposition that the whole machinery of Parliament is to be kept in operation for a totally different purpose—for the purpose of suiting the personal convenience of hon. Gentlemen opposite. Now, I do not underrate that personal convenience. If it can be served without detriment to the public interest, then by all manner of means let it be served; but it is, it seems to me, desperately and dangerously wrong to reverse the order of priority and to say that the public business must yield precedence to the personal convenience of any section of hon. Members.
It will surely be admitted beyond dispute that the careful discussion of complicated Clauses of the major financial Measure of the year is, at any rate, less easy at half-past three in the morning than it is at half-past three in the afternoon. Surely, if this House has any justification for its existence, it is that it should give to these important matters the closest and most efficient analysis. That consideration is being admittedly sacrificed by the Home Secretary to personal convenience. [An HON. MEMBER: "No."] An hon. Member says "No," but the Home Secretary says "Yes." We had experience only a few minutes ago of the diversity of leadership on the benches opposite. Now, apparently, a further centre of resistance is developing.

1905
We have had from the Government Front Bench a perfectly frank statement—and I give the Home Secretary credit for his frankness—that the reason for this is that it is inconvenient for certain hon. Members if the Committee rises at this hour. I do not believe that in the history of the House such a statement has ever before been made by a Leader of the House. It seems to me that if this Government had done nothing else of which to be ashamed, it ought to be deeply ashamed of having prostituted the procedure
of Parliament by subordinating public duty to private convenience. If hon. Members opposite cannot appreciate that shame, let me tell them that their constituents, when they get their chance, will show it to them.
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 292; Noes, 281.

Division No. 114.]

AYES

[3.28 a.m.

Acland, Sir Richard

Davies, Stephen (Merthyr)

Hudson, James (Ealing, N.)

Adams, Richard

de Freitas, Geoffrey

Hughes, Emrys (S. Ayrshire)

Albu, A. H.

Deer, G.

Hughes, Hector (Aberdeen, N.)

Alien, Arthur (Bosworth)

Delargy, H. J.

Hynd, H. (Accrington)

Allen, Scholefield (Crewe)

Dodds, N. N.

Hynd, J. B. (Attercliffe)

Anderson, Alexander (Motherwell)

Donnelly, D.

Irvine, A. J. (Edge Hill)

Anderson, Frank (Whitehaven)

Driberg, T. E. N.

Irving, W. J. (Wood Green)

Attlee, Rt. Hon. C. R.

Dugdale, Rt. Hon. John (W. Bromwich)

Isaacs, Rt. Hon. G. A.

Awbery, S. S.

Dye, S.

Janner, B.

Ayles, W. H.

Ede, Rt. Hon. J. C.

Jay, D. P. T.

Bacon, Miss Alice

Edelman, M.

Jeger, George (Goole)

Baird, J.

Edwards, John (Brighouse)

Jenkins, R. H.

Balfour, A.

Edwards, Rt. Hon. Ness (Caerphilly)

Johnson, James (Rugby)

Barnes, Rt. Hon. A. J.

Edwards, W. J. (Stepney)

Johnston, Douglas (Paisley)

Bartley, P.

Evans, Albert (Islington, S. W.)

Jones, David (Hartlepool)

Bellenger, Rt. Hon. F. J.

Evans, Edward (Lowestoft)

Jones, Frederick Elwyn (West Ham, S.)

Benn, Wedgwood

Evans, Stanley (Wednesbury)

Jones, Jack (Rotherham)

Benson, G.

Ewart, R.

Jones, William Elwyn (Conway)

Beswick, F.

Fernyhough, E.

Keenan, W.

Bevan, Rt. Hon. A. (Ebbw Vale)

Field, Capt. W. J.

Kenyon, C.

Bing, G. H. C.

Finch, H. J.

Key, Rt. Hon. C. W.

Blenkinsop, A.

Fletcher, Eric (Islington, E.)

King, Dr. H. M.

Blyton, W. R.

Follick, M.

Kinghorn, Sqn. Ldr. E.

Boardman, H.

Foot, M. M.

Kinley, J.

Booth, A.

Forman, J. C.

Lang, Gordon

Bottomley, A. G.

Fraser, Thomas (Hamilton)

Lee, Frederick (Newton)

Bowles, F. G. (Nuneaton)

Freeman, John (Watford)

Lee, Miss Jennie (Cannock)

Braddock, Mrs. Elizabeth

Freeman, Peter (Newport)

Lever, Harold (Cheetham)

Brook, Dryden (Halifax)

Gaitskell, Rt. Hon. H. T. N.

Lever, Leslie (Ardwick)

Brooks, T. J. (Normanton)

Ganley, Mrs. C. S.

Lewis, Arthur (West Ham, N.)

Broughton, Dr. A. D. D.

Gibson, C. W.

Lewis, John (Bolton, W.)

Brown, Rt. Hon. George (Belper)

Gilzean, A.

Lindgren, G. S.

Brown, Thomas (Ince)

Glanville, James (Consett)

Lipton, Lt.-Col. M.

Burke, W. A.

Gooch, E. G.

Logan, D. G.

Burton, Miss E.

Gordon-Walker, Rt. Hon. P. C.

Longden, Fred (Small Heath)

Butler, Herbert (Hackney, S.)

Greenwood, Anthony (Rossendale)

McAllister, G.

Callaghan, L. J.

Greenwood, Rt. Hn. Arthur (Wakefield)

MacColl, J. E.

Carmichael, J.

Grenfell, D. R.

McGhee, H. G.

Castle, Mrs. B. A.

Grey, C. F.

McGovern, J.

Champion, A. J.

Griffiths, David (Rother Valley)

McInnes, J.

Chetwynd, G. R.

Griffiths, Rt. Hon. James (Llanelly)

Mack, J. D.

Clunie, J.

Griffiths, William (Exchange)

McKay, John (Wallsend)

Cocks, F. S.

Gunter, R. J.

Mackay, R. W. G. (Reading, N.)

Coldrick, W.

Hale, Joseph (Rochdale)

McLeavy, F.

Collick, P.

Hall, Rt. Hon. Glenvil (Colne Valley)

MacMillan, Malcolm (Western Isles)

Collindridge, F.

Hall, John (Gateshead, W.)

McNeil, Rt. Hon. H.

Cook, T. F.

Hamilton, W. W.

MacPherson, Malcolm (Stirling)

Cooper, Geoffrey (Middlesbrough, W.)

Hannan, W.

Mainwaring, W. H.

Cooper, John (Deptford)

Hardman, D. R

Mallalieu, E. L. (Brigg)

Corbet, Mrs. Freda (Peckham)

Hargreaves, A.

Mallalieu, J. P. W. (Huddersfield, E.)

Cove, W. G.

Hastings, S.

Mann, Mrs. Jean

Craddock, George (Bradford, S.)

Hayman, F. H.

Manuel, A. C.

Crawley, A.

Henderson, Rt. Hon. Arthur (Tipton)

Marquand, Rt. Hon. H. A

Crosland, C. A. R.

Herbison, Miss M.

Mathers, Rt. Hon. G.

Crossman, R. H. S.

Hewitson, Capt. M.

Mellish, R. J.

Cullen, Mrs. A.

Hobson, C. R.

Messer, F.

Daines, P.

Holman, p.

Middleton, Mrs. L

Dalton, Rt. Hon. H.

Holmes, Horace (Hemsworth)

Mikardo, Ian.

Darling, George (Hillsborough)

Houghton, D.

Mitchison, G. R

Davies, A. Edward (Stoke, N.)

Hoy, J.

Moeran, E. W.

Davies, Harold (Leek)

Hubbard, T.

Monslow, W.

Moody, A. S.

Robens, Rt. Hon. A.

Tomney, F.

Morgan, Dr. H. B.

Roberts, Goronwy (Caernarvonshire)

Turner-Samuels, M.

Morley, R.

Robertson, J. J. (Berwick)

Ungoed-Thomas, Sir Lynn

Morris, Percy (Swansea, W.)

Robinson, Kenneth (St. Pancras, N.)

Usborne, H.

Mort, D. L.

Rogers, George (Kensington, N.)

Vernon, W. F.

Moyle, A.

Ross, William

Viant, S. P.

Mulley, F. W.

Royle, C.

Wallace, H. W.

Murray, J. D.

Shawcross, Rt. Hon. Sir Hartley

Watkins, T. E.

Nally, W.

Shinwell, Rt. Hon. E.

Webb, Rt. Hon. M. (Bradford, C.)

Neal, Harold (Bolsover)

Shurmer, P. L. E.

Weitzman, D.

Noel-Baker, Rt. Hon. P. J.

Silverman, Julius (Erdington)

Wells, Percy (Faversham)

O'Brien, T.

Silverman, Sydney (Nelson)

Wells, William (Watsalt)

Oldfield, W. H.

Simmons, C. J.

West, D. G.

Oliver, G. H.

Slater, J.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Orbach, M.

Smith, Ellis (Stoke, S.)

White, Mrs. Eirene (E. Flint)

Padley, W. E.

Smith, Norman (Nottingham, S.)

White, Henry (Derbyshire, N. E.)

Pagel, R. T.

Snow, J. W.

Whiteley, Rt. Hon. W.

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Sorensen, R. W.

Wilcook, Group Capt. C. A. B.

Paling, Will T. (Dewsbury)

Soskice, Rt. Hon. Sir Frank

Wilkes, L.

Pannell, T. C.

Sparks, J. A.

Wilkins, W. A.

Pargiter, G. A.

Steele, T.

Willey, Frederick (Sunderland)

Parker J.

Stewart, Michael (Fulham, E.)

Willey, Octavius (Cleveland)

Paton, J.

Stokes, Rt. Hon. R. R.

Williams, David (Neath)

Pearson, A.

Strachey, Rt. Hon. J.

Williams, Rev. Llywelyn (Abertillery)

Peart, T. F.

Strauss, Rt. Hon. George (Vauxhall)

Williams, Ronald (Wigan)

Porter, G.

Stross, Dr. Barnett

Williams, Rt. Hon. Thomas (Don V'lly)

Price, Philips (Gloucestershire, W.)

Summerskill, Rt. Hon. Edith

Williams, W. T. (Hammersmith, S.)

Proctor, W. T.

Sylvester, G. O.

Wilson, Rt. Hon. Harold (Huyton)

Pryde, D. J.

Taylor, Bernard (Mansfield)

Winterbottom, Ian (Nottingham, C.)

Pursey, Cmdr. H.

Taylor, Robert (Morpeth)

Winterbottom, Richard (Brightside)

Rankin, J.

Thomas, David (Aberdare)

Wise, F. J.

Rees, Mrs. D.

Thomas, George (Cardiff)

Woodburn, Rt. Hon. A.

Reeves, J.

Thomas, Iorwerth (Rhondda, WO

Wyatt, W. L.

Reid, Thomas (Swindon)

Thomas, Ivor Owen (Wrekin)

Yates, V. F.

Reid. William (Camlachie)

Thorneycroft, Harry (Clayton)

Younger, Rt. Hon.

Rhodes, H.

Thurtle, Ernest

Richards, R.

Timmons, J.

TELLERS FOR THE AYES:

Mr. Popplewell and Mr. Bowden

NOES

Aitken, W. T.

Churchill, Rt. Hon. W. S.

Galbraith, Cmdr. T. D. (Pollok)

Alport, C. J. M.

Clarke, Col. Ralph (East Grinstead)

Galbraith, T. G. D. (Hillhead)

Amery, Julian (Preston, N.)

Clarke, Brig. Terence (Portsmouth, W.)

Gammans, L. D.

Amory, Heathcoat (Tiverton)

Clyde, J. L.

Garner-Evans, E. H. (Denbigh)

Arbutfnot, John

Colegate, A.

Gates, Maj. E. E.

Ashton, H. (Chelmsford)

Conant, Maj. R. J. E.

Gomme-Duncan, Col. A.

Assheton, Rt. Hon. R. (Blackburn, W.)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Gridley, Sir Arnold

Astor, Hon. M. L.

Cooper-Key, E. M.

Grimston, Hon. John (St. Albans)

Baker, P. A. D.

Corbett, Lt.-Col. Uvedale (Ludtaw)

Grimston, Robert (Westbury)

Baldock, Lt.-Cmdr. J. M.

Craddock, Beresford (Spelthome)

Harden, J. R. E.

Baldwin, A. E.

Cranborne, Viscount

Hare, Hon. J. H. (Woodbridge)

Banks, Col. C.

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

Harris, Frederic (Croydon, N.)

Baxter, A. B.

Crosthwaite-Eyre, Col. O. E.

Harris, Reader (Heston)

Beamish, Maj. Tufton

Crouch, R. F.

Harvey, Air-Codre. A. V. (Macclesfield)

Bell, R. M.

Crowder, Capt. John (Finchiey)

Harvey, Ian (Harrow, E.)

Bennett, Dr. Reginald (Gosport)

Crowder, Petre (Ruislip—North wood)

Harvie-Walt, Sir George

Bennett, W. G. (Woodside)

Cundiff, F. W.

Hay, John

Kevins, J. R. (Liverpool, Toxteth)

Cuthbert, W. N.

Head, Brig. A. H.

Birch, Nigel

Davidson, Viscountess

Heald, Lionel

Bishop, F. P.

Davies, Nigel (Epping)

Henderson, John (Cathcart)

Black, C. W.

de Chair, Somerset

Hicks-Beach, Maj. W. W.

Boles, Lt.-Col. D. C. (Wells)

De la Bère, R.

Higgs, J. M. C.

Boothby, R.

Deedes, W. F.

Hill, Dr. Charles (Luton)

Bossom, A. C.

Dodds-Parker, A. D.

Hill, Mrs. E. (Wythenshawe)

Bowen, E. R. (Cardigan)

Donner, P. W.

Hinchingbrooke, Viscount

Boyd-Carpenter, J. A.

Douglas-Hamilton, Lord Malcolm

Hirst, Geoffrey

Boyle, Sir Edward

Drayson, G. B.

Hollis, M. C.

Bracken, Rt. Hon. B.

Drewe, C.

Holmes, Sir Stanley (Harwich)

Braine, B. R.

Dugdale, Maj. Sir Thomas (Richmond)

Hope, Lord John

Braithwaite, Sir Albert (Harrow, W.)

Duncan, Capt. J. A. L.

Hopkinson, Henry

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Dunglass, Lord

Hornsby-Smith, Miss P.

Bromley-Davenport, Lt.-Col. W

Duthie, W. S.

Horsbrugh, Rt. Hon. Florence

Brooke, Henry (Hampstead)

Eccles, D. M.

Howard, Gerald (Cambridgeshire)

Browne, Jack (Govan)

Eden, Rt. Hon. A.

Howard, Greville (St. Ives)

Buchan-Hepburn, P. G. T.

Elliot, Rt. Hon. W. E.

Hudson, Sir Austin (Lewisham, N.)

Bullock, Capt. M.

Erroll, F. J.

Hudson, Rt. Hon. Robert (Southport)

Bullus, Wing Commander E. E.

Fisher, Nigel

Hudson, W. R. A. (Hull, N.)

Burden, F. A.

Fort, R.

Hurd, A. R.

Butcher, H. W.

Foster, John

Hutchinson, Geoffrey (Ilford, N.)

Butler, Rt. Hn. R. A. (Saffron Walden)

Fraser, Hon. Hugh (Stone)

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Carr, Robert (Mitcham)

Fraser, Sir I. (Morecambe & Lonsdale)

Hutchison, Colonel James (Glasgow)

Carson, Hon. E.

Fyfe, Rt. Hon. Sir David Maxwell

Hyde, Lt.-Col. H. M.

Channon, H.

Gage, C. H.

Hylton-Foster, H. B.

1908

1909

Jennings, R.

Moore, Lt.-Col. Sir Thomas

Spence, H. R. (Aberdeenshire, W.)

Johnson, Howard (Kemptown)

Morrison, John (Salisbury)

Spans, Sir Patrick (Kensington, S.)

Jones, A. (Hall Green)

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

Stanley, Capt. Hon. Richard (N. Fylda)

Joynson-Hicks, Hon. L. W.

Mott-Radclyffe, C. E.

Stevens, G. P.

Kaberry, D.

Nabarro, G.

Steward, W. A. (Woolwich, W.)

Kerr, H. W. (Cambridge)

Nicholls, Harmar

Stewart, Henderson (Fife, E.)

Kingsmill, Lt.-Col. W. H.

Nicholson, G.

Stoddart-Scott, Col. M.

Lambert, Hon. G.

Nield, Basil (Chester)

Storey, S.

Lancaster, Col. C. G.

Noble, Cmdr. A. H. P.

Strauss, Henry (Norwich, S.)

Langford-Holt, J.

Nugent, G. R. H.

Stuart, Rt. Hon. James (Moray)

Law, Rt. Hon. R. K.

Nutting, Anthony

Studholme, H. G.

Leather, E. H. C.

Oakshott, H. D.

Summers, G. S.

Legge-Bourke, Maj. E. A. H.

Odey, G. W.

Sutcliffe, H.

Lennox-Boyd, A. T.

O'Neill, Rt. Hon. Sir Hugh

Taylor, Charles (Eastbourne)

Lindsay, Martin

Ormsby-Gore, Hon. W. D.

Taylor, William (Bradford, N.)

Linstead, H. N.

Orr, Capt. L. P. S.

Tee ling, W.

Llewellyn, D.

Orr-Ewing, Charles Ian (Hendon, N.)

Teevan, T. L.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Orr-Ewing, Ian L. (Weston-super-Mare)

Thomas, J. P. L. (Hereford)

Lloyd, Maj. Guy (Renfrew, E.)

Osborne, C.

Thompson, Kenneth Pugh (Walton)

Lloyd, Selwyn (Wirral)

Peake, Rt. Hon. O

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Lockwood, Lt.-Col. J. C.

Perkins, W. R. D.

Thorneycroft, Peter (Monmouth)

Longden, Gilbert (Herts, S. W.)

Peto, Brig. C. H. M.

Thornton-Kemsley, Col. C. N.

Low, A. R. W.

Pickthorn, K.

Thorp, Brig. R. A. F.

Lucas, Sir Jocelyn (Portsmouth, S.)

Pitman, I. J.

Tilney, John

Lucas, P. B. (Brentford)

Powell, J. Enoch

Turner, H. F. L.

Lucas-Tooth, Sir Hugh

Price, Henry (Lewisham, W.)

Turton, R. H.

Lyttelton, Rt. Hon. O.

Prior-Palmer, Brig. O.

Tweedsmuir, Lady

McAdden, S. J.

Profumo, J. D.

Vane, W. M. F.

McCorquodale, Rt. Hon. M. S.

Raikes, H. V.

Vaughan-Morgan, J. K.

Macdonald, Sir Peter (I of Wight)

Rayner, Brig. R

Vosper, D. F.

Mackeson, Brig. H. R.

Redmayne, M.

Wakefield, Edward (Derbyshire, W.)

McKibbin, A.

Remnant, Hon. P.

Wakefield, Sir Wavell (Marylebone)

McKie, J. H. (Galloway)

Renton, D. L. M.

Walker-Smith, D. C.

Maclay, Hon. John

Roberts, Maj. Peter (Heeley)

Ward, Hon. George (Worcester)

Maclean, Fitzroy

Robertson, Sir David (Caithness)

Ward, Miss I. (Tynemouth)

MacLeod, Iain (Enfield, W.)

Robinson, Roland (Blackpool, S.)

Waterhouse, Capt. Rt. Hon. C.

MacLeod, John (Ross and Cromarty)

Robson-Brown, W.

Watkinson, H.

Macmillan, Rt. Hon. Harold (Bromley)

Rodgers, John (Sevenoaks)

Webbe, Sir H. (London & Westminster)

Macpherson, Major Niall (Dumfries)

Roper, Sir Harold

Wheatley, Maj. M. J. (Poole)

Maitland, Cmdr. J. W.

Ropner, Col. L.

White, Baker (Canterbury)

Manningham-Buller, R. E.

Russell, R. S.

Williams, Charles (Torquay)

Marlowe, A. A. H.

Ryder, Capt. R. E. D.

Williams, Gerald (Tonbridge)

Marples, A. E.

Salter, Rt. Hon. Sir Arthur

Williams, Sir Herbert (Croydon, E.)

Marshall, Douglas (Bodmin)

Sandys, Rt. Hon. D.

Wills, G.

Marshall, Sidney (Sutton)

Shepherd, William

Wilson, Geoffrey (Truro)

Maude, Angus (Ealing, S.)

Smiles, Lt.-Col. Sir Walter

Winterton, Rt. Hon. Earl

Maude, John (Exeter)

Smithers, Peter (Winchester)

Wood, Hon. R.

Maudling, R.

Smithers, Sir Waldron (Orpington)

York, C.

Medlicott, Brig. F.

Smyth, Brig. J. G. (Norwood)

Mellor, Sir John

Snadden, W. McN.

TELLERS FOR THE NOES:

Molson, A. H. E.

Soames, Capt. C.

Mr. Digby and Mr. Heath.

Monckton, Sir Walter

Spearman, A. C. M.

Question put accordingly, "That the Chairman do report Progress, and ask leave to sit again."
The Chairman: I must warn the Committee that the Division bells are out of order. I will give instructions that the
messengers do inform hon. Members in all parts of the House when Divisions are called.
The Committee divided: Ayes, 281; Noes, 291.

Division No. 115.]

AYES

[3.39 a.m.

Aitken, W. T.

Birch, Nigel

Bullus, Wing Commander E. E.

Alport, C. J. M.

Bishop, F. P.

Burden, F. A.

Amery, Julian (Preston, N.)

Black, C. W.

Butcher, H. W.

Amory, Heathcoat (Tiverton)

Boles, Lt.-Col. D. C. (Wells)

Butler, Rt. Hn. R. A. (Saffron Walden)

Arbuthnot, John

Boolhby, R.

Carr, Robert (Mitcham)

Ashton, H. (Cheimsford)

Bossom, A. C.

Carson, Hon. E.

Assheton, Rt. Hon. R. (Blackburn, W.)

Bowen, E. R. (Cardigan)

Channon, H.

Astor, Hon. M. L.

Boyd-Carpenter, J. A

Churchill, Rt. Hon. W. S.

Baker, P. A. D.

Boyle, Sir Edward

Clarke, Col. Ralph (East Grinstead)

Baldock, Lt.-Cmdr. J. M.

Bracken, Rt. Hon. B.

Clarke, Brig. Terence (Portsmouth, W.)

Baldwin, A. E.

Braine, B. R.

Clyde, J. L.

Banks, Col. C.

Braithwaite, Sir Albert (Harrow, W.)

Colegate, A.

Baxter, A. B.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Beamish, Major Tufton

Bromley-Davenport, Lt.-Col. W.

Cooper-Key, E. M.

Bell, R. M.

Brooke, Henry (Hampstead)

Corbelt, Lt.-Col. Uvedale (Ludlow)

Bennett, Dr. Reginald (Gosport)

Browne, Jack (Govan)

Craddock, Beresford (Spelthorne)

Bonnet, William (Woodside)

Buchan-Hepburn, P. G. T.

Cranborne, Viscount

Bevins, J. R. (Liverpool, Toxteth)

Bullock, Capt. M.

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

Crosthwaite-Eyre, Col. O. E.

Jones, A. (Hall Green)

Profumo, J. D.

Crouch, R. F.

Joynson-Hicks, Hon. L. W.

Raikes, H. V.

Crowder, Capt. John (Finchley)

Kaberry, D.

Rayner, Brig. R.

Crowder, Petre (Ruislip—Northwood)

Kerr, H. W. (Cambridge)

Redmayne, M.

Cundiff, F. W.

Kingsmill, Lt.-Col. W. H.

Remnant, Hon. P.

Cuthbert, W. N.

Lambert, Hon. G.

Renton, D. L. M.

Davidson, Viscountess

Lancaster, Col. C. G.

Roberts, Maj. Peter (Heeley)

Davies, Nigel (Epping)

Langford-Holt, J.

Robertson, Sir David (Caithness)

de Chair, Somerset

Law, Rt. Hon. R. K.

Robinson, Roland (Blackpool, S.)

De la Bère, R.

Leather, E. H. C.

Robson-Brown, W.

Deedes, W. F.

Legge-Bourke, Maj. E. A. H.

Rodgers, John (Sevenoaks)

Digby, S. Wingfield

Lennox-Boyd, A. T.

Roper, Sir Harold

Dodds-Parker, A. D.

Lindsay, Martin

Ropner, Col. L.

Donner, P. W.

Linstead, H. N.

Russell, R. S.

Douglas-Hamilton, Lord Malcolm

Llewellyn, D.

Ryder, Capt. R. E. D.

Drayson, G. B.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Salter, Rt. Hon. Sir Arthur

Drewe, C.

Lloyd, Maj. Guy (Renfrew, E.)

Sandys, Rt. Hon. D.

Dugdale, Maj. Sir Thomas (Richmond)

Lloyd, Selwyn (Wirral)

Shepherd, William

Duncan, Capt. J. A. L.

Lockwood, Lt.-Col. J. C.

Smiles, Lt.-Col. Sir Walter

Dunglass, Lord

Longden, Gilbert (Herts, S. W.)

Smithers, Peter (Winchester)

Duthie, W. S.

Low, A. R. W.

Smithers, Sir Waldron (Orpington)

Eccles, D. M.

Lucas, Sir Jocelyn (Portsmouth, S.)

Smyth, Brig. J. G. (Norwood)

Eden, At. Hon. A.

Lucas, P. B. (Brentford)

Snadden, W. McN.

Elliot, Rt. Hon. W. E.

Lucas-Tooth, Sir Hugh

Soames, Capt. C.

Erroll, F. J.

Lyttelton, Rt. Hon. O.

Spearman, A. C. M.

Fisher, Nigel

McAdden, S. J.

Spence, H. R. (Aberdeenshire, W.)

Fort, R.

McCorquodale, Rt. Hon. M. S.

Spens, Sir Patrick (Kensington, S.)

Foster, John

Macdonald, Sir Peter (I. of Wight)

Stanley, Capt. Hon. Richard (N. Fylde)

Fraser, Hon. Hugh (Stone)

Mackeson, Brig. H. R.

Stevens, G. P.

Fraser, Sir I. (Morecambe & Lonsdale)

McKibbin, A.

Steward, W. A. (Woolwich, W.)

Fyfe, Rt. Hon. Sir David Maxwell

McKle, J. H. (Galloway)

Stewart, Henderson (Fife, E.)

Gage, C. H.

Maclay, Hon. John

Stoddart-Scott, Col. M.

Galbraith, Cmdr. T. D. (Pollok)

Maclean, Fitzroy

Storey, S.

Gamrnans, L. D.

MacLeod, Iain (Enfield, W.)

Strauss, Henry (Norwich, S.)

Garner-Evans, E. H. (Denbigh)

MacLeod, John (Ross and Cromarty)

Stuart, Rt. Hon. James (Moray)

Gates, Maj. E. E.

Macmillan, Rt. Hon. Harold (Bromley)

Studholme, H. G.

Gomme-Dunoan, Col. A.

Macpherson, Major Niall (Dumfries)

Summers, G. S.

Gridley, Sir Arnold

Maitland, Cmdr. J. W.

Sutcliffe, H.

Grimston, Hon. John (St. Albans)

Manningham-Buller, R. E.

Taylor, Charles (Eastbourne)

Grimston, Robert (Westbury)

Marlowe, A. A. H.

Taylor, William (Bradford, N.)

Harden, J. R. E.

Marples, A. E.

Teeling, W.

Hare, Hon. J. H. (Woodbridge)

Marshall, Douglas (Bodmin)

Teevan, T. L.

Harris, Frederic (Croydon, N.)

Marshall, Sidney (Sutton)

Thomas, J. P. L. (Hereford)

Harris, Reader (Heston)

Maude, Angus (Ealing S.)

Thompson, Kenneth Pugh (Walton)

Harvey, Air-Codre. A. V. (Macclesfield)

Maude, John (Exeter)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Harvey, Ian (Harrow, E.)

Maudling, R.

Thorneycroft, Peter (Monmouth)

Harvie-Watt, Sir George

Medlicott, Brig. F.

Thornton-Kemsley, Col. C. N.

Hay, John

Mellor, Sir John

Thorp, Brig. R. A. F.

Head, Brig. A. H.

Molson, A. H. E.

Tilney, John

Heald, Lionel

Monckton, Sir Walter

Turner, H. F. L.

Heath, Edward

Moore, Lt.-Col. Sir Thomas

Turton, R. H.

Henderson, John (Cathcart)

Morrison, John (Salisbury)

Tweedsmuir, Lady

Hicks-Beach, Maj. W. W.

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

Vane, W. M. F.

Higgs, J. M. C.

Mott-Radclyffe, C. E.

Vaughan-Morgan, J. K.

Hill, Dr. Charles (Lutott)

Nabarro, G.

Vosper, D. F.

Hill, Mrs. E. (Wythenshawe)

Nicholls, Harmar

Wakefield, Edward (Derbyshire, W.)

Hinchingbrooke, Viscount

Nicholson, G.

Wakefield, Sir Wavell (Marylebone)

Hirst, Geoffrey

Nield, Basil (Chester)

Walker-Smith, D. C.

Hollis, M. C.

Noble, Cmdr. A. H. P.

Ward, Hon. George (Worcester)

Holmes, Sir Stanley (Harwich)

Nugent, G. R. H.

Ward, Miss I. (Tynemourh)

Hope, Lord John

Nutting, Anthony

Waterhouse, Capt. Rt. Hon. C.

Hopkinson, Henry

Oakshott, H. D.

Watkinson, H.

Hornsby-Smith, Miss P.

Odey, G. W.

Webbe, Sir H. (London & Westminster)

Horsbrugh, Rt. Hon. Florence

O'Neill, Rt. Hon. Sir Hugh

Wheatley, Maj. M. J. (Poole)

Howard, Gerald (Cambridgeshire)

Ormsby-Gore, Hon. W. D.

White, Baker (Canterbury)

Howard, Greville (St. Ives)

Orr, Capt. L. P. S.

Williams, Charles (Torquay)

Hudson, Sir Austin (Lewisham, N.)

Orr-Ewing, Charles Ian (Hendon, N.)

Williams, Gerald (Tonbridge)

Hudson, Rt. Hon. Robert (Southport)

Orr-Ewing, Ian L. (Weston-super-Mara)

Williams, Sir Herbert (Croydon, E.)

Hudson, W. R. A. (Hull, N.)

Osborne, C.

Wills, G.

Hurd, A. R.

Peake, Rt. Hon. O.

Wilson, Geoffrey (Truro)

Hutchkison, Geoffrey (Ilford, N.)

Perkins, W. R. D.

Winterton, Rt. Hon. Earl

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Peto, Brig. C. H. M.

Wood, Hon. R.

Hutchison, Colonel James (Glasgow)

Pickthorn, K.

York, C.

Hyde, Lt.-Col. H. M.

Pitman, I. J.

Hylton-Foster, H. B.

Powell, J. Enoch

TELLERS FOR THE AYES:

Jennings, R.

Price, Henry (Lewisham, W.)

Major Conant and

Johnson, Howard (Kemptown)

Prior-Palmer, Brig. O.

Mr. T. G. D. Galbraith.

NOES

Acland, Sir Richard

Allen, Scholefield (Crewe)

Awbery, S. S.

Adams, Richard

Anderson, Alexander (Motherwell)

Ayles, W. H.

Albu, A. H.

Anderson, Frank (Whitehaven)

Bacon, Miss Alice

Allen, Arthur (Bosworth)

Attlee, Rt. Hon. C. R.

Baird, J.

1912

1913

Balfour, A.

Greenwood, Anthony (Rossendale)

Monslow, W.

Barnes, Rt. Hon. A. J.

Greenwood, Rt. Hn. Arthur (Wakefield)

Moody, A. S.

Bartley, P.

Grenfell, D. R.

Morgan, Dr. H. B.

Bellenger, Rt. Hon. F. J.

Grey, C. F.

Morley, R.

Bonn, Wedgwood

Griffiths, David (Bother Valley)

Morris, Percy (Swansea, W.)

Benson, G.

Griffiths, Rt. Hon. James (Llanelly)

Mort, D. L.

Beswick, F.

Griffiths, William (Exchange)

Moyle, A.

Sevan, Rt. Hon. A. (Ebbw Vale)

Gunter, R. J.

Mulley, F. W.

Bing, G. H. C.

Hale, Joseph (Rochdale)

Murray, J. D.

Blenkinsop, A.

Hall, Rt. Hon. Glenvil (Colns Valley)

Nally, W.

Blyton, W. R.

Hall, John (Gateshead, W.)

Neal, Harold (Bolsover)

Boardman, H.

Hamilton, W. W.

Noel-Baker, Rt. Hon. P. J.

Booth, A.

Hannan, W.

O'Brien, T.

Bottomley, A. G.

Hardman, D. R.

Oldfield, W. H.

Bowden, H. W.

Hargreaves, A.

Oliver, G. H.

Bowles, F. G. (Nuneaton)

Hastings, S.

Orbach, M.

Braddock, Mrs. Elizabeth

Hayman, F. H.

Padley, W. E.

Brook, Dryden (Halifax)

Henderson, Rt. Hon. Arthur (Tipton)

Paget, R. T.

Brooks, T. J. (Normanton)

Herbison, Miss M.

Paling, Rt. Hon. Wilfred (Dearne Vally)

Broughton, Dr. A. D. D.

Hewitson, Capt. M.

Paling, Will T. (Dewsbury)

Brown, Rt. Hon. George (Belper)

Hobson, C. R.

Panned, T. C.

Brown, Thomas (Ince)

Holman, P.

Pargiter, G. A.

Burke, W. A.

Holmes, Horace (Hemsworth)

Parker, J.

Burton, Miss E.

Houghton, D.

Paton, J.

Butler, Herbert (Hackney, S.)

Hoy, J.

Pearson, A.

Callaghan, L. J.

Hubbard, T.

Peart, T. F.

Carmichael, J.

Hudson, James (Ealing, N.)

Porter, G.

Castle, Mrs. B. A.

Hughes, Emrys (S. Ayrshire)

Price, Philips (Gloucestershire, W.)

Champion, A. J.

Hughes, Hector (Aberdeen, N.)

Proctor, W. T.

Chetwynd, G. R.

Hynd, H. (Accrington)

Pryde, D. J.

Clunie, J.

Hynd, J. B. (Attercliffe)

Pursey, Cmdr. H.

Cocks, F. S.

Irvine, A. J. (Edge Hill)

Rankin, J.

Coldrick, W.

Irving, W. J. (Wood Green)

Rees, Mrs. D.

Colliok, P.

Isaacs, Rt. Hon. G. A.

Reeves, J.

Collindridge, F.

Janner, B.

Reid, Thomas (Swindon)

Cook, T. F.

Jay, D. P. T.

Reid, William (Camlachie)

Cooper, Geoffrey (Middlesbrough, W.)

Jeger, George (Goole)

Rhodes, H.

Cooper, John (Deptford)

Jenkins, R. H.

Richards, R.

Corbet, Mrs. Freda (Peckham)

Johnson, James (Rugby)

Robens, Rt. Hon. A.

Cove, W. G.

Johnston, Douglas (Paisley)

Roberts, Goronwy (Caernarvonshire)

Craddock, George (Bradford, S.)

Jones, David (Hartlepool)

Robertson, J. J. (Berwick)

Crawley, A.

Jones, Frederick Elwyn (West Ham, S.)

Robinson, Kenneth (St. Pancras, N.)

Crosland, C. A. R.

Jones, Jack (Rotherham)

Rogers, George (Kensington, N.)

Crossman, R. H. S.

Jones, William Elwyn (Conway)

Ross, William

Cullen, Mrs. A.

Keenan, W.

Shawcross, Rt. Hon. Sir Hartley

Daines, P.

Kenyon, C.

Shinwell, Rt. Hon. E.

Dalton, Rt. Hon. H.

Key, Rt. Hon. C. W.

Shurmer, P. L. E.

Darling, George (Hillsborough)

King, Dr. H. M.

Silverman, Julius (Erdington)

Davies, A. Edward (Stoke, N.)

Kinghorn, Sqn. Ldr. E.

Silverman, Sydney (Nelson)

Davies, Harold (Leek)

Kinley, J.

Simmons, C. J.

Davies, Stephen (Merthyr)

Lang, Gordon

Slater, J.

de Freitas, Geoffrey

Lee, Frederick (Newton)

Smith, Ellis (Stoke, S.)

Deer, G.

Lee, Miss Jennie (Cannock)

Smith, Norman (Nottingham, S.)

Delargy, H. J.

Lever, Harold (Cheetham)

Snow, J. W.

Dodds, N. N.

Lever, Leslie (Ardwick)

Sorensen, R. W.

Donnelly, D.

Lewis, Arthur (West Ham, N.)

Soskice, Rt. Hon. Sir Frank

Driberg, T. E. N.

Lewis, John (Bolton, W.)

Sparks, J. A.

Dugdale, Rt. Hon. John (W. Bromwich)

Lindgren, G. S.

Steele, T.

Dye, S.

Lipton, Lt.-Col. M.

Stewart, Michael (Fulham, E.)

Ede, Rt. Hon. J. C.

Logan, D. G.

Stokes, Rt. Hon. R. R.

Edelman, M.

Longden, Fred (Small Heath)

Strachey, Rt. Hon. J.

Edwards, John (Brighouse)

McAllister, G.

Strauss, Rt. Hon. George (Vauxhall)

Edwards, Rt. Hon. Ness (Caerphlliy)

MacColl, J. E.

Stross, Dr. Barnett

Edwards, W. J. (Stepney)

McGhee, H. G.

Summerskill, Rt. Hon. Edith

Evans, Albert (Islington, S. W.)

McGovern, J.

Sylvester, G. O.

Evans, Edward (Lowestoft)

McInnes, J.

Taylor, Bernard (Mansfield)

Evans, Stanley (Wednesbury)

Mack, J. D.

Taylor, Robert (Morpeth)

Ewart, R.

McKay, John (Wallsend)

Thomas, David (Aberdare)

Fernyhough, E.

Mackay, R. W. G. (Reading, N.)

Thomas, George (Cardiff)

Field, Capt. W. J.

McLeavy, F.

Thomas, Iorwerth (Rhondda, W.)

Finch, H. J.

MacMillan, Malcolm (Western Isles)

Thomas, Ivor Owen (Wrekin)

Fletcher, Eric (Islington, E.)

McNeil, Rt. Hon. H.

Thorneycroft, Harry (Clayton)

Follick, M.

MacPherson, Malcolm (Stirling)

Thurtle, Ernest

Foot, M. M.

Mainwarig, W. H.

Timmons, J.

Forman, J. C.

Mallalieu, E. L. (Brigg)

Tomney, F.

Fraser, Thomas (Hamilton)

Mallalieu, J. P. W. (Huddersfield, E.)

Turner-Samuels, M.

Freeman, John (Watford)

Mann, Mrs. Jean

Ungoed-Thomas, Sir Lynn

Freeman, Peter (Newport)

Manuel, A. C.

Usbarne, H.

Gaitskell, Rt. Hon. H. T. N.

Marquand, Rt. Hon. H. A.

Vernon, W. F.

Ganley, Mrs. C. S.

Mellish, R. J.

Viant, S. P.

Gibson, C. W.

Messer, F.

Wallace, H. W.

Gilzean, A.

Middleton, Mrs. L.

Watkins, T. E.

Glanville, James (Cornell)

Mikardo, Ian.

Webb, Rt. Hon. M. (Bradford, C.)

Gooch, E. G.

Mitchlson, G. R.

Weitzman, D.

Gordon-Walker, Rt. Hon. P. C.

Moeran, E. W.

Wells, Percy (Faversham)

1914

1915

Wells, William (Walsall)

Willey, Frederick (Sunderland)

Winterbottom, Richard (Brightside)

West, D. G.

Willey, Octavius (Cleveland)

Wise, F. J.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Williams, David (Neath)

Woodburn, Rt. Hon. A.

While, Mrs. Eirene (E. Flint)

Williams, Rev. Llywelyn (Abertillery)

Wyatt, W. L.

White, Henry (Derbyshire, N. E.)

Williams, Ranald (Wigan)

Yates, V. F.

Whiteley, Rt. Hon. W.

Williams, Rt. Hon. Thomas (Don V'lly)

Younger, Rt. Hon. K.

Wilcock, Group Capt. C. A. B.

Williams, W. T. (Hammersmith, S.)

Wilkes, L.

Wilson, Rt. Hon. Harold (Huyton)

TELLERS FOR THE NOES:

Wilkins, W. A.

Winterbottom, Ian (Nottingham, C.)

Mr. Popplewell and Mr. Royle.

The Chairman: I should notify the Committee that the Division bells are out of order. I have instructed the messengers and the Serjeant-at-Arms to inform hon. Members and call out "Division!" when a Division is called.
The Minister of Works (Mr. G. Brown): They are working again, Major Milner.
The Chairman: I am informed by the Minister of Works that they are on again.
Mr. Churchill: Might not the House have been informed of that fact before the decision was taken, because it certainly might have made a difference to the decision if the machinery of the House has broken down under the strain put upon it?—[Interruption.]—On a point of order, might I ask the Minister whether we could be informed what time it was known that this was broken down? Is it not rather a serious matter that Members should not have the bells ringing in the regular way?
The Chairman: I think the right hon. Gentleman was not present in the House, the moment I was notified—I assume it was on the authorities of the House knowing the bells were off—I did inform the Committee, and I did so before appointing Tellers. It was not possible to do so at any earlier moment.
Mr. Churchill: I should be very churlish if I did not make my acknowledgment to you, Major Milner.
Mr. Logan: It is not without precedent. The wires have been cut in the House before today and Business went on.
Mr. Somerset de Chair: Is it not difficult to take our Business at this time, and if in addition the bells break down is it not making it extremely difficult?

Clause 28.—(TRANSACTIONS DESIGNED TO AVOID LIABILITY TO THE PROFITS TAX.)
The Chairman: Mr. Eccles.
Mr. Logan: On a point of order. I listened to the earnest appeal made by the
1916
hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and I thought for the convenience of the Committee, seeing that there are 21 Amendments to Clause 28, it would expedite the business if they could be taken together.
The Chairman: I wish they could, but I am afraid that that is not possible.
Mr. Eccles: I beg to move, in page 20, line 29, to leave out from "where," to "may," in line 33, and to insert:
"any transaction is not a bona fide commercial transaction and has as its main purpose or one of its main purposes, the avoidance or reduction of liability to the profits tax, the Commissioners."
This Amendment in the names of my right hon. Friend and hon. Friends is fundamental to this horrid Clause. I regret having to discuss it at this time in the morning but I will try to make my argument as clear as I can. As it stands, the Clause is quite unacceptable to us. We shall try to amend it. We shall listen to the Government's arguments, but I am doubtful whether anything respectable can be made out of such a bad beginning.
The drafting of the Clause is very complicated, but its main purpose is clear. Perhaps it would be for the convenience of the Committee if I tried to put it very shortly. In subsection (1) the Commissioners of Inland Revenue are given power, at their discretion, to make an assessment to Profits Tax for an amount which they think the taxpayer would have paid had he conducted his business in a manner which the Commissioners think he would have done had he not had avoidance of tax in mind. To make matters worse, under subsection (3), when the Commissioners consider that a taxpayer has arranged his business with the result that his liability to tax has been reduced, without further ado they may assume that his motive was to avoid tax.
The purpose of this Amendment is to limit and define these powers, which we consider are far too wide. As the Amendment goes to the root of the Clause the Committee may allow me to begin the

1917
argument by some reference to the fundamental issues of tax-evasion. Our ideas on why crimes are committed ought to influence the nature of the penalties we prescribe. Taxation is now so monstrously high that only prigs and humbugs will manifest surprise that a growing number of citizens should twist and turn, this way and that, to escape the Chancellor's net.
All taxpayers are human, and many of them are no worse than the monkey in the zoo on whose cage the notice reads "This animal has a bad disposition. When he is attacked he defends himself." So does the taxpayer when he is attacked by a Government which fails even to provide a groundnut for £36 millions of his money.
Mrs. Mann: Is the hon. Gentleman likening the taxpayer to a monkey?
Mr. Eccles: I said the taxpayer was no worse in one respect. None the less, we agree that certain taxpayers have effected transactions which are so nakedly for the purpose of evading tax that the Government should have some powers in reserve to go after them.
"Evasion" is a much better word than "avoidance," which is used here. There is a significant difference between these two words. A man has a right to avoid tax, but if he deliberately evades it, that is another matter altogether. If, when I have made this speech, I leave the Chamber and drink a glass of water instead of a cup of tea I shall avoid tax, but the exercise of that choice cannot be called a crime. But if I sneak into the Festival of Britain without paying the gate money, that would be evading tax and I should be hauled up. Using that example to show what would happen in company practice if this Clause goes through, the Commissioners would have power, not to force me to drink tea, but to tax me for drinking water.
I do not like the word "avoidance" in the Bill, and at a later stage I hope my hon. Friends may support an Amendment to substitute for it "evasion." Even if all our Amendments are accepted, the granting of the powers asked for in this Clause would be a most regrettable act, which we should like to see repealed as soon as circumstances permit, that is, as soon as the burden of taxation—which is the
1918
father and mother of evasion—can be reduced.
4.0 a.m.
The Attorney-General is sure to ask why we are objecting to a Clause which is modelled on Sections in the 1941 and 1944 Finance Acts designed to deal with evasion of E.P.T. We do not accept the E.P.T. legislation as a precedent. When it was introduced by the Coalition Government, they declared that the need for such powers arose from the fact that E.P.T. was a new and temporary tax. Sir Kingsley Wood made that perfectly clear. In a more general way, it can be said that many restrictions on personal rights and liberties are accepted in war for the precise purpose of carrying the battle to a victory which will ensure the return of those very same rights and liberties.
Far too often the Labour Government have relied on the conditions of Hitler's war as a model for their Socialist Utopia. Time and again they have extended wartime Measures into peace and got away with it. In our opinion all controls and discretionary powers, tolerated when life itself was at stake, should be most jealously reviewed and most reluctantly continued in peace. Therefore we reject the parallel with E.P.T. legislation and propose to leave out the first words of the Clause. As it stands, subsection (1) begins:
"Where the Commissioners are of opinion …"
and goes on to say that when certain transactions have been effected for the purpose of avoiding tax, they may make the taxpayer pay as much as they think he ought to have paid.
The subsection goes too far in two respects. First of all, it is left to the Commissioners' discretion, to their opinion, to decide when transactions are unlawful. The present Lord Chancellor used a phrase which struck me very much when, as Solicitor-General, he was defending the Clause in which these powers were first brought forward in relation to E.P.T. Lord Jowitt said:
"It is a difficult thing to leave anything to a person's discretion, because, once you do so, you leave it also to his indiscretion."—[OFFICIAL REPORT: 17th June, 1941; Vol. 372, c. 607.]
Colonel Gomme-Duncan: Could my hon. Friend say on which side the Lord Chancellor was at that time?
Mr. Eccles: He was a member of the Coalition Government and the noble Lord was using those words in relation to the humble taxpayer, and, of course, he was a Socialist at that time. I am using these words as a Conservative in relation to the Executive, about the Commissioners of the Inland Revenue, because, however careful and wise these gentlemen may be, it is wrong in principle to leave so much to their discretion.
It would be bad enough if we gave such powers to a Minister, who at least would be responsible to the House; and if we thought he abused his powers we could go after him. But to give those powers to the Commissioners, that cloistered body of Torquemadas, is altogether wrong, because it is the facts and not the motives which ought to be examined. Therefore, we propose in our Amendment to leave out the words, "the Commissioners are of opinion" and thus to make it a question of fact whether or not the transactions to be adjusted fall within the definition of unlawful acts.
In the second place, we wish to define more clearly what are to be unlawful transactions. We propose to insert the words on the Order Paper, which I have already read out. These words carry out what we believe to be the intention of the Government. They cannot want to adjust bona fide commercial transactions. I challenge the right hon. learned Gentleman the Attorney-General to say that the Government are aiming at anything other than deliberate evasion. There is a precedent for our Amendment and it will be found in Section 18 of the 1936 Finance Act. The purpose of that Section was to prevent individuals from transferring their assets abroad, and so to evade Income Tax, but it specifically exempted transactions affected mainly for some purpose other than the purpose of avoiding tax. That is a rough and ready description of a commercial transaction.
We think we are on good ground in asking for these words which were used in the 1936 Act to be inserted into this Bill because that was a peace-time Measure drawn with much more care than the E.P.T. legislation. If the Government do not restrict the definition to non-commercial transactions let us see what would arise. Any transaction, as the Clause now stands, which results in the avoidance of tax, is open to review, and, broadly speaking,
1920
that means that any expense charged against profits can be attacked.
Suppose a firm decides to buy a motorcar for the use of important overseas customers. If it buys a Rolls-Royce instead of a Morris 8 it will avoid tax. Are the Commissioners to assess the company as though it had bought a Morris 8? They have the power to do so, and before long we shall find the Commissioners giving a horse-power rating to every company in the country.
Let us take another case. Suppose a company in need of new capital decides to make an issue of debentures instead of ordinary shares. By that it will avoid liability for profits tax, and the Commissioners will have to decide whether the debentures were issued to avoid tax. If they do so decide they must assess the company as though it had issued ordinary shares. On what grounds could they come to such a decision? They would have to make an estimate of the future earning capacity of the company, of possible trends in interest rates at the time the debentures were issued and to discover what alternatives were open to the company to borrow money if it had not used the method of debentures.
It is quite fantastic to put on the Commissioners a decision such as this, and indeed the Chancellor of the Exchequer realises this, because in subsection (3) he relieves them of the responsibility. There they are empowered to say that because the issue of debentures resulted in the avoidance of tax the directors must have had tax avoidance as their main purpose when they made the issue. My hon. Friends will multiply examples of transactions which result in a diminution of the liability and which we should all agree are perfectly genuine commercial transactions, and of a type which no one in his senses would wish to turn into a crime.
If we brought all these transactions under suspicion there would be no end to uncertainty in business and to the overwork of the Inland Revenue. One consequence would be that the relative attraction of conducting business in other countries compared with the United Kingdom would increase still further. If Clause 28 were to become law without amendment I can well understand that the Government want to have Clause 32, which puts in prison all the United Kingdom companies.

1921
Those are some of the particular reasons for asking the Committee, in the terms of our Amendment, to define the unlawful transactions aimed at in the Clause as a non "bona fide commercial transaction" and as having the avoidance of tax as a main purpose. But there are some more general considerations with which I will close my remarks. The arguments for the powers sought in the first subsection even when those powers have been defined and restricted by our Amendment, are a striking reminder that the present high level of taxation has much wider revenue.
High taxation does more than hit a man's pocket; it leaves a scar on his thinking and on his character. Everyone is familiar with the point of diminishing returns at which, if the rate of tax is pushed any higher, the yields falls. There is also the point of diminishing moral returns when, if a tax is pushed too high, there is a loss of honesty and character which makes itself felt among Ministers and officials as well as among taxpayers.
Take, first, the lowering of standards on the side of the Government. Fifty years ago no Government would have dreamed of giving such discretionary powers to the Commissioners to re-adjust the citizen's affairs. And why not? Because both they and the public, not being demoralised by intolerable taxation, would have thought such arbitrary power indecent and un-British. But as the taxes rise higher and higher, the Government become more and more powerful and the avoidance of taxes appears in their eyes to be more and more wicked. Today, the lust to punish the little citizens, who are now so far beneath the mighty Government machine, grows more savage and vindictive as the machine itself swells and proliferates.
The Inland Revenue pursue with a ferocious inhumanity the single black sheep who stands out among a hundred honest taxpayers. All sense of proportion is lost and, in their blinkered zeal to harry, hobble and chastise the solitary sinner, they entirely overlook the effect of their persecution upon the hundred good citizens; and, I may add, on their own respect for the convenience and liberties of their fellows. One must not forget that deterioration in high places is an inevitable result of the colossal system of power which the servants of the State are now forced to operate.
1922
As for the taxpayer himself, throughout all history he has always been corrupted by heavy taxes, and even in this virtuous country he will be corrupted by them. Of course, the modern State needs a very large revenue, but it also needs reliable, honest citizens who can be trusted both to do their business with a whole-hearted respect for the law and in an emergency, to do their duty.
Mr. Woodburn: The hon. Gentleman is talking about the honest citizen. Is it not the duty of the Government to protect the honest citizen against the dishonest citizen who dodges his due taxation by whatever means possible? Is it not the Government's duty in this case to protect the honest citizen, and is not the hon. Gentleman defending the dishonest citizen?
Mr. Eccles: The right hon. Gentleman should recognise the facts and should realise that it is the Government who create the dishonest citizen.
That is the really serious thing about this Clause, and it must sadden every hon. Member of this Committee when he sees economic or financial necessity driving the Government to measures which do violence to the common stuff of humanity shared, as it must be, by those in power and those for whom they are responsible. From one evil comes another. This Clause is the child of oppressive taxation, and we who are the guardians of the British tradition should not pass it without substantial amendment.
4.15 a.m.
Mr. Boyd-Carpenter: This Amendment, which has been, if I may say so, so effectively moved by my hon. Friend, seeks to substitute the objective test of the facts of the matter for the subjective test of the opinion of the Commissioners of Inland Revenue, and, in principle, that is surely a very much to be preferred substitution. I do not want to say anything which would even seem to cast aspersions upon the Commissioners, who are responsible public official who attempt to do their duty according to their rights. But the mere opinion of individual officials is, it seems to me, in legislation, a remarkably poor substitute for laying down precise tests of fact, and what we seek to do by this Amendment is to lay down a test of fact whether or not a bona fide commercial transaction is involved.

1923
In passing, I ask the learned Attorney-General: Is it the desire of the Government that any bona fide commercial transaction should be attacked under the powers given by this Clause? I hope that the right hon. and learned Gentleman will answer that, because then we shall at any rate be clear where the Government stand. If the Government can say, as I hope they will say, that they do not wish to attack any such transaction, then it would surely be wiser so to enact and to make their wishes clear in statutory form, in words which were used in the Finance Act, 1936, in somewhat analogous circumstances.
If, on the other hand, it is the view of the Government that, in pursuit of taxation which they believe to have been evaded, they are prepared to attack even bona fide commercial transactions, then it would be more honest and frank if they were to tell this Committee that that is their intention. I therefore hope that the right hon. and learned Gentleman may find it convenient to answer that specific question.
The other point to which I invite the attention of the Committee is the extraordinary thing that we are asked to do from a constitutional point of view. We are asked, not to enact with some degree of precision what transactions are to be open to attack, what transactions are to be treated as being contrary to public policy, but to delegate that power, not to one of the Ministers of the Crown, who—with the exception of the Minister of Transport—answer questions from that Bench, but to a body of officials outside who are to be given power, in substance, to amend the Revenue legislation passed by this House.
Now even if an immensely strong case on tax evasion could be made out, I myself would hesitate to give officials outside that, in the technical sense, wholly irresponsible legislative power. That power is not subject to any measure of Parliamentary control; not even to the Affirmative resolution procedure on Statutory Instruments—which we have reserved even when we deal, say, with so grave a matter as the opening of Sunday cinemas in Little Puddleton—nor to the Negative resolution procedure. This is simply handed over to the Commissioners and their opinion, thereby, no
1924
doubt intentionally, making for all practical purposes appeal, at any rate beyond the Special Commissioners, impossible.
That is constitutionally a monstrous thing to do even if, from a practical point of view, there are merits and advantages. But I do not think any advantages we may be told about will be really sufficient to outweigh the constitutional disadvantages. Were we to be told that these necessities existed, that would be to cast a severe aspersion upon the capacity of the Government and its advisers to draft legislation. If there is a real, specific and definite evil here, surely the right hon. and learned Gentleman with his advisers can draft specific legislation to deal with it, which can be discussed in the House and its efficacy questioned.
To provide that the whole thing can be shovelled over to the hands of the Commissioners who, quite unfettered, are to decide whether one commercial transaction offends the law and another does not, is an astonishing proposition for this Committee to be debating even at 4.20 in the morning. I do believe that we would be unwise, unless we are told a great deal more than we have been told so far, to assent to that. I hope that we shall not be stampeded by the nonsense about tax evasion. No one wants to assist that. But it does not follow from that proposition that every action which the Government may see fit to take in the name of preventing tax evasion is right or sensible.
Once that attitude is adopted one is taking up precisely the same attitude as totalitarian States, that anything whether enacted in legislation or not, which is inconvenient to those who control the State is, for that reason, an offence against the law. That is a doctrine of totalitarianism, whether of the Fascist Right or the Communist Left. It is the attitude that the public interest, in this case the prevention of tax evasion, must take precedence over every safeguard of the liberty of the individual. That is an attitude which hon. Members in all quarters of this Committee condemn abroad, and which in certain quarters is not observed with that degree of clarity when it is advanced at home.
I hope that hon. Members will not say that this is to prevent tax evasion, and that, therefore, the question of constitutional principle of the freedom of the individual does not matter. It is our duty

1925
to hold the balance equally between the citizen and the State in this matter. Experience over a good many years has shown that the best and most effective way to hold that balance evenly is to put the restrictive provisions in full legislative form, so that the citizen may known whether what he does is lawful or unlawful, and so that he may have, in case of dispute with the executive, recourse to the King's courts.
That, I am sure, is a far more important matter even than stopping occasional bits of tax evasion; because that is a principle which, once sacrificed, cannot be recovered afterwards in the way that unpaid revenue can be. I hope that we shall not submit to a demand which, I believe, comes from the Board of Inland Revenue, and which I believe that right hon. Gentlemen opposite dislike just as much as we do.
Mr. Manningham-Buller: I intervene at this moment only because I want to get from the Attorney-General answers to specific questions about the extent of this Clause. In spite of the powerful arguments advanced by my hon. Friends, I think that the true interpretation of this Clause makes its even worse than they have themselves indicated. The right hon. Member for East Stirling (Mr. Woodburn) interrupted my hon. Friend the Member for Chippenham (Mr. Eccles) and suggested that this Clause was for the purpose of protecting the good taxpayer from the bad, and that our objection to it was that it hit a tax dodging.
I do not think that he can have heard, or if he heard, cannot have understood, the opening remarks of my hon. Friend: for, if he had, he would have appreciated that our objection is something much deeper than hitting at the tax dodger. It is quite true that the right hon. Gentleman may have been misled by the marginal note to this Clause, but then it is very unwise to rely too much on the marginal note for that, perhaps, gives an indication of what was the first intention of the Clause, that it should apply to transactions designed to avoid liability to the Profits Tax.
If the Clause itself did not do more than apply to transactions designed in the sense of evading liability to Profits Tax, then I think there would be little comment to be
1926
raised in connection with it. But, in my view, it goes much further than that; and of course, in considering its interpretation, one must have no regard to the marginal note. Anyone just reading this Clause, and not familiar with decisions arrived at on points similar to those arising under it, would form the view that this Clause only applies to transactions effected with the purpose, mainly, or as one of the main purposes, of avoidance or reduction of liability to Profits Tax.
That, I submit, is the first impression one might get; but that is not the full effect of the Clause. In its present form, I think it will apply to any ordinary commercial transaction effected in the ordinary and usual course of business if, in fact, that transaction results in tax avoidance or reduction; even although, at the time that the transaction was put into operation, there was no intention whatever of securing that result. If that result follows from the transaction, then it would; be deemed to have been a purpose of the transaction and, no doubt, one of the main purposes. For, just as a man is presumed to intend the natural consequences of his action, so, if one result of a transaction is the avoidance or reduction of tax it would be presumed that that was the purpose; and that presumption, according to the authorities, is most difficult to rebut If there is avoidance or reduction, that will be presumed to have been one of the main purposes.
There are three cases to which I would refer the learned Attorney-General in support of this proposition, decided on wording very similar to the wordng of this Section. First, Majestic (Derby) Ltd., Marshall Castings, Ltd., and Joseph Smith (Cleckheaton) Ltd. All decided, and all establishing that in these cases, the transaction was held to be effected with the main purpose of tax avoidance because that was the result of the transaction; even although the Special Commissioners found, as a fact, that when the transaction was started, the individual responsible for starting it had no intention of avoiding tax, or of reducing it.
4.30 a.m.
If that is the interpretation to be given to this Clause in the light of these authorities, I am sure most hon. Members of the Committee have been very misled by this Clause if they think that what one has to have regard to is the object for

1927
which the transaction is entered into. If it was a Clause which would only hit tax dodgers' operations, if it was a Clause that would only hit the culpable mala fide, and almost fraudulent transactions for tax evasion, then we should not be spending this time at this hour of the morning discussing it.
Mr. Woodburn: Does it make any difference to the company that, for instance has not arranged its affairs in such a way that part of its charges are not liable to Profits Tax, if the other people are arranging their affairs in such a way that their affairs are not liable to Profits Tax? Does it not inevitably mean the cost goes on to the company in running its affairs in one direction and the other company avoids it by arranging its affairs in another direction?
Mr. Manningham-Buller: If the right hon. Gentleman is suggesting it is very unfair for an individual to place his money on deposit at one-half per cent. interest and so pays less Income Tax than he would by placing his money where he got a better yield and so paid more—that is all the right hon. Gentleman is saying comes to—I am sorry we are discussing it at an early hour of the morning, because I am sure he is showing difficulty in following the arguments advanced. He failed also to follow the arguments advanced by my hon. Friend. I know I am putting an intricate argument to follow, but I am doing my best and I hope I am succeeding in trying to put a difficult and important argument on this Clause
My argument is that whereas this Clause will apply to the perfectly ordinary commercial transactions entered into by a company without thought in its mind of tax avoidance or tax reduction, entered into for ordinary normal business purposes, but if that transaction entered into only with that object has the result of tax avoidance or tax reduction—the fortuitous result, the result not contemplated but actually following, which was not by any means the intention with which it was entered into—then, I think I am right in saying, it will be deemed to be the purpose and held to be the purpose, in the light of those authorities I have referred to, even though the Special Commissioners might come to the definite
1928
conclusion that there was no intention of avoiding or reducing tax.
Mr. Woodburn: Perhaps the hon. and learned Gentleman will clear up the point. Why should profit made in that company not pay its contribution to the State the same as the profit of another company?
Mr. Turton: On a point of order. Is it in order for the hon. Gentleman the Member for Bolton, West (Mr. John Lewis), to recline full-length on the bench?
The Temporary-Chairman (Mr. Touche): I do not think I need take any notice of it.
Mr. Boyd-Carpenter: Not a very attractive sight.
Mr. Logan: Do not make a noise; the hon. Member is waking up that side now.
Mr. Manningham-Buller: That is one of the disadvantages of discussing this matter at this early hour on a Clause, which I am sure, would be of great interest to the hon. Gentleman the Member for Bolton, West (Mr. J. Lewis). I do not think he has been paying very much attention to it but, in spite of that, I will not repeat it. I really cannot undertake the very difficult task at this hour of the morning of seeking to explain once again the reasons why we on this side of the Committee think that this is a very bad Clause indeed. Our objection is not because it will hit some people who are tax dodgers but because, in its operation, it will hit and penalise many companies which had not any idea of engaging in tax evasion.
I hope that the right hon. and learned Gentleman will answer the question put to him in such a short form by my hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). Perhaps I might have the attention of the Attorney-General.
The Attorney-General: I am sorry.
Mr. Manningham-Buller: I agree that the right hon. and learned Gentleman is extremely competent, but I should flatter him if I thought that he could take in the argument I am advancing at the same time as the instructions he is obviously receiving from his hon. Friend behind him.

1929
I ask him to give a specific answer to the question: Is it intended that this Clause shall apply to bona fide commercial transactions not entered into with any intention of tax avoidance or reduction? If the Attorney-General says it is not intended to have that effect, then I suggest that by the acceptance of this wording he is making that absolutely clear beyond doubt.
My hon. Friend referred to Section 18 of the 1936 Act. That, again, was a Clause introduced into the Bill. It had as its preamble the words "in order to prevent avoidance of tax." That Clause was directed to people transferring money outside this country, but the right hon. and learned Gentleman no doubt is aware that it was specifically provided in that Clause that the bona fide commercial transaction should not come within its ambit. The actual wording of that exception to the Clause was:
"bona fide commercial transactions not designed for the purpose of avoiding liability to taxation."
In our Amendment we have sought to introduce the same provision and, by doing so, it appears to us that we shall be carrying out the intention shown in the marginal note to this Clause by leaving it applied to transactions designed to avoid liability, while exempting from its operation transactions not so designed, even though one indirect result should be the reduction of liability to Profits Tax.
Mr. Hylton-Foster: I bow to no hon. Member of this Committee in my altruistic enthusiasm for seeing that my fellow taxpayers have to pay the uttermost farthing which the law demands of them. But I believe this Committee, and the right hon. and learned Gentleman the Attorney-General not excluded, ought to look with considerable suspicion on a Clause which, on the face of it, is nothing but a device, an attempt to make the taxpayer pay notwithstanding that he has arranged his affairs so that the law does not compel him to pay an amount which this Clause is designed to extort from him. When devices of that kind are encountered, one has to look to see what excuse can be offered for them.
My hon. Friend the Member for Chippenham (Mr. Eccles) has already anticipated that we are going to hear about E.P.T. and the war-time Clauses. That seems to be the weakest possible defence for a Clause of this kind—I do
1930
not know whether it is to be advanced—because, not only was E.P.T. new taxation, not only was the state of war making things difficult for the revenue, but there were under bombardment changes of trade, changes of location, changes of personality, shortage of accountants, those people on whom the revenue so rightly put their trust, even shortage of bits of paper on which to do sums. No sort or kind of parallel can be found with the Clause now introduced.
Every time our privileges are taken away in war—the original privilege of the subject—it is always the war-time precedent that is used to prevent them getting back to their normal state, and I do not believe this should be compared to it. I would like to show for a moment how this Clause is going to work, unless it has this Amendment in it. We need not adopt the interpretation of the law which my hon. and learned Friend the Member for Northamptonshire, South (Mr. Manningham-Buller) has just been suggesting, to see how hopeless it will be in practice.
What happens with the person, firm or company which has a perfectly bona fide commercial transaction and wants to know how to do it? It goes to its advisors—thank goodness—its accountants, its lawyers, and gets advice and is told, "You can do it that way, or that way, but from the tax point of view, that is the cheapest way to do it." No one but a fool would do anything but adopt that way—indeed, they have duties compelling them, their duty to the shareholders compels them; their duty to the customer compels them, because if they put more tax on, they put prices up; their duty to the workers compels them because on the tax they pay depends the amount they have to invest in maintenance, including machinery and welfare. In the last resort they are convinced of the need to be sensible about tax, and of not butting their heads into paying more tax than they need. They take the advice they are given, and adopt the cheapest method from the Profits Tax point of view. The primary purpose is a bona fide commercial one, and the ultimate purpose is a bona fide commercial one.
By that time, as they have been advised, this is one of the main purposes of the reduction of liability to Profits Tax. Then you get those worthy citizens, the commissioners. It is a very difficult

1931
question, and what you will get in actual practice is a difference of opinion between different sets of Commissioners in different divisions. If there is one vice you cannot tolerate in taxation, it is that it should be equal and fair between equivalent specimens of taxpayers. That is what you will not get if you confer a discretion of the kind this Clause, un-amended, does confer.
4.45 a.m.
That is why we have always insisted in this land, and I hope this is particularly understood by the Committee this morning, that the conferring of a wide discretion is the evening of the supremacy of the law. If we include a wide discretion such as this Amendment would confer on the Commissioners, what we are doing is to substitute the "incertain and crooked cord of discretion for the golden and streight metwand of the law."
Mr. Henry Strauss: The right hon. and learned Attorney-General might give some guidance to the Committee on the meaning of "transaction or transactions." I wonder whether he, or any other hon. or right hon. Gentleman opposite, has any clear idea of the nature of the transaction which he might wish to fall within the mischief of this Clause.
Really, the Government are faced with this dilemma. If they have got some idea of the nature of the transaction which they wish to bring within the mischief of this Clause, it would be far less offensive to all the principles of our law if they endeavoured to define that transaction and to hit it so that the tax became legally due if people indulged in it. If, on the other hand, they have no idea of what the transaction is which they wish to bring within the scope of this Clause, but merely fear that some ingenious legal practitioners or accountants may think of some transaction which, if adopted, would cause the company to escape from legal liability, then how foolish really is the principle that they are here adopting.
They will be abandoning the well-known principles of law, which have been mentioned by my hon. and hon. and learned Friends who have already spoken, for the sake of one year's tax. Of course, if a transaction which they have not foreseen but which they wish, after it has taken place, that they had foreseen, takes place, in the next Finance Act they can
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hit it for the future. Therefore, the whole of this legally offensive Clause must be designed, if it has any object which is not absurd, to save the tax for one year on a transaction that the Government and their advisers have been, unable to foresee. Is it really worth it?
I should like to ask also this question of the right hon. and learned Gentleman. I am asking this for information, because I do not pretend to have pursued researches on the subject. Can he give us guidance on how far the words "transaction or transactions" have been defined? Let me give one example. Suppose a company decided to pay next to no dividend, to pay a very small dividend indeed—what many hon. Members might consider an unreasonably small dividend. The effect of that decision will be that they will pay less in Profits Tax than they would otherwise pay, and that may be one of the main objects which made the directors decide upon so low a dividend. Would that be a transaction within the meaning of the Clause? I ask that question, but would add that I am under the impression that it would not be.
I do not think it would be a transaction, but I think you can, in thinking out various decisions of that kind, find that you can say with comparative confidence of some that they are not transactions, of others that they are dubious, and of others that they are undoubtedly transactions. That is why I put that question to the right hon. and learned Gentleman. I think the point of what is meant by "transaction or transactions" is one on which the Committee is entitled to legal guidance from the Law Officers of the Crown.
But the main objection to the Clause as it stands, and as it will stand unless an amendment such as that now under discussion is adopted, is this: that it will have all that legal offensiveness which has been described by previous speakers in advocating this Amendment, and that the Clause will have no adequate compensation in any gain to the Government. If the transaction which the Government wish to fall within the mischief of the Clause is now foreseen by them, they should define it with legal precision. If it is not foreseen by them, it is asking the Committee to take a most foolish step when the Government invite

1933
us to do what is legally offensive only for the purpose of saving tax for one year on a transaction the nature of which they have been unable to foresee.
The Attorney-General: The Amendment raises a comparatively small issue on this Clause, although during the discussion hon. Members have used arguments advancing their view that the Clause is undesirable. In a sense it is a convenient course that at the outset we should have some general discussion whether the Clause is one we should accept or not. Hon. Members have used many adjectives about it—that it is offensive to them, that it curtails liberty in a way which is unconstitutional, that there is no respectable precedent, and they even went so far as to say that however it was amended they doubted whether it could ever become acceptable.
May I give some reasons why we think it was unavoidable that we should use this precedent? It is our experience, unfortunately, that there is a growing number of all sorts of different transactions resorted to to avoid Profits Tax. I can give a great many examples. [HON. MEMBERS: "Go on."] If hon. Members say "Go on" I will give them, so that they may see the multiplicity of devices which can be resorted to. These are actual cases that have come to notice, and I am informed that the number is growing. I cannot say that it has reached serious proportions yet, but it will do so.
The first example is this. A director controlled company which carries on business at a number of shops, the profits of which are aggregated for the purpose of computing its profits liable to tax, sets up a number of separate companies each running two of its shops, with a view to obtaining in the case of the new companies the benefit of the abatement provisions for businesses with small profits—the tax is not charged under £2,000, and is then on a sliding scale up to £12,000—and also the allowance for directors' remuneration of £2,500 in the case of each company.
That is one kind of transaction, and you can play upon it infinitely. Here is another. A trading company, with income from investments which represent accumulated reserves, transfers the investments to a separate company in return for shares in that company, which shares the trading company distributes to its
1934
own shareholders as a partial return of capital. The result is that the new investment holding company obtains the benefit of the abatement provisions. That admits of a whole number of different variations. The controlling directors of a director controlled company transfer sufficient of their shares to members of their family to reduce the directors' personal holdings below 50 per cent., so that the company ceases—technically—to be director controlled. The remuneration of the controlling directors is thereafter allowable in full in computing the company's profits, instead of being subject to the £2,500 limitation.
That admits of all sorts of different variations. Take this example. The director of a director controlled company transfers sufficient of his shares to his wife to bring his personal shareholding below 5 per cent. of the ordinary shares, thus qualifying himself as a whole-time service director, and his remuneration is allowable in full as a deduction against profits. That kind of device can be multiplied almost ad infinitum.
I can go on thinking of devices of that sort, and if they are not drastically checked the result will be extremely serious. Hon. Members look at the picture as if the taxpayer strikes against the Revenue. That is not a true picture. The Revenue have to see that every taxpayer pays a fair share. Hon. Members on both sides differ strongly about what is the appropriate rate of taxation—that is a party point of view and differences will persist—but I am sure all hon. Members will agree with me that, whatever the rate of tax, everybody must pay his fair share. In using this Clause the Inland Revenue are simply trying to bring that about by protecting the taxpayer who wants to pay his fair share from having to pay part of the burden which should be on the shoulders of those who want to get rid of it.
Mr. John Foster: Does the right hon. and learned Gentleman say that the transactions he cited are bona fide commercial transactions?
The Attorney-General: It depends on what is meant by bona fide commercial transactions. We are dealing with transactions the actors in which desire to avoid the burden of tax.

1935
May I proceed with my argument? We are faced with a growing number of potential evasions, which is growing continually, and we have to do something to prevent a very serious loss of tax, which would be paid by those taxpayers who do not try to shift the burden off their shoulders on to those of other people. We have been told we are trying to justify this by using the E.P.T. precedent. I do not try to justify it by the E.P.T. precedent—that is neither here nor there. Hon. Members have said that was war-time legislation and hoped I do not seek to justify it on those grounds.
The hon. Member for Chippenham (Mr. Eccles) was fearful about the consequences, and other hon. Members gave examples of how they thought the Clause might operate harshly. Speaking from my own experience, after appearing in a great many E.P.T. cases, and from the advice of those who advise me, the difficulties hon. Members fear have simply not arisen. The difficulty is the other way round. It is always difficult to get Commissioners to conclude that the case they are dealing with is one within the Act.
We had two choices. Either we could use this Clause, drastic as it is, and it would be futile to pretend it is not, or to go the other way round and start working out the endless Clauses to be put on the Statute Book year after year, as we have done for years past in the case of Income Tax to stop up leakages as they appear in the course of a year's trading. In the case of Profits Tax these leakages are multiplying thick and fast, and there seems to be a number of evasions in connection with this tax.
5.0 a.m.
Mr. J. Foster: I am grateful to the right hon. and learned Gentleman for giving way. Is there not another alternative that of Section 18 of the 1936 Act there is a proposal between the drastic Clause and the stopping up of every loophole.
The Attorney-General: That is not really a precedent. It is a Section dealing with the transfer of income abroad, and is not the same kind of thing as that with which we are dealing.
To come back to the point I was making, we had the alternative of using this Clause, or beginning the laborious process about which hon. Members complain
1936
of having an elaborate and difficult Clause on the Statute Book always one jump behind, trying to catch up with the person who has found some way of getting out of it The examples I have quoted to the Committee are sufficient for pages and pages of Clauses to stop them. It would mean heaps of complicated Clauses, with the kind of language about which the hon. and gallant Gentleman the Member for Bristol, North-East (Lieut.-Commander Braithwaite) complained earlier when it was used in relation to directors' remuneration. It is one thing or the other.
I entirely sympathise with the hon. and gallant Gentleman. The language is extremely complicated, but there is no other way round, and, on balance, having given the matter great thought and weight of the kind hon. Gentlemen have urged, and considered its novel character and that its only precedent was that of war-time, we thought it better to use the Clause, drastic though it is, in dealing with an undoubted mischief which is growing in proportion and which will be serious unless something is done about it.
I should like, before I close, to enter a protest a mild protest, against the suggestion that this is an infringement of liberty. I hope hon. Gentlemen will not say this, because it is not. Anyone is perfectly free to carry out the transactions. We do not make it a crime. No one is inhibited. He can carry out the transactions as much as he likes, but we say if the Commissioners are satisfied there was a tax avoidance motive, and that it was the main motive, or one of the main motives, the transactions stands but the tax position is readjusted to be that which it would have been if the transaction had not been carried out. I say that it is not right to describe this as an invasion of liberty; it is nothing of the sort.
It is not the first time we have used direction in this matter. Section 21 of the Finance Act 1922 which dealt with the avoidance of the payment of Supertax on undistributed profits is an example of directions used. I want to be fair to the Committee and to say that in that case, in Section 21, the limit of the discretion which is vested in the Special Commissioners is narrower than the limit in this case, but not so very much narrower. Here they have a wider discretion, but,

1937
nevertheless, it is fastened to certain broad lines. If they see fit to make a direction they have to do it in such a way as to equate the position to what it would have been had the transaction not taken place.
May I call attention to the appeal provisions? The Commissioners make the directions and there is an appeal to the Special Commissioners. The Special Commissioners can review the whole thing and say, "We think this is a case in which no direction should have been made "—and they can cancel the direction. There is a very large loophole of escape. The Special Commissioners can do justice if they feel that it is not right that the direction should have been made.
I have endeavoured to deploy the general considerations on which I seek to justify the Clause. To deal with the particular consideration raised by the Amendment I would say that we certainly have no desire at all to catch bona fide commercial transactions where there is no tax motive, but to require the Commissioners to perform the test of saying whether a particular case is a bona fide commercial transaction or not is to put upon them something extremely difficult. Supposing we have a case such as I have given—where companies are formed to take over specific shops, there being in that case the desire to use the abatement provisions. It is very difficult for the Special Commissioner hearing the case to say whether the transactions are bona fide or not.
Mr. Maudling Mr. Maudling rose—
The Attorney-General: Perhaps I might finish; this has been a lengthy argument already.
The main point on which they have to focus in asking whether a direction should be made is whether one of the main purposes is tax avoidance. If they find that, the rest does not matter. One cannot say what is a bona fide transaction, but what they have to ask themselves is this: is tax avoidance one of the main purposes, and if it is, then it is right to make the direction.
Mr. Manningham-Buller: The right hon. and learned Gentleman keeps mentioning the "main purpose," but does he not agree with the view I put forward—that the first thing the Commissioners will
1938
do is to see the result, and if one of the results is tax avoidance or tax reduction, on the authorities I cited is it not assumed that one of the purposes was achieved by the result? If that is so—and I think it is so—the right hon. and learned Gentleman is not being entirely frank by attaching so much importance to the word "purpose". If the Clause was limited so as to apply only to transactions designed for the purpose of tax evasion or avoidance there would not be all this argument. Does he not agree that this Clause, in its wording, which sets the frame to the picture, goes far wider than that?
The Attorney-General: I do not complain of that intervention, because my speech was lengthy, but I was about to come to that point. The advice I would give the Committee is that the Commissioners must be of the opinion that it was, in fact, one of the main purposes. If hon. Members look at subsection (3) they will see that a particular type of transaction is referred to, centering upon a transaction which involved the transfer of shares. This has been specifically laid down by the cases, one of which is Crown Bedding v. Commissioners of Inland Revenue, decided in 1946, reported in the All England Reports. In a subsection (1) transaction the Commissioners must be of opinion that it was the main purpose or one of the main purposes. They have to be of that opinion, never mind what the result is.
Clearly, if the result was tax avoidance, that would obviously be an important factor which they would take into account in making up their minds whether it was the main purpose or one of the main purposes. It is only when we get to subsection (3) that we have to look at the transaction to see what the main benefit was, and if the main benefit was tax avoidance or reduction the main purpose or one of the main purposes is deemed to have been met.
Looking at the next subsection it is found that on going to the Special Commissioners on appeal from the Commissioners the Special Commissioners can upset the whole thing—never mind whether it is deemed to have been met or not—if they think a direction should not have been made. If a company can go to the Special Commissioners and say, "We do not care what is deemed. In fact it was not our main intention." the

1939
Special Commissioners have a perfect right to say, "Then the direction should not have been made."
Mr. Manningham-Buller: I hope the right hon. and learned Gentleman will forgive my saying that my argument was not directed to subsection (3) at all. We will no doubt have an opportunity of discussing that later. My argument was directed to the interpretation of subsection (1). I agree that the wording there is:
"the main purpose or one of the main purposes,"
but I suggest to him—and I should be interested to hear whether he agrees or disagrees—that on the decided cases, of which I gave him the names, the first thing that happens in practice is that the result of the transaction is ascertained, and if one of the results is the avoidance or reduction of tax, then that is assumed to be one of the purposes.
In those cases, as I said, that has been held by the Special Commissioners, although they have come to the definite conclusion that tax avoidance was not the motive of the transaction. Now that, it seems to me, would apply to subsection (1), and I should be interested to know whether the right hon. and learned Gentleman agrees or disagrees with that. If he agrees, then it is quite clear that subsection (1) will apply equally to transactions whether they are perfectly bona fide commercial transactions or tax dodging transactions.
The Attorney-General: I have not the Marshall Castings case before me, and I accept what the hon. and learned Gentleman says, but my impression of it was—and that is the impression of those who advise me—that it was a case which was decided not on subsection (1) but on subsection (3). I can only say—and I say so with all respect to him—that I should be very surprised indeed if he has correctly interpreted the principle of those cases and their application to subsection (1), because it seems to me that the language of subsection (1) is perfectly plain.
What is requisite is that the Commissioners should be
"of opinion that the … purpose … was."
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I quite agree that, supposing the result was tax avoidance, it is probable that they would come to the conclusion of fact—not certain, but only probable—that that was either the main purpose or one of the main purposes, but beyond that I would not go. It still remains for them to decide whether as a fact, in their opinion, tax avoidance was the main purpose or one of the main purposes.
I have endeavoured both to deploy the general arguments in the light of which I would support this Clause and to give the reasons why I think the Amendment ought not to be accepted. I therefore hope that the Committee will reject the Amendment.
5.15 a.m.
Mr. Pickthorn: I hope the Committee will forgive my voice, but I will do my best to be audible.
It is interesting to hear the Attorney-General explain that he sees no invasion of liberty in this matter. He sees no invasion of liberty in the provision that if a man has arranged his affairs within the provisions of the law, but so that he pays less tax than he would have done if he had arranged them differently, it shall be open to the administration to hold that is to be considered not to have happened, and that the tax is nevertheless to be collected.
I could quite understand the argument that it were necessary to get this money in that way, and therefore to make some sort contraction of liberty. I could understand the argument which we have read recently from the pen of the hon. Member for Coventry, East (Mr. Crossman), in which he explained that the Socialist Party owing, as it does, everything to two great wars, is now under a duty to exploit the cold war to reduce liberties and extend controls.
I could understand that defence, but I find it a little difficult to understand, and I think it would be illuminating to the public, if the Leader of the House had not so arranged matters as to make practically certain that the public will not know, that his Majesty's legal adviser can see no invasion of liberty in what is proposed, and in resisting the Amendment which we are now discussing. I did not understand his argument about the appeal to the Special Commissioners. He argued

1941
that this was not so bad, because after all the Special Commissioners might hold that though the Commissioners were right, yet in all the circumstances the result was not fair, and that therefore the appellant should win.
I think I am putting fairly what the Attorney-General told us. He will, of course, understand that I say in no sense ironically that he lives with this business all the time, and that he may find it easy to know what are the "other circumstances" which the Special Commissioners would take into account, and which would cause them to reverse a decision by the Commissioners. But the learned Attorney gave no indication of what they might be.
I did not understand his argument on the competition between "bona fide" as a test, on the one hand, and "main purpose" as a test on the other. He said that for the Commissioner to decide whether a transaction was a bona fide transaction would be much too difficult for them. On the other hand, he said that they have simply to decide whether one of the main purposes was tax evasion. Does the right hon. and learned Gentleman really think that that is the simpler decision of the two? How many "main purposes" does he think there can be in this matter? And what percentage of the aggregate purposes must there be in any one for it to be a "main purpose"? Have those words to be judicially defined?
That brings me to another point which I intended to raise, but which was raised by my hon. and learned Friend who sits by me, and which the Attorney-General
did not attempt to answer. I hope that he will think it worth while for those of us who are not lawyers, and even for those of us who are lawyers, to try to explain what "transaction" means. I have not looked it up in the dictionary, but my guess would be that a transaction is something which necessitates two parties. If we look at subsection (3), which, of course, is not in order at present, though it has been referred to by previous speakers, it will be seen that in this all the transactions are, to use the horrible current slang, bi-partite.
They are all things which require two parties; and the special question which I put is: "What is the difference between transaction and action?" Some of the illustrations given by the learned Attorney-General were not really transactions. Then, returning to where I began, following the example of the Poet Laureate, the assumption by the use of the word "due" on the hypothesis of either side approaching what the man is doing, is not avoiding something which is due at the time at which he enters upon that transaction. Much of the learned Attorney's argument was vitiated by an unconscious want of continuity of mind in the use of the word "due," which seemed to beg several questions.
Mr. R. J. Taylor Mr. R. J. Taylor rose in Ms place, and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 292; Noes, 276.

Division No. 116.]

AYES

[5.23 a.m.

Acland, Sir Richard

Boardman, H.

Collindridge, F.

Adams, Richard

Booth, A.

Cook, T. F.

Albu, A. H.

Bottomley, A. G.

Cooper, Geoffrey (Middlesbrough, W.)

Allen, Arthur (Bosworth)

Bowden, H. W.

Cooper, John (Deptford)

Allen, Scholefield (Crewe)

Bowles, F. G. (Nuneaton)

Corbet, Mrs. Freda (Peckham)

Anderson, Alexander (Motherwell)

Braddock, Mrs. Elizabeth

Cove, W. G.

Anderson, Frank (Whitehaven)

Brook, Dryden (Halifax)

Craddock, George (Bradford. S.)

Attlee, Rt. Hon. C. R

Brooks, T. J. (Normanton)

Crawley, A.

Awbery, S. S.

Broughton, Dr. A. D. D.

Crosland, C. A. R

Ayles, W. H.

Brown, Rt. Hon. George (Belper)

Crossman, R. H. S.

Bacon, Mill Alica

Brown, Thomas (Ince)

Cullen, Mrs. A.

Baird, J.

Burke, W. A.

Daines, P.

Balfour, A.

Burton, Miss E.

Dalton, Rt. Hon. H.

Barnes, Rt. Hon. A. J.

Butler, Herbert (Hackney, S.)

Darling, George (Hillsborough)

Bartley, P.

Callaghan, L. J.

Davies, A. Edward (Stoke, N.)

Bellenger, Rt. Hon. F. J.

Carmichael, J.

Davies, Harold (Leek)

Benn, Wedgwood

Cattle, Mrs. B. A.

Davies, Stephen (Merthyr)

Benson, G.

Champion, A. J.

de Freitas, Geoffrey

Beswiek, F.

Chetwynd, G. R.

Deer, G.

Bevan, Rt. Hon. A. (Ebbw Vale)

Clunle, J.

Delargy, H. J.

Bing, G. H. C.

Cocks, F. S.

Dodds, N. N.

Blenkinsop, A.

Coldriek, W.

Donnelly, D.

Blyton, W. R.

Collick, P.

Driberg, T. E. N.

Dugdale, Rt. Hon. John (W. Bromwich)

Kinghorn, Sun. Ldr. E.

Richards, R.

Dye, S.

Kinley, J.

Robens, Rt. Hon. A.

Ede, Rt. Hon. J. C.

Lang, Gordon

Roberts, Goronwy (Caernarvonshire)

Edelman, M.

Lee, Frederick (Newton)

Robertson, J. J. (Berwick)

Edwards, John (Brighouse)

Lee, Miss Jennie (Cannock)

Robinson, Kenneth (St. Pancras, N.)

Edwards, Rt. Hon. Ness (Caerphilly)

Lever, Harold (Cheetham)

Rogers, George (Kensington, N.)

Edwards, W. J. (Stepney)

Lever, Leslie (Ardwick)

Ross, William

Evans, Albert (Islington, S. W.)

Lewis, Arthur (West Ham, N.)

Royle, C.

Evans, Edward (Lowestoft)

Lewis, John (Bolton, W.)

Shawcross, Rt. Hon. Sir Hartley

Evans, Stanley (Wednesbury)

Lindgren, G. S.

Shinwell, Rt. Hon. E.

Ewart, R.

Lipton, Lt.-Col. M.

Shurmer, P. L. E.

Fernyhough, E.

Logan, D. G.

Silverman, Julius (Erdington)

Field, Capt. W. J.

Longden, Fred (Small Heath)

Silverman, Sydney (Nelson)

Finch, H. J.

McAllister, G.

Simmons, C. J.

Fletcher, Eric (Islington, E.)

MacColl, J. E.

Slater, J.

Follick, M.

McGhee, H. G.

Smith, Ellis (Stoke, S.)

Foot, M. M.

McGovern, J.

Smith, Norman (Nottingham, S.)

Forman, J. C.

McInnes, J.

Snow, J. W.

Fraser, Thomas (Hamilton)

Mack, J. D.

Sorensen, R. W.

Freeman, John (Watford)

McKay, John (Wallsend)

Soskice, Rt. Hon. Sir Frank

Freeman, Peter (Newport)

Mackay, R. W. G. (Reading, N.)

Steele, T.

Gaitskell, Rt. Hon. H. T. N.

McLeavy, F.

Stewart, Michael (Fulham, E.)

Ganley, Mrs. C. S.

MacMillan, Malcolm (Western Isles)

Stokes, Rt. Hon. R. R.

Gibson, C. W.

McNeil, Rt. Hon. H.

Strachey, Rt. Hon. J.

Gilzean, A.

MacPherson, Malcolm (Stirling)

Strauss, Rt. Hon. George (Vauxhall)

Glanville, James (Consett)

Mainwaring, W. H.

Stross, Dr. Barnett

Gooch, E. G.

Mallalieu, E. L. (Brigg)

Summerskill, Rt. Hon. Edith

Gordon-Walker, Rt. Hon. P. C.

Mallalieu, J. P. W. (Huddersfield, E.)

Sylvester, G. O.

Greenwood, Anthony (Rossendale)

Mann, Mrs. Jean

Taylor, Bernard (Mansfield)

Greenwood, Rt. Hn. Arthur (Wakefield)

Manuel, A. C.

Taylor, Robert (Morpeth)

Grenfell, D. R.

Marquand, Rt. Hon. H. A.

Thomas, David (Aberdare)

Grey, C. F.

Mathers, Rt. Hon. G.

Thomas, George (Cardiff)

Griffiths, David (Rother Valley)

Mellish, R. J.

Thomas, Iorwerth (Rhondda, W.)

Griffiths, Rt. Hon. James (Llanelly)

Messer, F.

Thomas, Ivor Owen (Wrekin)

Griffiths, William (Exchange)

Middleton, Mrs. L.

Thorneycroft, Harry (Clayton)

Gunter, R. J.

Mikardo, Ian.

Thurtle, Ernest

Hale, Joseph (Rochdale)

Mitchison, G. R

Timmons, J.

Hall, John (Gateshead, W.)

Moeran, E. W.

Tomney, F.

Monslow, W.

Turner-Samuels, M.

Hall, Rt. Hon. Glenvil (Colne Valley)

Moody, A. S.

Ungoed-Thomas, Sir Lynn

Hamilton, W. W.

Morgan, Dr. H. B.

Usborne, H.

Hardman, D. R.

Morley, R.

Vernon, W. F.

Hargreaves, A.

Morris, Percy (Swansea, W.)

Viant, S. P.

Hastings, S.

Mort, D. L.

Wallace, H. W.

Hayman, F. H.

Moyle, A.

Watkins, T. E.

Henderson, Rt. Hon. Arthur (Tipton)

Mulley, F. W.

Webb, Rt. Hon. M. (Bradford, C.)

Herbison, Miss M.

Murray, J. D.

Weitzman, D.

Hewitson, Capt. M.

Nally, W.

Walls, Percy (Faversham)

Hobson, C. R.

Neal, Harold (Bolsover)

Weds, William (Walsall)

Holman, P.

Noel-Baker, Rt. Hon. P. J.

West, D. G.

Holmes, Horace (Hemsworth)

O'Brien, T.

Wheatley, Rt. Hon. John (Edmb'gh E.)

Houghton, D.

Oldfield, W. H.

White, Mrs. Eirene (E. Flint)

Hoy, J.

Oliver, G. H.

White, Henry (Derbyshire, N. E.)

Hubbard, T.

Orbach, M.

Whiteley, Rt. Hon. W.

Hudson, James (Ealing, N.)

Padley, W. E.

Wilcock, Group Capt. C. A. B.

Hughes, Emrys (S. Ayrshire)

Paget, R. T.

Wilkes, L.

Hughes, Hector (Aberdeen, N.)

Paling, Rt. Hon. Wilfred (Deane V'lly)

Wilkins, W. A.

Hynd, H. (Accrington)

Paling, Will T. (Dewsbury)

Willey, Frederick (Sunderland)

Hynd, J. B. (Attercliffe)

Pannell, T. C.

Willey, Octavius (Cleveland)

Irvine, A J. (Edge Hill)

Pargiter, G. A.

Williams, David (Neath)

Irving, W. J. (Wood Green)

Parker J.

Williams, Rev. Llywelyn (Abertillery)

Isaacs, Rt. Hon. G. A.

Paton, J.

Williams, Ronald (Wigan)

Janner, B.

Pearson, A.

Williams, Rt. Hon. Thomas (Don V'lly)

Jay, D. P. T.

Peart, T. F.

Williams, W. T. (Hammersmith, S.)

Jeger, George (Goole)

Popplewell, E.

Wilson, Rt. Hon. Harold (Huyton)

Jenkins, R. H.

Porter, G.

Winter bottom, Ian (Nottingham, C.)

Johnson, James (Rugby)

Price, Philips (Gloucestershire, W.)

Winterbottom, Richard (Brightside)

Johnston, Douglas (Paisley)

Proctor, W. T.

Wise, F. J.

Jones, David (Hartlepool)

Pryde, D. J.

Woodburn, Rt. Hon. A.

Jones, Frederick Elwyn (West Ham, S.)

Pursey, Cmdr. H.

Wyatt. W. L.

Jones, Jack (Rotherham)

Rankin, J.

Yates, V. F.

Jonas, William Elwyn (Conway)

Rees, Mrs. D.

Younger, Rt. Hon. K.

Keenan, W.

Reeves, J.

Kenyon, C.

Raid, Thomas (Swindon)

TELLERS FOR THE AYES:

Key, Rt. Hon. C. W.

Reid, William (Camlachie)

Mr. Hannan and Mr. Sparks

King, Dr. H. M.

Rhodes, H.

NOES

Aitken, W. T.

Ashton, H. (Cheimsford)

Baldwin, A. E.

Alport, C. J. M.

Assheton, Rt. Hon. R. (Blackburn, W.)

Banks, Col. C.

Amery, Julian (Preston, N)

Astor, Hon. M. L.

Baxter, A. B.

Amory, Heathcoat (Tiverton)

Baker, P. A. D.

Beamish, Maj. Tufton

Arbuthnot, John

Baldock, Lt.-Cmdr. J. M

Bell, R. M.

1944

1945

Bennett, Dr. Reginald (Gosport)

Harvie-Watt, Sir George

Nicholls, Harmar

Bennett, William (Woodside)

Hay, John

Nicholson, G.

Bevins, J. R. (Liverpool, Toxteth)

Head, Brig. A. H

Nield, Basil (Chester)

Birch, Nigel

Heald, Lionel

Noble, Cmdr. A. H. P.

Bishop, F. P.

Henderson, John (Cathcart)

Nugent, G. R. H.

Black, C. W.

Hicks-Beach, Maj. W. W.

Nutting, Anthony

Boles, Lt.-Col. D. C. (Wells)

Higgs, J. M. C.

Oakshott, H. D.

Boothby, R.

Hill, Dr. Charles (Luton)

Odey, G. W.

Bossom, A. C.

Hill, Mrs. E. (Wythenshawe)

O'Neill, Rt. Hon. Sir Hugh

Boyd-Carpenter, J. A.

Hinchingbrooke, Viscount

Ormsby-Gore, Hon. W. D.

Boyle, Sir Edward

Hirst, Geoffrey

Orr, Capt. L. P. S.

Bracken, Rt. Hon. B.

Hollis, M. C.

Orr-Ewing, Charles Ian (Hendon, N.)

Braine, B. R.

Holmes, Sir Stanley (Harwich)

Orr-Ewing, Ian L. (Weslon-super-Mare)

Braithwaite, Sir Albert (Harrow, W.)

Hope, Lord John

Osborne, C.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Hopkinson, Henry

Perkins, W. R. D.

Bromley-Davenport, Lt.-Col. W.

Hornsby-Smith, Miss P.

Peto, Brig. C. H. M.

Brooke, Henry (Hampstead)

Horsbrugh, Rt. Hon. Florence

Pickthorn, K.

Browne, Jack (Govan)

Howard, Gerald (Cambridgeshire)

Pitman, I. J.

Buchan-Hepburn, P. G. T.

Howard, Greville (St. Ives)

Powell, J. Enoch

Bullock, Capt. M.

Hudson, Sir Austin (Lewisham, N.)

Price, Henry (Lewisham, W.)

Bullus, Wing Commander E. E.

Hudson, W. R. A. (Hull, N.)

Profumo, J. D.

Burden, F. A.

Hurd, A. R.

Raikes, H. V.

Butcher, H. W.

Hutchinson, Geoffrey (Ilford, N.)

Rayner, Brig. R.

Butler, Rt. Hn. R. A. (Saffron Walden)

Hutchison, Lt.-Cmdr.Clark (E'b'rgn W.)

Redmayne, M.

Carr, Robert (Mitcham)

Hutchison, Colonel James (Glasgow)

Remnant, Hon. P.

Carson, Hon. E.

Hyde, Lt.-Col. H. M.

Renton, D. L. M.

Channon, H.

Hylton-Foster, H. B.

Roberts, Maj. Peter (Heeley)

Clarke, Col. Ralph (East Grinstead)

Jennings, R.

Robertson, Sir David (Caithness)

Clarke, Brig. Terence (Portsmouth, W.)

Johnson, Howard (Kemptown)

Robinson, Roland (Blackpool, S.)

Clyde, J. L.

Jones, A. (Hall Green)

Robson-Brown, W.

Colegate, A.

Joynson-Hicks, Hon. L. W.

Rodgers, John (Sevenoaks)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Kaberry, D.

Roper, Sir Harold

Cooper-Key, E. M.

Kerr, H. W. (Cambridge)

Ropner, Col. L

Corbett, Lt.-Col. Uvedale (Ludlow)

Kingsmill, Lt.-Col. W. H.

Russell, R. S.

Craddock, Beresford (Spelthorne)

Lambert, Hon. G.

Ryder, Capt. R. E. D.

Cranborne, Viscount

Lancaster, Col. C. G

Salter, Rt. Hon. Sir Arthur

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

Langford-Holt, J.

Sandys, Rt. Hon. D.

Crosthwaite-Eyre, Col. O. E.

Law, Rt. Hon. R. K.

Shepherd, William

Crouch, R. F.

Leather, E. H. C.

Smiles, Lt.-Col. Sir Walter

Crowder, Capt. John (Finchley)

Legge-Bourke, Maj. E. A. H.

Smithers, Peter (Winchester)

Crowder, Petre (Ruislip—Northwood)

Lennox-Boyd, A. T.

Smithers, Sir Waldron (Orpington)

Cundiff, F. W.

Lindsay, Martin

Smyth, Brig. J. G. (Norwood)

Cuthbert, W. N.

Linstead, H. N.

Snadden, W. McN.

Davidson, Viscountess

Llewellyn, D.

Soames, Capt. C.

Davies, Nigel (Epping)

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Spearman, A. C. M.

de Chair, Somerset

Lloyd, Maj. Guy (Renfrew, E.)

Spence, H. R. (Aberdeenshire, W.)

De la Bère, R.

Lloyd, Selwyn (Wirral)

Spens, Sir Patrick (Kensington, S.)

Deedes, W. F.

Lockwood, Lt.-Col. J. C.

Stanley, Capt. Hon. Richard (N. Fylde)

Dlgby, S. Wingfield

Longden, Gilbert (Herts, S. W.)

Stevens, G. P.

Dodds-Parker, A. D.

Low, A. R. W.

Steward, W. A. (Woolwich, W.)

Dornner, P. W.

Lucas, Sir Jocelyn (Portsmouth, S.)

Stewart, Henderson (Fife, E.)

Douglas-Hamilton, Lord Malcolm

Lucas, P. B. (Brentford)

Stoddart-Scott, Col. M.

Drayson, G. B.

Lucas-Tooth, Sir Hugh

Storey, S.

Drewe, C.

Lyttelton, Rt. Hon. O.

Strauss, Henry (Norwich, S.)

Dugdale, Maj. Sir Thomas (Richmond)

McAdden, S. J.

Stuart, Rt. Hon. James (Moray)

Duncan, Capt. J. A. L.

McCorquodale, Rt. Hon. M. S.

Studholme, H. G.

Dunglass, Lord

Macdonald, Sir Peter (I. of Wight)

Summers, G. S.

Duthie, W. S.

Macketon, Brig. H. R.

Sutcliffe, H.

Eccles, D. M.

McKibbin, A.

Taylor, Charles (Eastbourne)

Eden, Rt. Hon. A.

McKie, J. H. (Galloway)

Taylor, William (Bradford, N.)

Elliot, Rt. Hon. W. E.

Maclay, Hon. John

Teeling, W.

Erroll, F. J.

Maclean, Fitzroy

Teevan, T. L.

Fisher, Nigel

MacLeod, Iain (Enfield, W.)

Thomas, J. P. L. (Hereford)

Fort, R.

MacLeod, John (Ross and Cromarty)

Thompson, Kenneth Pugh (Walton)

Foster, John

Macmillan, Rt. Hon. Harold (Bromley)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Fraser, Hon. Hugh (Stone)

Macpherson, Major Niall (Dumfries)

Thorneycroft, Peter (Monmouth)

Fraser, Sir I. (Morecambe & Lonsdale)

Maitland, Cmdr. J. W.

Thornton-Kemsley, Col. C. N.

Fyfe, Rt. Hon. Sir David Maxwell

Manningham-Buller, R. E.

Thorp, Brig. R. A. F.

Gage, C. H.

Marlowe, A. A. H.

Tilney, John

Galbraith, Cmdr. T. D. (Pollok)

Marples, A. E.

Turner, H. F. L.

Gaibraith, T. G. D. (Hillhead)

Marshall, Douglas (Bodmin)

Turton, R. H.

Gammans, L. D.

Marshall, Sidney (Sutton)

Tweedsmuir, Lady

Garner-Evans, E. H. (Denbigh)

Maude, Angus (Ealing, S.)

Vane, W. M. F.

Gates, Maj. E. E.

Maude, John (Exeter)

Vaughan-Morgan, J. K.

Gomme-Dunean, Col. A.

Maudling, R.

Vosper, D. F.

Gridley, Sir Arnold

Medlicott, Brig. F.

Wakefield, Edward (Derbyshire, W.)

Grimston, Hon. John (St. Albans)

Mellor, Sir John

Wakefield, Sir Wavell (Marylebone)

Grimston, Robert (Westbury)

Molson, A. H. E.

Walker-Smith, D. C.

Harden, J. R. E.

Monckton, Sir Walter

Ward, Hon. George (Worcester)

Hare, Hon. J. H. (Woodbridge)

Moore, Lt.-Col. Sir Thomas

Ward, Miss I. (Tynemouth)

Harris, Frederic (Croydon, N.)

Morrison, John (Salisbury)

Waterhouse, Capt. Rt. Hon. C.

Harris, Reader (Heston)

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

Watkinson, H.

Harvey, Air-Codre. A. V. (Macclesfield)

Mott-Radclyffe, C. E.

Webbe, Sir H. (London & Westminster)

Harvey, Ian (Harrow, E.)

Nabarro, G.

Wheatley, Maj. M. J. (Poole)

1946

1947

White, Baker (Canterbury)

Wills, G.

York, C.

Williams, Charles (Torquay)

Wilson, Geoffrey (Truro)

Williams, Gerald (Tonbridge)

Winterton, Rt. Hon. Earl

TELLERS FOR THE NOES:

Williams, Sir Herbert (Croydon, E.)

Wood, Hon. R.

Major Conant and Mr. Heath.

Question put accordingly, "That the words proposed to be left out, to 'whether', in line 31, stand part of the Clause."
The Committee divided: Ayes, 292; Noes, 279.

Division No. 117.]

AYES

[5.35 a.m.

Acland, Sir Richard

Ede, Rt. Hon. J. C.

Key, Rt. Hon. C. W.

Adams, Richard

Edelman, M.

King, Dr. H. M.

Albu, A. H.

Edwards, John (Brighousa)

Kinghorn, Sn. Ldr.E.

Allen, Arthur (Bosworth)

Edwards, Rt. Hon. Ness (Caerphilly)

Kinley, J.

Allen, Scholefield (Crewe)

Edwards, W. J. (Stepney)

Lang, Gordon

Anderson, Alexander (Motherwell)

Evans, Albert (Islington, S. W.)

Lee, Frederick (Newton)

Anderson, Frank (Whitehaven)

Evans, Edward (Lowestoft)

Lee, Miss Jennie (Cannock)

Attlee, Rt. Hon. C. R.

Evans, Stanley (Wednesbury)

Lever, Harold (Cheetham)

Awbery, S. S.

Ewart, R.

Lever, Leslie (Ardwick)

Ayles, W. H.

Fernyhough, E.

Lewis, Arthur (West Ham, N.)

Bacon, Miss Alice

Field, Capt. W. J.

Lewis, John (Bolton, W.)

Baird, J.

Finch, H. J.

Lindgren, G. S.

Balfour, A.

Fletcher, Eric (Islington, E.)

Upton, Lt.-Col. M.

Barnes, Rt. Hon. A. J

Follick, M.

Logan, D. G.

Bartley, P.

Fool, M. M.

Longden, Fred (Small Heath)

Bellenger, Rt. Hon. F. J.

Forman, J. C.

McAllister, G.

Benn, Wedgwood

Fraser, Thomas (Hamilton)

MacColl, J. E.

Benson, G.

Freeman, John (Watford)

McGhee, H. G.

Beswick, F.

Freeman, Peter (Newport)

McGovern, J.

Sevan, Rt. Hon. A. (Ebbw Vale)

Gaitskell, Rt. Hon. H. T. N

McInnes, J.

Bing, G. H. C.

Ganley, Mrs. C. S.

Mack, J. D.

Blenkinsop, A.

Gibson, C. W.

McKay, John (Wallsend)

Blyton, W. R.

Gllzean, A.

Mackay, R. W. G. (Reading, N.)

Boardman, H.

Glanville, James (Consett)

McLeavy, F.

Booth, A.

Gooch, E. G.

MacMillan, Malcolm (Western Isles)

Bottomley, A. G.

Gordon-Walker, Rt. Hon. P. C.

McNeil, Rt. Hon. H.

Bowden, H. W.

Greenwood, Anthony (Rossendala)

MacPherson, Malcolm (Stirling)

Bowles, F. G. (Nuneaton)

Greenwood, Rt. Hn. Arthur (Wakefield)

Mainwaring, W. H.

Braddock, Mrs. Elizabeth

Grenfell, D. R.

Mallalieu, E. L. (Brigg)

Brook, Dryden (Halifax)

Grey, C. F.

Mallalieu, J. P. W. (Huddersfield, E.)

Brooks, T. J. (Normanton)

Griffiths, David (Rother Valley)

Mann, Mrs. Jean

Broughton, Dr. A. D. D.

Griffiths, Rt. Hon. James (Llanelly)

Manuel, A. C.

Brown, Rt. Hon. George (Belper)

Griffiths, William (Exchange)

Marquand, Rt. Hon. H. A.

Brown, Thomas (Ince)

Gunter, R. J.

Mathers, Rt. Hon. G.

Burke, W. A.

Hale, Joseph (Rochdale)

Mellish, R. J.

Burton, Miss E.

Hall, Rt. Hon. Glenvil (Colne Valley)

Messer, F.

Butler, Herbert (Hackney, S.)

Hall, John (Gateshead, W.)

Middleton, Mrs. L.

Callaghan, L. J.

Hamilton, W. W.

Mikardo, Ian.

Carmichael, J.

Hardman, D. R.

Mitchison, G. R.

Castle, Mrs. B. A.

Hargreaves, A.

Moeran, E. W.

Champion, A. J.

Hastings, S.

Monslow, W.

Chetwynd, G. R.

Hayman, F. H.

Moody, A. S.

Clunie, J.

Henderson, Rt. Hon. Arthur (Tipton)

Morgan, Dr. H. B.

Cocks, F. S.

Herbison, Miss M.

Morley, R.

Coldrick, W.

Hewitson, Capt. M.

Morris, Percy (Swansea, W.)

Collick, P.

Hobson, C. R.

Mort, D. L.

Collindridge, F.

Holman, P.

Moyle, A.

Cook, T. F.

Holmes, Horace (Hemsworth)

Mulley, F. W.

Cooper, Geoffrey (Middlesbrough, W.)

Houghton, D.

Murray, J. D.

Cooper, John (Deptford)

Hoy, J.

Nally, W.

Corbet, Mrs. Freda (Peckham)

Hubbard, T.

Neal, Harold (Bolsover)

Cove, W. G.

Hudson, James (Eating, N.)

Noel-Baker, Rt. Hon. P. J.

Craddock, George (Bradford, S.)

Hughes, Emrys (S. Ayrshire)

O'Brien, T.

Crawley, A.

Hughes, Hector (Aberdeen, N.)

Oldfield, W. H.

Crosland, C. A. R.

Hynd, H. (Accrington)

Oliver, G. H.

Crossman, R. H. S.

Hynd, J. B. (Attercliffe)

Orbach, M.

Cullen, Mrs. A.

Irvine, A. J. (Edge Hill)

Padley, W. E.

Daines, P.

Irving, W. J. Wood Green)

Paget, R. T.

Dalton, Rt. Hon. H.

Isaacs, Rt. Hon. G. A.

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Darling, George (Hillsborough)

Janner, B.

Paling, Will T. (Dewsbury)

Davies, A. Edward (Stoke, N.)

Jay, D. P. T.

Pannell, T. C.

Davies, Harold (Leek)

Jeger, George (Goole)

Pargiter, G. A.

Davies, Stephen (Merthyr)

Jenkins, R. H.

Parker J.

de Freitas, Geoffrey

Johnson, James (Rugby)

Paton, J.

Deer, G.

Johnston, Douglas (Paisley)

Pearson, A.

Delargy, H. J.

Jones, David (Hartlepool)

Peart, T. F.

Dodds, N. N.

Jones, Frederick Erwyn (West Ham, S.)

Popplewell, E.

Donnelly, D.

Jones, Jack (Rorherham)

Porter, G.

Driberg, T. E. N.

Jones, William Elwyn (Conway)

Price, Philips (Gloucestershire, W.)

Dugdale, Rt. Hon. John (W. Bromwich)

Keenan, W.

Proctor, W. T.

Bye, S.

Kenyon, C.

Pryde, D. J.

Pursey, Cmdr. H.

Steele, T.

Wells, Percy (Faversham)

Rankin, J.

Stewart, Michael (Fulham, E.)

Wells, William (Walsall)

Ren, Mrs. D.

Stokes, Rt. Hon. R. R.

West, D. G.

Reeves, J.

Strachey, Rt. Hon. J.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Reid, Thomas (Swindon)

Strauss, Rt. Hon. George (Vauxhall)

White, Mrs. Eirene (E. Flint)

Reid, William (Camlachie)

Stross, Dr. Barnett

White, Henry (Derbyshire, N. E.)

Rhodes, H.

Summerskill, Rt. Hon. Edith

Whiteley, Rt. Hon. W.

Richards, R.

Sylvester, G. O.

Wilcock, Group Capt. C. A.

Roberts, Rt. Hon. A.

Taylor, Bernard (Mansfield)

Wilkes, L.

Roberts, Goronwy (Caernarvonshire)

Taylor, Robert (Morpeth)

Wilkins, W. A.

Robertson, J. J. (Berwick)

Thomas, David (Aberdare)

Willey, Frederick (Sunderland)

Robinson, Kenneth (St. Pancras, N.)

Thomas, George (Cardiff)

Willey, Octavius (Cleveland)

Rogers, George (Kensington, N.)

Thomas, Iorwerth (Rhondda, W.)

Williams, David (Neath)

Ross, William

Thomas, Ivor Owen (Wrekin)

Williams, Rev. Llywelyn (Abertillery)

Royle, C.

Thorneycroft, Harry (Clayton)

Williams, Ronald (Wigan)

Shawcross, Rt. Hon. Sir Hartley

Thurtle, Ernest

Williams, Rt. Hon. Thomas (Don V'lly)

Shinwell, Rt. Hon. E.

Timmons, J.

Williams, W. T. (Hammersmith, S.)

Shurmer, P. L. E.

Tomney, F.

Wilson, Rt. Hon. Harold (Huyton)

Silverman, Julius (Erdington)

Turner-Samuels, M.

Winterbottom, Ian (Nottingham, C.)

Silverman, Sydney (Nelson)

Ungoed-Thomas, Sir Lynn

Winterbottom, Richard (Brightside)

Simmons, C. J.

Usborne, H.

Wise, F. J.

Slater, J.

Vernon, W. F.

Woodburn, Rt. Hon. A.

Smith, Ellis (Stoke, S.)

Viant, S. P.

Wyatt, W. L.

Smith, Norman (Nottingham, S.)

Wallace, H. W.

Yates, V. F.

Snow, J. W.

Watkins, T. E.

Younger, Rt. Hon. K

Sorensen, R. W.

Webb, Rt. Hon. M. (Bradford, C.)

Soskice, Rt. Hon. Sir Frank

Weitzman, D.

TELLERS FOR THE AYES:

Mr. Hannan and Mr. Sparks.

NOES

Aitken, W. T.

Crosthwaite-Eyre, Col. O. E.

Higgs, J. M. C.

Alport, C. J. M.

Crouch, R. F.

Hill, Dr. Charles (Luton)

Amery, Julian (Preston, N.)

Crowder, Capt. John (Finchley)

Hill, Mrs. E. (Wythenshawe)

Amory, Heathcoat (Tiverton)

Crowder, Petre (Ruislip—Northwood)

Hinchingbrooke, Viscount

Arbuthnot, John

Cundiff, F. W.

Hirst, Geoffrey

Ashton, H. (Chelmsford)

Cuthbert, W. N.

Hollis, M. C.

Assheton, Rt. Hon. R. (Blackburn, W.)

Davidson, Viscountess

Holmes, Sir Stanley (Harwich)

Astor, Hon. M. L.

Davies, Nigel (Epping)

Hope, Lord John

Baker, P. A. D.

de Chair, Somerset

Hopkinson, Henry

Baldock, Lt.-Cmdr. J. M.

De la Bère, R.

Hornsby-Smith, Miss P.

Baldwin, A. E.

Deedes, W. F.

Horsbrugh, Rt. Hon. Florence

Banks, Col. C.

Digby, S. Wingfield

Howard, Gerald (Cambridgeshire)

Baxter, A. B.

Dodds-Parker, A. D.

Howard, Greville (St. Ives)

Beamish, Maj. Tufton

Donner, P. W.

Hudson, Sir Austin (Lewisham, N.)

Bell, R. M.

Douglas-Hamilton, Lord Malcolm

Hudson, Rt. Hon. Robert (Southport)

Bennett, Dr. Reginald (Gosport)

Drayson, G. B.

Hudson, W. R. A. (Hull, N.)

Bennett, W. G. (Woodside)

Drewe, C.

Hurd, A. R.

Bevins, J. R. (Liverpool, Toxteth)

Dugdale, Maj. Sir Thomas (Richmond)

Hutchinson, Geoffrey (Ilford, N.)

Birch, Nigel

Duncan, Capt. J. A. L.

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Bishop, F. P.

Dunglass, Lord

Hutchison, Colonel James (Glasgow)

Black, C. W.

Duthie, W. S.

Hyde, Lt.-Col. H. M.

Boles, Lt.-Col. D. C. (Wells)

Eccles, D. M.

Hylton-Foster, H. B.

Boothby, R.

Eden, Rt. Hon. A.

Jennings, R.

Bossom, A. C.

Elliot, Rt. Hon. W. E.

Johnson, Howard (Kemptown)

Bowen, E. R. (Cardigan)

Erroll, F. J.

Jones, A. (Hall Green)

Boyd-Carpenter, J. A.

Fisher, Nigel

Joynson-Hicks, Hon. L. W.

Boyle, Sir Edward

Fort, R.

Kaberry, D.

Bracken, Rt. Hon. B.

Foster, John

Kerr, H. W. (Cambridge)

Braine, B. R.

Fraser, Hon. Hugh (Stone)

Kingsmill, Lt.-Col. W. H.

Braithwaite, Sir Albert (Harrow, W.)

Fraser, Sir I. (Morecambe & Lonsdale)

Lambert, Hon. G.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Fyfe, Rt. Hon. Sir David Maxwell

Lancaster, Col. C. G

Bromley-Davenport, Lt.-Col. W

Gage, C. H.

Langford-Holt, J.

Brooke, Henry (Hampstead)

Galbraith, Cmdr. T. D. (Pollok)

Law, Rt. Hon. R. K.

Browne, Jack (Govan)

Galbralth, T. G. D. (Hillhead)

Leather, E. H. C.

Buchan-Hepburn, P. G. T.

Gammans, L. D.

Legge-Bourke, Maj. E. A. H

Bullock, Capt. M.

Garner-Evans, E. H. (Denbigh)

Lennox-Boyd, A T.

Bullus, Wing Commander E. E

Gates, Maj. E. E.

Lindsay, Martin

Burden, F. A.

Gomme-Duncan, Col. A

Linstead, H. N.

Butcher, H. W.

Gridley, Sir Arnold

Llewellyn, D.

Butler, Rt. Hn. R. A. (Saffron Walden)

Grimston, Hon. John (St. Albans)

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Carr, Robert (Mitcham)

Grimston, Robert (Westbury)

Lloyd, Maj. Guy (Renfrew, E.)

Carson, Hon. E.

Harden, J. R. E,

Lloyd, Selwyn (Wirral)

Channon, H.

Hare, Hon. J. H. (Woodbridge)

Lockwood, Lt.-Col. J. C.

Clarke, Col. Ralph (East Grinslead)

Harris, Frederic (Croydon, N.)

Longden, Gilbert (Herts, S. W.)

Clarke, Brig. Terence (Portsmouth, W.)

Harris, Reader (Heston)

Low, A. R. W.

Clyde, J. L

Harvey, Air-Codre. A. V. (Macclesfield)

Lucas, Sir Jocelyn (Portsmouth, S.)

Colegate, A.

Harvey, Ian (Harrow, E.)

Lucas, P. B. (Brentford)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Harvie-Watt, Sir George

Lucas-Tooth, Sir Hugh

Cooper-Key, E. M

Hay, John

Lyttelton, Rt. Hon. O.

Corbett, Lt.-Col. Uvedale (Ludlow)

Head, Brig. A. H.

McAdden, S. J.

Craddock, Beresford (Spelthorne)

Heald, Lionel

McCorquodale, Rt. Hon. M. S.

Cranborne, Viscount

Heath, Edward

Macdonald, Sir Peter (I. of Wight)

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

Henderson, John (Cathcart)

Mackeson, Brig. H R

Hicks-Beach, Maj. W. W

McKibbin, A

McKie, J. H. (Galloway)

Peto, Brig. C. H. M.

Summers, G. S.

Maclay, Hon. John

Pickthorn, K.

Sutcliffe, H.

Maclean, Fitzroy

Pitman, I. J.

Taylor, Charles (Eastbourne)

MacLeod, Iain (Enfield, W.)

Powell, J. Enoch

Taylor, William (Bradford, N.)

MacLeod, John (Ross and Cromarty)

Price, Henry (Lewisham, W.)

Teeling, W.

Macmillan, Rt. Hon. Harold (Bromley)

Profumo, J. D.

Teevan, T. L.

Macpherson, Major Niall (Dumfries)

Raikes, H. V.

Thomas, J. P. L. (Hereford)

Maitland, Cmdr. J. W.

Rayner, Brig. R.

Thompson, Kenneth Pugh (Walton)

Manningham-Buller, R. E.

Redmayne, M.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Marlowe, A. A. H.

Remnant, Hon. P.

Thorneycroft, Peter (Monmouth)

Marples, A. E.

Renton, D. L. M.

Thornton-Kemsley, Col. C. N.

Marshall, Douglas (Bodmin)

Roberts, Maj. Peter (Heeley)

Thorp, Brig. R. A. F.

Marshall, Sidney (Sutton)

Robertson, Sir David (Caithness)

Tilney, John

Maude, Angus (Ealing, S.)

Robinson, Roland (Blackpool, S.)

Turner, H. F. L.

Maude, John (Exeter)

Robson-Brown, W.

Turton, R. H.

Maudling, R.

Rodgers, John (Sevenoaks)

Tweedsmuir, Lady

Medlicotl, Brig. F.

Roper, Sir Harold

Vane, W. M. F.

Mellor, Sir John

Ropner, Col. L.

Vaughan-Morgan, J. K.

Molson, A. H. E.

Russell, R. S.

Vosper, D.F.

Monckton, Sir Walter

Ryder, Capt. R. E. D.

Wakefield, Edward (Derbyshire, W.)

Moore, Lt.-Col. Sir Thomas

Salter, Rt. Hon. Sir Arthur

Wakefield, Sir Wavell (Marylebone)

Morrison, John (Salisbury)

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

Sandys, Rt. Hon. D.

Walker-Smith, D. C.

Mott-Radclyffe, C. E.

Shepherd, William

Ward, Hon. George (Worcester)

Nabarro, G.

Smiles, Lt.-Col. Sir Walter

Ward, Miss I. (Tynemouth)

Nicholls, Harmar

Smithers, Peter (Winchester)

Waterhouse, Capt. Rt. Hon. C.

Nicholson, G.

Smithers, Sir Waldron (Orpington)

Watkinson, H.

Niald, Basil (Chester)

Smyth, Brig. J. G. (Norwood)

Webbe, Sir H. (London & Westminster)

Noble, Cmdr. A. H. P.

Snadden, W. McN.

Wheatley, Major M. J. (Poole)

Nugent, G. R. H.

Soames, Capt. C.

White, Baker (Canterbury)

Nutting, Anthony

Spearman, A. C. M.

Williams, Charles (Torquay)

Oakshott, H. D.

Spence, H. R. (Aberdeenshire, W.)

Williams, Gerald (Tonbridge)

Odey, G. W.

Spens, Sir Patrick (Kensington, S.)

Williams, Sir Herbert (Croydon, E.)

O'Neill, Rt. Hon. Sir Hugh

Stanley, Capt. Hon. Richard (N Fylde)

Wills, G.

Ormsby-Gore, Hon. W. D.

Stevens, G. P.

Wilson, Geoffrey (Truro)

Orr, Capt. L. P. S.

Steward, W. A. (Woolwich, W.)

Winterton, Rt. Hon. Earl

Orr-Ewing, Charles Ian (Hendon, N.)

Stewart, Henderson (Fife, E.)

Wood, Hon. R.

Orr-Ewing, Ian L. (Weston-super-Mare)

Stoddart-Scott, Col. M.

York, C.

Osborne, C.

Storey, S.

Peake, Rt. Hon. O.

Strauss, Henry (Norwich, S.)

TELLERS FOR THE NOES:

Perkins, W. R. D.

Stuart, Rt. Hon. James (Moray)

Mr. Studholme and Major Conant.

5.45 a.m.
Mr. Manningham-Buller: I beg to move, in page 20, line 31, to leave out from "effected" to "was" in line 32.
I think it may be for the convenience of the Committee if, with this Amendment, we discussed two others, namely, in page 20. to leave out lines 38 to 41, and, in page 21, line 34, at the end, to insert:
(5) The expressions "transaction" or "transactions" in this section shall not include a transaction which was effected before the date of the passing of this Act or made in pursuance of a contract entered into before that date.
All these Amendments have some connection. I assume that it will still be possible for us to divide on each one.
The Deputy-Chairman: No. If the first Amendment falls, the others fall with it.
Mr. Manningham-Buller: One is consequential, I agree. I am not sure about the one on line 34, and in my explanation I shall state why I think it does not fall with the first Amendment.
Subsection (1) deals with transactions effected before or after the passing of this Bill. This extremely bad Clause—bad because it is far too wide, and goes further
1952
than is necessary to achieve the purpose which the Attorney-General has indicated—is bad also in this respect. So far as I can see, subsection (1) has unlimited retrospective effect. The proviso then says that the subsection does not apply to transactions completed before 10th April.
I am not sure that I understand the difference between the interpretation of "effected" and "completed." Obviously, some difference is intended, in view of the use of "effected" in line 31 and of "completed" in line 40. The effect of subsection (1) appears to be that it applies to every class of transaction no matter how long ago it was effected, but if it has been completed by 10th April, then it is outside the scope of the provision.
We have had before now long and somewhat controversial debates on retrospective legislation. Last year, when we were discussing the Finance Bill, we heard advanced what we thought to be cogent arguments to justify legislation based on the proposition that the individuals against whom the legislation was directed had received warning. There has been no warning in this case that any penal Clause such as this would have retrospective effect. It is wrong to penalise with-
out warning transactions which were perfectly lawful when entered into.
The proviso limiting retrospective effect is a proviso to subsection (1) and there is no similar limitation to subsection (3). Why should that proviso be inserted only in subsection (1)? It seems to us that subsection (3) is not intended to have unlimited retrospective effect, and that the limiting proviso should not be a proviso to subsection (1), but should be a proviso to the Clause. That is the reason for the third Amendment, in which we ask for a limitation on the retrospective effect of the whole Clause. I submit that the third Amendment does not automatically fall with the first Amendment, which applies only to subsection (1), if it is defeated. I advance that argument now to save time.
The Deputy-Chairman: I understood that the three Amendments went together and that the hon. and learned Gentleman thought the same until he found that I was not going to call the last one.
Mr. Manningham-Buller: I agree they go conveniently together for the purpose of discussion. It is convenient to discuss the whole retrospective effect of the Clause in one debate. It would be tiresome to discuss it on subsection (1) and then discuss the absence of any limiting words in subsection (3) in two separate debates, but they are two separate points.
The Deputy-Chairman: I am willing to allow a Division on the third of these three Amendments if there is no further discussion when we reach it.
Mr. Manningham-Buller: We shall be most obliged, if we are unsuccessful in securing any acceptance by the Government of the proposal in the first Amendment.
It is monstrous that this penal Clause should apply, as clearly it does in view of the speech of the right hon. and learned Gentleman on the last Amendment, to perfectly lawful and innocent transactions effected without intent of tax avoidance and probably a long time ago. It is in the hope that we might at least minimise to some extent an injustice which might flow from this Clause in its present form that I move this Amendment.
Viscount Hinchingbrooke: These Amendments are designed to remove a most mischievous part of this
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Clause. The Attorney-General, on the last Amendment, instanced several cases of transactions which came to light in the Inland Revenue, and which would be the type of transaction that this Clause seeks to incorporate within the Act. One of those cases appeared to be that of a large group of companies engaged in the retail trade. The Attorney-General said they were trying to avoid tax by a reduction in the size of the company by splitting it up into small units and thereby becoming entitled to some provision under previous Finance Acts.
That will be just the type of case which will be caught if this Clause becomes law. It is obviously a transaction started some months, or perhaps years, ago. It is obviously a case not completed before the year in question, because if it had been I doubt very much whether the Attorney-General would have brought it before the House now. He has no doubt been given that example by the Inland Revenue as one they desperately desire to catch by this provision.
But here is a business the directors and managers of which are anxious to know how they stand. Having started their operations in a legitimate way weeks, months or perhaps years ago, not believing they would be penalised, they find that, because of the retrospective nature of the Clause which we are now trying to amend, they are having to pay tax on the highest scale. I should have thought this case justified our moving this Amendment.
6.0 a.m.
Mr. J. Foster: The object of these Amendments is to get rid of the retrospective provision. One of the odd features of the Clause is that it talks of "transaction or transactions." The question was put on the previous Amendment as to what "transaction or transactions" meant. It is also relevant to this Amendment to know what is the difference between the singular and the plural, because if we look at the Clause we find that it says:
"Where the Commissioners are of the opinion that the main purpose or one of the main purposes for which any transaction or transactions was or were effected …"
they can take certain steps. It gives as an exception that if
"the transaction or, if there are more than one all the transactions were completed."
The draftsmen seem to have an idea that

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the transactions are connected, but nowhere do we see in the Clause what is the connection between the transactions.
Let me take an example. Suppose that a company took steps to set up a pension fund for their employees. That is a transaction which they are invited to undertake by the Finance Acts, because a tax inducement is given to them to undertake it. But this Bill apparently regards that step as harmful. Obviously, it is a transaction which will reduce profits.
Mr. Glenvil Hall: Nonsense.
Mr. Foster: It sounds nonsense, but then most of this Clause is nonsense. The right hon. Gentleman puts his finger on the spot. Where does he think it is nonsense?
Mr. Hall: The hon. and learned Gentleman should not talk like that. He knows very well that this Clause aims at people who are trying to avoid the payment of tax. He cannot say that to set up a superannuation fund under the law and to get the reliefs provided is to avoid the payment of tax.
Mr. Foster: That is the point. The Clause may aim at something but it does not hit it. It is because hon. Members opposite have not their wits about them that they cannot see that. I think I can satisfy the Committee that I am right here; it sounds absurd and it is absurd, but it is what the Clause says. I am sure the right hon. Gentleman will follow me in this. First of all, setting up a pension fund is a transaction. We can all agree about that. Secondly that pension fund will reduce the liability to Profits Tax. We can all agree about that. Therefore, if in setting up the fund the directors decide that they will set it up first of all because it reduces Profits Tax and secondly because they want to help their employees, then one of the main purposes is the reduction of Profits Tax and that is hit by this Clause.
Mr. Houghton: Rubbish.
Mr. Foster: I invite the hon. Member for Sowerby (Mr. Houghton) to say why he thinks that is rubbish.
Mr. Houghton: For the simple reason that the setting up of a pensions fund has as its main purpose the provision of superannuation benefits for employees.
Mr. Foster: That is one of the main purposes.
Mr. Houghton: I am expressing that as my opinion in support of the epithet which I hurled across the Floor. I invite any right hon. or hon. Gentleman opposite to state any case under the provisions of the 1941 Act or the 1944 Act dealing with avoidance of Excess Profits Duty where the setting up of a pension scheme was judged to have as one of its main purposes the avoidance of E.P.T.
Mr. Foster: The first answer is that, obviously one cannot deal with the Clauses as if they were law before they become law. The second answer is that, it is well known that in certain cases a pensions fund is sought to be set up because it reduces the liability to taxation.
Mr. Nally: With great respect, we cannot allow the hon. and learned Gentleman to get away with that. He was challenged by my hon. Friend on two previous occasions, where the same principle was involved, to state one single case and he did not accept that challenge. He now goes on to say that it is well known that in superannuation schemes, of which he presumably has knowledge, one of the main motives, if not the main motive, is the avoidance of tax.
I now invite the hon. and learned Gentleman to state any case. After all, we on this side have, from the trade union point of view, had some experience—I have myself—in drafting superannuation schemes. I invite the hon. and learned Gentleman to stand up in this Committee and give one solitary example from his own experience where a superannuation scheme of any company has been drafted for the prime purpose of avoiding tax. We shall be delighted to know the name.
Mr. Foster: It is an implicit inducement given in the Income Tax Act. That is the foolish part of the hon. Gentleman's intervention. The Income Tax Act gives an inducement to people by saying "If you do this in certain ways you will reduce your liability to taxation." Of course one of the main objects is to get off a bit of tax. It does not make any sense otherwise.

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I am only giving this instance in passing, and I am sorry that the result of the Clause was not appreciated by hon. Gentlemen opposite. I think it is a good thing that it should go out to the country that if companies set up pensions schemes and superannuation schemes they will find themselves caught by the provisions of this Clause. I was only giving that instance in order to show how the Clause really operates.
In one place the Clause refers to "transaction or transactions," but the value of that is not at all clear, because we catch a transaction by saying "transaction." If somebody else carries out another transaction it is still caught by the word "transaction"; we do not have to say "transaction or transactions." But we do have to say "transaction or transactions" if there is envisaged some connection between them. Under the Income Tax Act there may be a series of transactions which are connected together, but no word of that appears in this Clause.
Exception given to any transaction which was completed would be an understandable exception, but if there is more than one transaction all of them have to be completed but without any connection between them. Suppose before this Bill comes into force a company sets up a pension fund and also undertakes some other transaction, those are two transactions. Does it mean that because the company undertook more than one transaction before the coming into force of this Bill they have both to be completed? That is nonsense. This provision is complicated, and I have every sympathy with laymen.
Mr. Jack Jones: I heard the hon. and learned Gentleman say that many hon. Members on this side of the Committee would not have their wits about them at this time of the morning. I realised when working for 35 years in the steel industry that a man is not at his best at six o'clock in the morning, but I think we are witty enough and alive enough to realise what he is now telling us, and I want to have it put on record so that it can be told to the country, and particularly to his constituents in Northwich who work for Ludwig Mond, or Brunner Mond, of
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Is the hon. and learned Gentleman now telling his constituents that Ludwig Mond, or Brunner Mond, as the case may be, who was supposed to be magnanimous, and who was supposed to be giving the persons who worked for him a share in the profits and to be looking after them in their old age, was doing nothing of the sort, and that all he was doing in putting forward those schemes was avoiding paying legitimate tax?
Mr. Foster: The hon. Member is one argument behind, or two arguments behind. But there is no mystery about it. The Finance Act gave a tax inducement to the setting up of schemes.
Mr. Jones: That is not the point.
Mr. Foster: I am trying to put the facts clearly before the hon. Member, because I do not think that he is aware of them. The second point is that, this inducement having been given, people took advantage of it. One of their motives in taking advantage of it is obviously to take advantage of this concession.
The Finance Acts give this concession because, through the high rates of taxation, it would be uneconomic, or impossible, for employers to provide these schemes without the advantage given by the Finance Act. Therefore the answer is that one of the main purposes is to look after the employees, as every decent employer should, and the other purpose is to take advantage of the tax concession given by the Finance Act.
Mr. Jones: That is not the primary consideration.
Mr. Foster: One can check whether it is the primary purpose. There are two, three, four, or five ways of doing it. [Interruption.] I did give way. The hon. Member made a very tendentious intervention, and I am trying to answer it. Although it is 6.10 a.m. I am trying to deal with it as though he were asking a serious question. [Interruption.] It is difficult for me to answer if hon. Members will not let me finish a sentence. The answer to the question is that there are expensive ways of having superannuation schemes, and there are cheap ways. In other words, one can arrange one's pension scheme so that a great part of it is deductible for expenses. I do not think that the hon. Member would blame any

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company for taking advantage of the tax inducement provided by the Finance Act.
That brings me to an important point in regard to this Amendment. This Clause makes it imperative for any company always to choose the expensive way; because if it chooses the cheap way, one of its main purposes has been to avoid Profits Tax. Therefore, the Attorney-General said in his speech on one of the previous Amendments, if it was found that by doing it one way it has reduced its liability to Profits Tax, the transaction must be undone notionally and the company must be made to do it the expensive way. It has to do it in the expensive way in which it does not require to get the permission of the Commissioners and where, I think, all, or most, of the expenses for setting up a superannuation scheme are not deductible from profits.
But I have not reached the beginning of my illustration. I would say that the curious part about this Clause is the using of the words "transaction or transactions." The exemption which the second Amendment under discussion removes—but only to introduce a wider exemption—deals with the words "transaction or transactions." I should like to ask the Attorney-General what is the connection, or must there be a connection, between different transactions. If there must be a connection, what is it? Is it contained in the Bill, or must we guess what it is? Will it be a matter of interpretation by the Commissioners?
6.15 a.m.
If one says there are more than one, and all the transactions are completed, does that mean that one counts them like sheep—transaction one, transaction two, three, four—or does it mean that they have to be connected? What we are suggesting is that retrospective legislation in this instance is to be avoided, and that, therefore, the Amendment should be made in line 31 and that then the exemption should be removed, and the other Amendment inserted.
The general effect of the last Amendment is to protect any transaction begun pursuant to a contract coming into force before the coming into effect of this Bill, or before a certain date; I have not got it before me. The Amendments will then make clear that which in my submission is just,
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that no transaction brought into effect by contract should be hit by this Clause if no warning was given. That introduces a limitation on subsection (3), which at the moment has not even the proviso attached to subsection (1).
The latter provides that if one, or all the transactions are completed, the subsection shall not apply; but it does seem that in subsection (3), the transactions envisaged can be before, or after, the date of the exception in subsection (1) and no limitation can ensue. It is possible that, as subsection (3) is a section deeming something to have happened, it may be that no exception is required. As it is not operative on its own, but only refers back to the preceding provision, no limitation is required.
The main point of the Amendment is that it is not possible to see exactly what the contrast between the words "effected" and "completed" may be. It seems to be implied that a transaction can be effected without its being completed; but that, I think, will be a conception which may well lead to difficulties. The ordinary interpretation is that, if one effects something, one has completed it. If one does an act it usually means that one has completed it. The Attorney-General should tell us how he views the difference in wording between "effected" and "completed," because it might very well be said that a transaction which was effected before the passing of the Act would have been automatically completed.
One could have a series of transactions, some effected, and others contemplated, and, therefore, the proviso would not result in an exception. As I say, the wording is very complicated and the explanation must necessarily be complicated, and the questions must be complicated. That is not the fault of the Opposition. It is, I think, important in this case to realise that not only has the harmful principle of retrospective legislation been brought in but it is being made to operate on words which are not clear. It is bad enough to have retrospective legislation but at least the taxpayer should know where he stands.
If something was made liable to tax, which before this Bill was not liable to tax, it is essential that the taxpayer should at least know what transactions are liable to tax and what transactions he can consider he has effected, and which transactions he can consider he has completed.

1961
There is no definition of "transaction or transactions" in this Bill. It is hard enough to differentiate between what is a transaction and what is not a transaction. Is the payment of a dividend a transaction? If one sets up a pension fund, is the setting up of it a transaction, or is the continuing investment or reinvestment of the pension fund a transaction?
The Attorney-General very often does not meet the points which are put to him. He tries, I think, but he himself is overwhelmed by the complexity of this Bill and also by the fact that these expressions in this Clause are incapable of precise explanation. I would submit to him that as regards retrospective legislation that is more harmful than the introduction of the principle itself. If one gets a combination of the two evils, retrospective legislation and obscure legislation, the taxpayer cannot know where he stands, and cannot know what transactions he has entered into will come within the scope of this Clause.
For these reasons, I ask the Attorney-General if he will first explain what the Clause means, if he will explain to us what "transactions" entails when it is coupled with the words
"if there are more than one"
transaction, and if he will tell the Committee how he views the words "effective" and "complete."
The Attorney-General: I really do not think that this Clause is anything like as complicated or difficult as has been made out. I shall briefly address myself to the questions asked, first, with regard to the justification of this provision going back to Budget day, which is what it does. There was given a very clear warning, in general terms, I know, by the Chancellor in his Budget speech, and I will read it. He said:
"Finally, I propose to provide against avoidance of Profits Tax, in particular against arrangements for reducing Profits Tax liability by the issue of bonus shares coupled with redemption of capital, and also against avoidance of Profits Tax and Income Tax by switching profits from one associated concern to another."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 857.]
He referred there compendiously to all the Clauses he proposed to introduce. He did not describe this one in terms, but gave the clearest possible indication that
1962
those who are minded to avoid Profits Tax were likely to find in the Finance Bill a Clause designed to prevent them from so doing. I should have thought that was ample justification for making this Clause retrospective to Budget day.
The Amendment seeks to prevent it from operating until the Bill is passed. If that Amendment were passed it would be a field day for all would-be avoiders. They would have two months, or whatever the appropriate period is, to get down to working out their avoidance schemes and, no doubt, they would reap a rich harvest. I cannot think that it is seriously proposed that such an opportunity should be given by the terms of this Bill to those minded to put their taxation burdens on to the shoulders of their fellow citizens.
With regard to the specific points asked, I should have thought that subsection (3) is quite clearly limited in time to the time limit provided for subsection (1). Subsection (3) provides that where the given circumstances obtain, the avoidance or reduction of liability to the Profits Tax shall be deemed for the purposes of this Clause to have been the purpose. That has absolutely no effect unless it is a transaction which is within the time limits laid down in subsection (1), and those time limits are perfectly clearly specified in the proviso. Whatever "effected" means in the earlier part of subsection (1), the time limit which appears in the proviso clearly avoids any transaction being brought within the scope of the Clause, whether by subsections (1) or (3), if it is a transaction or a series of transactions completed before Budget day.
The hon. and learned Gentleman asked what was meant by the expression "transaction or transactions". If he would look more closely at the opening sentences of subsection (1) he would see that what is there intended is that we may have a single transaction or we may have a series of transactions—
Mr. J. Foster Mr. J. Foster indicated dissent.
The Attorney-General: The hon. and learned Gentleman shakes his head, if I may say so, characteristically, before I have said what I want to say. We may have a transaction or a series of transactions bound together by this: that the

1963
purpose which is protected in the subsection is common to all of them. The words are:
"the main purpose or one of the main purposes for which any transaction or transactions was or were effected …"
Where there are more transactions than one, we must find a situation in which we can say that the purpose at which we are looking is a purpose that is common to all. That is another way of simply saying that they must form part of one scheme or that, where there is one transaction or more than one each forming part of one scheme, then the Clause does not apply to them if the individual transaction or the series of transactions which form the scheme were completed before Budget day.
I think that the Amendments which are suggested not only do not improve the Clause, but would have a most disastrous effect, because they would be inviting all those who are minded to avoid the tax to get down to it and to do as much as they can until the Bill becomes an Act.
Mr. Pickthorn: I think that the Committee might have been saved time if the Attorney-General had explained to us what he took "transaction or transactions" to mean before the Government moved the Closure on the previous debate, rather than waiting for this one. Even now, with respect and without being so certain as was the hon. Member for Rotherham (Mr. Jack Jones) that I have all my wits about me at this time, I do not think the matter is wholly plain.
The Attorney-General imported into his explanation the word "series." But there is nothing about "series" in the Clause as drafted, and the whole argument is vitiated by the importation of that word. Even if we are—and I cannot think how either the Attorney-General or the draughtsman thought we were—to guess that the word "series" should be there, even then it is not quite easy to see the relation between "transaction or transactions" on line 3, page 21, and the same words in subsection 1, because on the second occasion, that is in page 21, it is:
"If it appears in the case of any transaction or transactions, being a transaction which involves, or transactions, one or more of which involve …."
1964
6.30 a.m.
That appears to contemplate a series of transactions at least one of which has in it two vices. Is that not right? [Interruption.] I am trying to understand a rather difficult bit of draughtsmanship. That seems to me to mean something quite different from what the words mean in subsection (1) just as similarly, I cannot understand the Attorney-General's apparent assumption that "effect" and "complete" are wholly identical words. I thought it was one of the normal rules of interpretation to suppose that, especially when they follow each other, two words meaning nearly, but not quite, the same are used, the almost irrebuttable assumption is that the two words are used because their meaning is different to the other.
I did think it was just possible that they had some connection with the actual meaning of the word transaction—just possible that it was thought that the transaction which required agreement between two parties—I do not know if the Minister is helping the Attorney-General but he is rather hindering me. [Interruption.] I am sorry I am physically not so good at doing it as I generally am.
An Hon. Member: The hon. Gentleman's arrogance is quite as good as usual.
Mr. Pickthorn: I do not know at this time whether it is in order for us to bandy across the floor of the Committee judgments of the moral qualities of each other, but I do not think it would be very helpful.
I did think it was just possible it was considered that "transaction" would necessarily involve two parties, and it might be effected without being completed. I do not think that is a very good explanation of this change of words, but it is the best that has occurred to me so far. If there is some better one, I think the Attorney-General ought already to have explained it to us, and I hope he will now do so. If the words are just designed by chance, like grains of pepper out of a pepper pot, then I do not think this provision should go further without Amendment.
Viscount Hinchingbrooke: I feel compelled to make a short and emphatic protest against this idea of the right hon. and learned Gentleman. He has now

1965
announced twice in the course of the debate that in some way the burden of taxation is shifted on to other groups in the community, one particular set of persons, or group of companies claiming to be relieved of the taxation. People bear the tax according to the assessment of tax made against them, and the right hon. and learned Gentleman is quite wrong to try and put a political gloss on this and say other sections of the community would feel aggrieved because we on this side of the Committee are quite legitimately trying to see whether a particular group of companies are being unduly penalised and compelled to pay taxation where they should not do so. I do not think the right hon. and learned Gentleman should be able to get away with this idea.
Mr. Hugh Fraser: The Attorney-General has not convinced us of the Tightness or desirability of making this Clause retrospective. He referred to some warnings issued by the Chancellor during his Budget oration, chiefly concentrated round the question of bonus issues. On this side of the House and in well informed sections of the community, one of the things we think that Socialists really know nothing about is bonus issues in industry.
But whatever the warning may have been, there is no question that this Clause is one of great gravity to the whole of the business community in this country. Once this type of rule, not by law, but by whim has been introduced, it will mean that next year, if this Government is in office—which, thank Heavens, is unlikely—it will be applied to every variety of tax. It applies here to the Profits Tax, but there is nothing to prevent this Government pushing it forward to cover every variety of tax. Under this Clause the Income Tax authorities are the detectives, the accusers, the police, and the judges of the victim, who, as often as not, will be an innocent one.
As my hon. and learned Friend has pointed out in an able speech ploughing through the immense difficulties and discrepancies of this Clause, it is perfectly possible for a superannuation scheme under certain circumstances to be regarded as having the partial function of avoiding taxation and, therefore, to be subject to the intervention of the Income Tax Commissioners. The same sort of
1966
thing is happening as we have seen in the past under this Government.
As my hon. Friend the Member for Chippenham (Mr. Eccles) pointed out, tax evasion is growing, owing to bad government and high taxation. [Interruption.] It is all very well for hon. Members to talk about encouragement, but we have seen the sort of person who gets through the net—Sidney Stanley and that type. It is precisely this type of legislation which will hit the innocent company. The clever sharks, the clever type of person with whom too many people in this House were friendly, will avoid this.
To bring forward this type of Clause without much fuller consideration than we have been allowed to give it tonight is something of a minor scandal. If this type of legislation is brought in, as it is being brought in by the Government, it means automatically that innocent people will be affected, ordinary innocent moves will be suspect. Right through there will be built up a sense of fear and a sense of an incipient Gestapo.
It has been said that the liberties of a country never go overnight; they go slowly. But they go fairly fast when hon. Gentlemen opposite bring forward this type of legislation, which will pry into everybody's affairs and which, at the whim of the wrong people in office, might condemn any activity of any company on the grounds that one of its purposes, however remote, may have been designed to avoid liability to taxation.
Sir Wavell Wakefield: Hon. Members opposite have challenged us to give any single instance in which this Clause would affect any superannuation scheme. I knew a case, two or three years ago, in which a superannuation scheme was being worked out for certain directors, and the whole purpose was to avoid taxation. I know of an instance now, where a superannuation scheme is being considered for two working directors, and the whole purpose is to avoid taxation. It is clear that the Commissioners have certain powers when they are of opinion that one of the purposes of a transaction is to avoid taxation.
It is no good assurances being given from the other side. Only last year an assurance was given that a Clause would not have certain effects, but the Inland Revenue took what was in the Clause,

1967
not the assurance of the Minister. In this Bill an Amendment is being moved to try and put right what took place last year. This is a bad Clause, great difficulty will be caused, genuine and innocent people will be harmed and industry will be hurt. This is another example of the mess and muddle of this Government.
Mr. Houghton: It is time a protest came from these benches. What we are getting from the other side is synthetic indignation. The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) claims no support from successive Royal Commissions on Income Tax from the doctrine that the payment of tax is a personal assessment unaccompanied by civic responsibility. The Royal Commission of 1919–20, in its comments on the tax evader, said it was equivalent to putting his hand in his neighbour's pocket. There can be no moral judgment stronger than that.
Several hon. Members opposite, including the two who spoke last, have referred to this Clause as if we had never seen its like before. Yet the first nine lines of subsection (1) are an exact copy of what appeared in the Finance Act. 1941, Section 35 (1). All the words complained of—"main purpose or one of the main purposes," "transaction or transactions"—have all appeared before. All the contentious words in this Clause appeared ten years ago in the Finance Act of 1941.
6.45 a.m.
With regard to retrospection, the E.P.T. retrospection provisions were retrospective not to Budget day, but to the beginning of E.P.T. When these provisions were strengthened in Section 33 (3) of the 1944 Finance Act, the strengthened provisions were made retrospective to the beginning of E.P.T., four years previously. I fear that hon. Gentlemen have not informed themselves on the history of this matter. If they look at Section 33 (3) of the 1944 Act, they will find embodied in that Act further words which govern the application of the retrospective Clause, which is the subject of contention in the present Bill.
As we have had such a long experience of provisions to check tax avoidance similar to these in the Bill, why have we not had cases cited to us where the Inland
1968
Revenue authorities had behaved badly and where the Special Commissioners had judged wrongly, maliciously and unjustly? We have not had a single case of the bad administration of these anti-avoidance provisions in earlier Acts as evidence against limiting them for the purpose of Profits Tax avoidance in the Bill before us. I think we are entitled to ask: what is all this fuss about?
Mr. Manningham-Buller: I can well understand the hon. Gentleman asking that question because from his speech it is obvious, although he "hotted up" a lot of synthetic sentiment, that he was otherwise engaged during the earlier part of the debate.
Mr. Houghton: I must refute that. I have sat in this Committee since proceedings commenced.
Mr. Manningham-Buller: I did not say the hon. Gentleman had been absent from the Committee. I said he must have been otherwise engaged.
Mr. Houghton: That is equally offensive.
Mr. Manningham-Buller: If he had been awake and alert, the hon. Gentleman could not have failed to hear my hon. Friend the Member for Chippenham (Mr. Eccles), in the course of moving the first Amendment to this Clause, refer to the previous legislation on which the hon. Gentleman has now treated us to the lengthy lecture. We are well aware of the Section to which he refers and to the history of war-time legislation. If the hon. Gentleman had remained alert, he might also have heard the Attorney-General say he was not prepared to rest his case on war-time legislation.
Mr. Houghton: I was not basing the case for the Clause in this Bill upon what was embodied in the 1941 and 1944 Acts. I was merely saying that we had experience of similar provisions and asked for evidence that they had been misapplied.
Mr. Manningham-Buller: I was dealing with the hon. Gentleman's speech point by point, and the first part—and a rather boring part in view of the history of the debate—was when he reminded the Committee, at great length, of the similarity between this Clause and earlier legislation. I have dealt with that. He asked

1969
for examples of bad administration in earlier legislation.
We are concerned with the width of the legislation. It is a bad precedent to give the Executive wider powers than is necessary to achieve their purpose. That is our objection to the Clause. We oppose tax dodging and tax evasion as much as does the hon. Gentleman, but we say that the Clause goes far further than is necessary to stop it. In speaking of the absence of instances of bad administration from the past the hon. Gentleman does not in any way show that the wording of this Clause is satisfactory and is not liable to great abuse. That is the danger.
Having answered the hon. Gentleman as briefly as I can, I would now turn to the speech of the right hon. and learned Gentleman. In dealing with the point about retrospection he said that the reference to "transactions" means a series of transactions, a scheme of transactions, a number of transactions all connected or inter-linked to achieve one purpose. I do not read the Clause as being so limited. It seems to me that there is no real connection between the transactions indicated in the Clause. I ask the right hon. and learned Gentleman to give further consideration to that point so as to make the meaning which he expresses clearer in the Clause.
In his speech the right hon. and learned Gentleman treated the word "effected" as having precisely the same meaning as "completed." I should have thought they had the same meaning, but because the two words are used in different contexts in the same Clause I feel there is some risk that when the phrase "the transaction is effected" is used it may be interpreted as meaning the actual making of an agreement for the transaction, whereas the completion might apply to the Executive. If they are intended to mean the same thing, and if it is simply meant that the Clause shall be retrospective to 10th April, I ask the right hon. and learned Gentleman to say that he will make Amendments.
Thirdly, it should be made quite clear by the alteration of the decisions of the retrospective proviso that it is applicable to Clause 3. If the right hon. and learned Gentleman will say that he will reconsider the Clause in all those connections no doubt he will effect some improvement, but as it is, in view of his explanation of
1970
the meaning which, in my view, is not completely carried out by the present wording, we must divide the Committee in support of the Amendment.
Mr. Nally: Whatever the truth of the situation, we can always rely on the hon. and learned Gentleman for Northants, South (Mr. Manningham-Buller) even at this hour to produce the slightly mildewed ham and go through exactly the same performances as is usual from him on these occasions. My hon. Friend the Member for Sowerby (Mr. Houghton) asked for, and did not receive, even from the hon. and learned Gentleman, one simple illustration of where injustice was done when similar legislation was enforced in the past. It is the sort of county court mind, which the layman would not use, the Hundred Court mind—
Mr. Hutchinson: Does not the hon. Gentleman appreciate that that is extremely disrespectful to a very ancient and well-established tribunal?
Mr. Nally: It is very ancient and well-established, but I have heard better pleading from office boys—I was a solicitor's office boy in previous employment—than we have heard tonight. I mean no disrespect to that court. I have heard a 16-year old before that court plead far more ably than the pleading from the Opposition Front Bench tonight. Only two Members have spoken from this side of the Committee on the Amendment, while five have spoken from the other side. To each speaker from the benches opposite we have said, "Give us one case of injustice being done." Hon. Members opposite began with the allegation that superannuation schemes had been introduced with evasion of tax as one of its main purposes.
Sir W. Wakefield: Avoidance.
Mr. Nally: All right, avoidance of tax. I could not care less. I invite any Member of the Opposition now to get up and tell us what particular firm he has in mind, where the main purpose or one of the main purposes of introducing a superannuation scheme was the avoidance of tax. Three times has it been said from the Opposition benches that this is one of the purposes. Now can we have from hon. Members opposite, who have referred to this continually, one single case of any superannuation scheme, large or

1971
small, whether for employees or for directors, introduced by a company whose main purpose, or one of whose main purposes, was the avoidance of tax?
Mr. Pitman: I think I can oblige the hon. Gentleman by giving the name of my own firm. In this matter of superannuation funds there is a submission of an estimate from an insurance company under the group insurance scheme, and there set out, as part of the story, is the net cost; that is to say, the cost after taking Income Tax into consideration; and for the future it will be an aggregated sum of Income Tax and Profits Tax. The facts of that situation are, and will be, laid in front of every company that considers any superannuation fund at any time, and it is wholly academic and wholly stupid to say that the consideration of Income Tax is not a main factor in the decision to put a superannuation fund into force.
Mr. Nally: The hon. Gentleman is confessing what seems to me to be a very small sin, if it be a sin at all. I can only hope, looking along the benches opposite, that we could have the same full and frank explanation from others. It seems to me that the hon. Gentleman has nothing at all to worry about. He has said himself that the thing was openly declared, and what it was intended to do. The purpose of it was to benefit the company; it was honestly decided upon and honestly administered. But if I read this Clause aright
"the main purpose or one of the main purposes for which any transaction or transactions … was the avoidance or reduction"—
Mr. Pitman: "Or reduction."
7.0 a.m.
Mr. Nally: I know sufficient about the hon. Gentleman's company to know that neither the main purpose nor one of the main purposes of the transaction which he has just been kind enough to describe to the Committee was to avoid or to evade tax payment.
Let me now go on to make this further point. The Opposition—including the hon. Member for Stafford and Stone (Mr. H. Fraser), that elongated streak of political misery—[HON. MEMBERS: "Withdraw."] Certainly not. I will repeat it, if necessary. The hon. Gentleman
1972
introduced certain names into the discussion. Let us make it perfectly clear what the Opposition are doing, despite, if I may say so, the point made by the hon. Member for Bath (Mr. Pitman). This is the best defence of pin-table saloon proprietors that this Committee has ever heard. We are not talking about the company of the hon. Member for Bath in terms of tax evasion. We are not talking about the honest, decent company which introduces a superannuation scheme, or the honest company that makes other similar provisions.
The Clause is perfectly clear in its first five or ten lines. We are not talking about those. We are talking about the pin-table boys, or the people who run greyhound tracks, or companies who do this sort of thing. Some companies have an arrangement with motorcar distributors. The Company gets a new motorcar and transfers it, as it is perfectly entitled to do, for the personal use of a director. At the expiry of the covenant that motorcar is sold to that director at a nominal price, and the director then sells it, getting another new car in its place, at a vastly inflated price. Now, where the original cost has been met by the company—
Brigadier Thorp: Is this in order?
Mr. Nally: Certainly I am in order. Where the original cost has been met by the company the Commissioners would at any rate be entitled to investigate whether or not that car transaction was an avoidance of tax, and they would be entitled, under the terms of this Clause—which the Opposition seek to weaken—to investigate the circumstances of the transaction.
Hypocrisy is always unwholesome, and I see no more reason why we on these benches should tolerate it from the Opposition at seven o'clock in the morning as at seven o'clock at night. It ought to be made perfectly plain in the country that, despite the fact that the motives are completely honest in many cases, what the Opposition are trying to do is to weaken the policy of the Government in dealing with those who seek to evade tax and who seek to evade their fair obligations, and to that extent I hope that we shall not have from our own Government Front Bench any weakness in this matter.
Lieut.-Commander Braithwaite: We are pleased to have had the two contributions from the benches opposite. But at the conclusion of what I am sure hon. Members opposite will agree has been a very good tempered all-night Sitting, I am sorry that the hon. Member for Bilston (Mr. Nally), who has now apparently assumed very much more responsibility in the party opposite, should have been the first to strike a jarring note. But I think we must be grateful to him, despite the fact that some of his remarks were, I thought, unnecessarily offensive.
At the same time, I think that he put his finger upon the weakness of this Clause more effectively than have some of my hon. Friends, because after speaking of two or three instances of superannuation funds being established which had the consequences laid down in the Clause, he brought to his feet the hon. Member for Bath (Mr. Pitman) who, with great frankness, told the Committee that his own firm had such a scheme, whereupon the hon. Member for Bilston went on to say that he need not worry, and that he was all right.
Mr. Nally: I trust him.
Lieut.-Commander Braithwaite: But that is the whole point. If the Clause stands part of the Bill my hon. Friend will no longer be all right. That is the whole point of our opposition to this Clause. If the Clause stands part of the Bill my hon. Friend will be unable to do the same in the future.
I feel sure that, despite the extremely painstaking explanations of the learned Attorney-General, there is in this Clause a very serious fault. It has been disclosed by the hon. Member for Bilston, who, by his vitriolic methods, has obtained results which we failed to get by our arguments. So I would suggest that there is very great force in the objections which have been put forward, if the intention is that laid down by the hon. Member for Sowerby (Mr. Houghton), who, after all, is an expert on this subject, and, I think, briefed his hon. Friend adequately, but with some unfortunate expressions.
I suggest that the intention is not fulfilled by the present wording of Clause 28, if it be the intention set forth by the hon. Member for Bilston. So, even at this late hour, and after a Sitting which has lasted so long, and though it is a heavy burden upon the Attorney-General, who has been so courteous throughout the night, he must be asked to consider once again the redrafting of this Clause between now and the Report stage. I know that that is grievous at this hour, and after all the work he has put into it; but I feel that it will have to be done again if only to satisfy the hon. Member for Bilston, who is such a formidable contestant for the leadership of the Government.
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place, and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 290; Noes, 278.

Division No. 118.]

AYES

[7.10 a.m.

Acland, Sir Richard

Bowden, H. W.

Craddock, George (Bradford, S.)

Adams, Richard

Bowles, F. G. (Nuneaton)

Crawley, A.

Albu, A. H.

Braddook, Mrs. Elizabeth

Crosland, C. A. R.

Allen, Arthur (Bosworth)

Brook, Dryden (Halifax)

Crossman, R. H. S.

Allen, Scholefield (Crewe)

Brooks, T. J. (Normanton)

Cullen, Mrs. A.

Anderson, Alexander (Motherwell)

Broughton, Dr. A. D. D.

Daines, P.

Anderson, Frank (Whitehaven)

Brown, Rt. Hon. George (Belper)

Dalton, Rt. Hon. H.

Attlee, Rt. Hon. C. R.

Brown, Thomas (Ince)

Darling, George (Hillsborough)

Awbery, S. S.

Burke, W. A.

Davies, A. Edward (Stoke, N.)

Ayles, W. H.

Burton, Miss E.

Davies, Harold (Leek)

Bacon, Mils Alice

Butler, Herbert (Hackney, S.)

Davies, Stephen (Merthyr)

Baird, J.

Callaghan, L. J.

de Freitas, Geoffrey

Balfour, A.

Carmichael, J.

Deer, G.

Barnes, Rt. Hon. A. J.

Castle, Mrs. B. A

Dodds, N. N.

Hartley, P.

Champion, A. J.

Donnelly, D.

Bellenger, Rt. Hon. F. J.

Chetwynd, G. R.

Driberg, T. E. N.

Benn, Wedgwood

Clunie, J.

Dugdale, Rt. Hon. John (W. Bromwich)

Benson, G.

Cocks, F. S.

Dye, S.

Beswck, F.

Coldrick, W.

Ede, Rt. Hon. J. C.

Sevan, Rt. Hon. A. (Ebbw Vale)

Collick, P.

Edelman, M.

Bing, G. H. C.

Collidridge, F.

Edwards John (Brighouse)

Blenkinsop, A.

Cook, T. F.

Edwards, Rt. Hon. Ness (Caerphilly)

Blyton, W. R.

Cooper, Geoffrey (Middlesbrough, W.)

Edwards, W. J. (Stepney)

Boardman, H.

Cooper, John (Deptford)

Evans, Albert (Islington, S. W.)

Booth, A.

Corbel, Mrs. Freda (Peekham)

Evans, Edward (Lowestoft)

Bottomley, A. G.

Cove, W. G.

Evans, Stanley (Wednesbury)

Ewarl, R.

Lever, Harold (Cheetham)

Robinson, Kenneth (St. Pancras, N.)

Fernyhough, E.

Lever, Leslie (Ardwick)

Rogers, George (Kensington, N.)

Field, Capt. W. J.

Lewis, Arthur (West Ham, N.)

Ross, William

Finch, H. J.

Lewis, John (Bolton, W.)

Royle, C.

Fletcher, Erie (Islington, E.)

Lindgren, G. S.

Shawcross, Rt. Hon. Sir Harlley

Follick, M.

Lipton, Lt.-Col. M.

Shinwell, Rt. Hon. E.

Foot, M. M.

Logan, D. G.

Shurmer, P. L. E.

Forman, J. C.

Longden, Fred (Small Heath)

Silverman, Julius (Erdington)

Fraser, Thomas ('Hamilton)

McAllister, G.

Silverman, Sydney (Nelson)

Freeman, John (Watford)

MacColl, J. E.

Simmons, C. J.

Freeman, Peter (Newport)

McGhee, H. G.

Slater, J.

Gaitskell, Rt. Hon. H. T. N

McGovern, J.

Smith, Ellis (Stoke, S.)

Ganley, Mrs. C. S.

McInnes, J.

Smith, Norman (Nottingham, S.)

Gibson, C. W.

Mack, J. D.

Snow, J. W.

Gilzean, A.

Mackay, R. W. G. (Reading, N.)

Sorensen, R. W.

Glanville, James (Consett)

McLeavy, F

Soskice, Rt. Hon. Sir Frank

Gooeh, E. G.

MacMillan, Malcolm (Western Isles)

Sparks, J. A.

Gordon-Walker, Rt. Hon. P. C.

McNeil, Rt. Hon. H.

Steele, T.

Greenwood, Anthony (Rossendale)

MacPherson, Malcolm (Stirling)

Stewart, Michael (Fulham, E.)

Greenwood, Rt. Hn. Arthur (Wakefield)

Mainwaring, W. H.

Stokes, Rt. Hon. R. R.

Grenfell, D. R.

Mallalieu, E. L. (Brigg)

Strachey, Rt. Hon. J.

Grey, C. F.

Mallalieu, J. P. W. (Huddersfield, E.)

Strauss, Rt. Hon. George (Vauxhall)

Griffiths, David (Rother Valley)

Mann, Mrs. Jean

Stross, Dr. Barnett

Griffiths, Rt. Hon. James (Llanelly)

Manuel, A. C.

Summerskill, Rt. Hon. Edith

Griffiths, William (Exchange)

Marquand, Rt. Hon. H. A.

Sylvester, G. O.

Gunter, R. J.

Mathers, Rt. Hon. G

Taylor, Bernard (Mansfield)

Hale, Joseph (Rochdale)

Mellish, R. J.

Taylor, Robert (Morpeth)

Messer, F.

Hall, Rt. Hon. Glenvil (Colne Valley)

Middleton, Mrs. L.

Thomas, David (Aberdare)

Hall, John (Gateshead, W.)

Mikarde, Ian.

Thomas, George (Cardiff)

Hamilton, W. W.

Mitchison, G. R.

Thomas, Iorwerth (Rhondda, W.)

Hannan, W.

Moeran, E. W.

Thomas, Ivor Owen (Wrekin)

Hardman, D. R.

Monslow, W.

Thorneycroft, Harry (Clayton)

Hargreaves, A.

Moody, A. S.

Thurtle, Ernest

Hastings, S.

Morgan, Dr. H. B.

Timmons, J.

Hayman, F. H

Morley, R.

Tomney, F.

Henderson, Rt. Hon. Arthur (Tipton)

Morris, Percy (Swansea, W.)

Ungoed-Thomas, Sir Lynn

Herbison, Miss M.

Mort, D. L.

Usborne, H.

Hewitson, Capt. M

Moyle, A.

Vernon, W. F.

Hobson, C. R.

Mulley, F. W.

Viant, S. P.

Holman, P.

Murray, J. D.

Wallace, H. W.

Helmes, Horace (Hemsworth)

Nally, W.

Watkins, T. E.

Houghton, D.

Neal, Harold (Bolsover)

Webb, Rt. Hon. M. (Bradford, C.)

Hoy, J.

Noel-Baker, Rt. Hon. P. J.

Weitzman, D.

Hubbard, T.

O'Brien, T.

Wells, Percy (Faversham)

Hudson, James (Ealing, N.)

Oldfield, W. H.

Wells, William (Walsall)

Hughes, Emrys (S. Ayrshire)

Oliver, G. H.

West, D. G.

Hughes, Hector (Aberdeen, N.)

Orbach, M.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Hynd, H. (Accrington)

Padley, W. E.

White, Mrs. Eirene (E. Flint)

Hynd, J. B. (Attercliffe)

Paget, R. T.

White, Henry (Derbyshire, N. E.)

Irvine, A. J. (Edge Hill)

Paling, Rt. Hon. W. (Dearne Valley)

Whiteley, Rt. Hon. W.

Irving, W. J. (Wood Green)

Paling, Will T. (Dewsbury)

Wilcock, Group Capt. C. A. B.

Isaacs, Rt. Hon. G. A.

Pannell, T. C.

Wilkes, L.

Janner, B.

Pargiter, G. A.

Wilkins, W. A.

Jay, D. P. T.

Parker, J.

Willey, Frederick (Sunderland)

Jeger, George (Goole)

Paton, J.

Willey, Octavius (Cleveland)

Jenkins, R. H.

Popplewell, E.

Williams, David (Neath)

Johnson, James (Rugby)

Porter, G.

Williams, Rev. Llywelyn (Abertillery)

Johnston, Douglas (Paisley)

Price, Philips (Gloucestershire, W.)

Williams, Ronald (Wigan)

Jones, David (Hartlepool)

Proctor, W. T.

Williams, Rt. Hon. Thomas (Don V'lly)

Jones, Frederick Elwyn (W. Ham, S.)

Pryde, D. J.

Williams, W. T. (Hammersmith, S.)

Jones, Jack (Rotherham)

Pursey, Cmdr. H.

Wilson, Rt. Hon. Harold (Huyton)

Jones, William Elwyn (Conway)

Rankin, J.

Winterbottom, Ian (Nottingham, C.)

Keenan, W.

Rees, Mrs. D.

Winterbottom, Richard (Brightside)

Kenyon, C.

Reeves, J.

Wise, F. J.

Key, Rt. Hon. C. W.

Reid, Thomas (Swindon)

Woodburn, Rt. Hon. A.

King, Dr. H. M.

Raid, William (Camlachie)

Wyatt, W. L.

Kinghorn, Sqn. Ldr. E.

Rhodes, H.

Yates, V. F.

Kinley, J.

Richards, R.

Younger, Rt. Hon. K.

Lang, Gordon

Robens, Rt. Hon. A.

Lee, Frederick (Newton)

Roberts, Goronwy (Caernarvonshire)

TELLERS FOR THE AYES:

Lee, Miss Jennie (Cannock)

Robertson, J. J. (Berwick)

Mr. Pearson and Mr. Delargy

NOES

Aitken, W. T.

Baldwin, A. E.

Black, C. W.

Alport, C. J. M.

Banks, Col. C.

Boles, Lt.-Col. D. C. (Wells)

Amery, Julian (Preston, N.)

Baxter, A. B.

Boothby, R.

Amory, Heathcoat (Tiverton)

Beamish, Maj. Tufton

Bossom, A. C.

Arbuthnot, John

Bell, R. M.

Bowen, E. R. (Cardigan)

Ashton, H. (Chelmsford)

Bennett, Dr. Reginald (Gosport)

Boyd-Carpenter, J. A.

Assheton, Rt. Hon. R. (Blackburn. W.)

Bennett, William (Woodsido)

Boyle, Sir Edward

Astor, Hon. M. L.

Bevins, J. R. (Liverpool, Toxteth)

Bracken, Rt. Hon. B.

Baker, P. A. D.

Birch, Nigel

Braine, B. R.

Baldeck, Lt.-Cmdr. J. M.

Bishop, F. P.

Braithwaite, Sir Albert (Harrow, W.)

1976

1977

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Hope, Lord John

Osborne, C.

Bromley-Davenport, Lt.-Col. W.

Hopkinson, Henry

Peake, Rt. Hon. O.

Brooke, Henry (Hampstead)

Hornsby-Smith, Miss P.

Perkins, W. R. D.

Browne, Jack (Govan)

Horsbrugh, Rt. Hon. Florence

Peto, Brig. C. H. M.

Buchan-Hepburn, P. G. T

Howard, Gerald (Cambridgeshire)

Pickthorn, K.

Bullock, Capt. M.

Howard, Greville (St. Ives)

Pitman, I. J.

Bullus, Wing Commander E. E.

Hudson, Sir Austin (Lewisham, N.)

Powell, J. Enoch

Burden, F. A.

Hudson, Rt. Hon. Robert (Southport)

Price, Henry (Lewisham, W.)

Butcher, H. W.

Hudson, W. R. A. (Hull, N.)

Prefumo, J. D.

Butler, Rt. Hn. R. A. (Saffron Walden)

Hurd, A. R.

Raikes, H. V.

Carr, Robert (Mitcham)

Hutchinson, Geoffrey (Ilford, N.)

Rayner, Brig. R.

Carson, Hon. E.

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Redmayne, M.

Channon, H.

Hutchison, Col. James (Glasgow)

Remnant, Hon. P.

Churchill, Rt. Hon. W. S.

Hyde, Lt.-Col. H. M.

Renton, D. L. M.

Clarke, Col. Ralph (East Grinstead)

Hylton-Foster, H. B.

Roberts, Maj. Peter (Heeley)

Clarke, Brig. Terence (Portsmouth, W.)

Jennings, R.

Robertson, Sir David (Caithness)

Clyde, J. L.

Johnson, Howard (Kemptown)

Robinson, Roland (Blackpool, S.)

Colegate, A.

Jones, A. (Hall Green)

Robson-Brown, W.

Conant, Maj. R. J. E.

Joynson-Hicks, Hon. L. W

Rodgers, John (Sevenoaks)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Kaberry, D.

Roper, Sir Harold

Cooper-Key, E. M.

Kerr, H. W. (Cambridge)

Ropner, Col. L.

Corbett, Lt.-Col. Uvedale (Ludlow)

Kingsmill, Lt.-Col. W. H.

Russell, R. S.

Craddock, Beresford (Spelthorne)

Lambert, Hon. G.

Ryder, Capt. R. E. D.

Cranborne, Viscount

Lancaster, Col. C. G.

Salter, Rt. Hon. Sir Arthur

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

Langford-Holt, J.

Sandys, Rt. Hon. D.

Crosthwaite-Eyre, Col. O. E.

Law, Rt. Hon. R. K.

Shepherd, William

Crouch, R. F.

Leather, E. H. C.

Smiles, Lt.-Col. Sir Walter

Crowder, Capt. John (Finchley)

Legge-Bourke, Maj E. A.

Smithers, Peter (Winchester)

Crowder, Petre (Ruislip—Northwood)

Lennox-Boyd, A. T.

Smithers, Sir Waldron (Orpington)

Cundiff, F. W.

Lindsay, Martin

Smyth, Brig. J. G. (Norwood)

Cuthbert, W. N.

Linstead, H. N.

Snadden, W. McN.

Davidson, Viscountess

Llewellyn, D.

Soames, Capt. C.

Davies, Nigel (Epping)

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Spearman, A. C. M.

de Chair, Somerset

Lloyd, Maj. Guy (Renfrew, E.)

Spence, H. R. (Aberdeenshire, W.)

De laère, R.

Lloyd, Selwyn (Wirral)

Spens, Sir Patrick (Kensington, S.)

Deedes, W. F.

Lockwood, Lt.-Col. J. C.

Stanley, Capt. Hon. Richard (N. Fylde)

Digby, S. Wingfield

Longden, Gilbert (Herts, S. W.)

Stevens, G. P.

Dodds-Parker, A. D.

Low, A. R. W.

Steward, W. A. (Woolwich, W.)

Donner, P. W.

Lucas, Sir Jocelyn (Portsmouth, S.)

Stewart, Henderson (Fife, E.)

Douglas-Hamilton, Lord Malcolm

Lucas, P. B. (Brentford)

Stoddart-Scott, Col. M.

Drayson, G. B.

Lucas-Tooth, Sir Hugh

Storey, S.

Dugdale, Maj. Sir Thomas (Richmond)

Lyttelton, Rt. Hon. O.

Strauss, Henry (Norwich, S.)

Duncan, Capt. J. A. L.

McAdden, S. J.

Stuart, Rt. Hon. James (Moray)

Dunglass, Lord

McCorquodale, Rt. Hon. M. S.

Studholme, H. G.

Duthie, W. S.

Macdonald, Sir Peter (I. of Wight)

Summers, G. S.

Ecckss, D. M.

Mackeson, Brig. H. R.

Sutcliffe, H.

Eden, Rt. Hon. A.

McKibbin, A.

Taylor, Charles (Eastbourne)

Elliot, Rt. Hon. W. E.

McKie, J. H. (Galloway)

Taylor, William (Bradford, N)

Erroll, F. J.

Maclay, Hon. John

Teeling, W.

Fisher, Nigel

Maclean, Fitzroy

Teevan, T. L.

Fort, R.

MacLeod, Iain (Enfield, W.)

Thomas, J. P. L. (Hereford)

Foster, John

MacLeod, John (Ross and Cromarty)

Thompson, Kenneth Pugh (Walton)

Fraser, Hon. Hugh (Stone)

Macmillan, Rt. Hon. Harold (Bromley)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Fraser, Sir Ian (Morecambe & Lonsdals)

Macpherson, Major Niall (Dumfries)

Thorneycroft, Peter (Monmouth)

Fyfe, Rt. Hon. Sir David Maxwell

Maltland, Cmdr. J. W.

Thornton-Kemsley, Col. C. N.

Gage, C. H.

Manningham-Buller, R. E.

Thorp, Brig. R. A. F.

Galbraith, Cmdr. T. D. (Pollok)

Marlowe, A. A. H.

Tilney, John

Galbraith, T. G. D. (Hillhead)

Marples, A. E.

Turner, H. F. L.

Gammans, L. D.

Marshall, Douglas (Bodmin)

Turton, R. H.

Garner-Evans, E. H. (Denbigh)

Marshall, Sidney (Sutton)

Tweedsmuir, Lady

Gomme-Duncan, Col. A.

Maude, Angus (Ealing S.)

Vane, W. M. F.

Gridley, Sir Arnold

Maude, John (Exeter)

Vaughan-Morgan, J. K.

Grimston, Hon. John (St. Albans)

Maudling, R.

Vosper, D. F.

Grimston, Robert (Westbury)

Medlicott, Brig. F.

Wakefield, Edward (Derbyshire, W.)

Harden, J. R. E.

Mellor, Sir John

Wakefield, Sir Wavell (Marylebone)

Hare, Hon. J. H. (Woodbridge)

Molson, A. H. E.

Walker-Smith, D. C.

Harris, Frederic (Croydon, N.)

Monckton, Sir Walter

Ward, Hon. George (Worcester)

Harris, Reader (Heston)

Moore, Lt.-Col. Sir Thomas

Ward, Miss I. (Tynemouth)

Harvey, Air Cdre. A. V. (Macclesfield)

Morrison, John (Salisbury)

Waterhouse, Capt. Rt. Hon. C.

Harvey, Ian (Harrow, E.)

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

Watkinson, H.

Harvie-Watt, Sir George

Mott-Radclyffe, C. E.

Webbe, Sir H. (London & Westminster)

Hay, John

Nabarro, G.

White, Baker (Canterbury)

Mead, Brig. A. H

Nicholls, Harmar

Williams, Charles (Torquay)

Heald, Lionel

Nicholson, G.

Williams, Gerald (Tonbridge)

Heath, Edward

Nield, Basil (Chester)

Williams, Sir Herbert (Croydon, E.)

Henderson, John (Cathcart)

Noble, Cmdr. A. H. P.

Wills, G.

Hicks-Beach, Maj. W. W.

Nugent, G. R. H.

Wilson, Geoffrey (Truro)

Higgs, J. M. C.

Nutting, Anthony

Winterton, Rt. Hon. Earl

Hill, Dr. Charles (Luton)

Oakshott, H. D.

Wood, Hon. R.

Hill, Mrs. E. (Wythenshawe)

Odey, G. W.

York, C.

Hinchingbrooke, Viscount

Ormsby-Gore, Hon. W. D.

Hirst, Geoffrey

Orr, Capt. L. P. S.

TELLERS FOR THE NOES:

Hollis, M. C.

Orr-Ewing, Charles Ian (Hendon, N.)

Mr. Drove and Major Wheatley.

Holmes, Sir Stanley (Harwich)

Orr-Ewing, Ian L. (Weston-super-Mare)

Question put accordingly, "That the words proposed to be left out stand part of the Clause."
The Committee divided: Ayes, 290; Noes, 279.

Division No. 119.]

AYES

[7.22 a.m.

Acland, Sir Richard

Ewart, R.

Longden, Fred (Small Heath)

Adams, Richard

Fernyhough, E.

McAllister, G.

Albu, A. H.

Field, Capt. W. J.

MacColl, J. E.

Allen, Arthur (Bosworth)

Finch, H. J.

McGhee, H. G.

Alton, Scholefield (Crewe)

Fletcher, Erie (Islington, E.)

McGovern, J.

Anderson, Alexander (Motherwell)

Follick, M.

McInnes, J.

Anderson, Frank (Whitehaven)

Fool, M. M.

Mack, J. D.

Attlee, Rt. Hon. C. R

Forman, J. C.

McKay, John (Wallsend)

Awbery, S. S.

Fraser, Thomas (Hamilton)

Mackay, R. W. G. (Reading, N.)

Ayles, W. H.

Freeman, John (Watford)

McLeavy, F.

Bacon, Miss Alice

Freeman, Peter (Newport)

MacMillan, Malcolm (Western Isles)

Baird, J.

Gaitskell, Rt. Hon. H. T. N.

McNeil, Rt. Hon. H.

Balfour, A.

Ganrey, Mrs. C. S.

MacPherson, Malcolm (Stirling)

Barnes, Rt. Hon. A. J.

Gibson, C. W.

Mainwaring, W. H.

Bartley, P.

Gilzean, A.

Mallalieu, E. L. (Brigg)

Bellenger, Rt. Hon. F. J.

Glanville, James (Consett)

Mallalieu, J. P. W. (Huddersfield, E.)

Benn, Wedgwood

Gooch, E. G.

Mann, Mrs. Jean

Benson, G.

Gordon-Walker, Rt. Hon. P. C.

Manuel, A. C.

Beswick, F.

Greenwood, Anthony (Rossendale)

Marquand, Rt. Hon. H. A.

Bevan, Rt. Hon. A. (Ebbw Vale)

Greenwood, Rt. Hn. Arthur (Wakefield)

Mathers, Rt. Hon. G.

Bing, G. H. C.

Grenfell, D. R.

Mellish, R. J.

Blenkinsop, A.

Grey, C. F.

Messer, F.

Blyton, W. R.

Griffiths, David (Rother Valley)

Middleton, Mrs. L.

Boardman, H.

Griffiths, Rt. Hon. James (Llanelly)

Mikardo, Ian.

Booth, A.

Griffiths, William (Exchange)

Mitchison, G. R.

Bottomley, A. G.

Gunter, R. J.

Moeran, E. W.

Bowden, H. W.

Hale, Leslie (Oldham, W.)

Monslow, W.

Bowles, F. G. (Nuneaton)

Halt, Rt. Hon. Glenvil (Colne Valley)

Moody, A. S.

Braddock, Mrs. Elizabeth

Hall, John (Gateshead, W.)

Morgan, Dr. H. B.

Brook, Dryden (Halifax)

Hamilton, W. W.

Morley, R.

Brooks, T. J. (Normanton)

Hannan, W.

Morris, Percy (Swansea, W.)

Broughton, Dr. A. D. D.

Hardman, D. R.

Mort, D. L.

Brown, Rt. Hon. George (Belper)

Hargreaves, A.

Moyle, A.

Brown, Thomas (Ince)

Hastings, S.

Mulley, F. W.

Burke, W. A.

Hayman, F. H.

Murray, J. D.

Burton, Miss E.

Henderson, Rt. Hon. Arthur (Tipton)

Nally, W.

Butler, Herbert (Hackney, S)

Herbison, Miss M.

Neal, Harold (Bolsover)

Callaghan, L. J.

Hewitson, Capt. M.

Noel-Baker, Rt. Hon. P. J.

Carmichael, J.

Hobson, C. R.

O'Brien, T.

Castle, Mrs. B. A.

Holman, P.

Oldfield, W. H.

Champion, A. J.

Holmes, Horace (Hemsworth)

Oliver, G. H.

Chetwynd, G. R.

Houghton, D.

Orbach, M.

Clunie, J.

Hoy, J.

Padley, W. E.

Cocks, F. S.

Hubbard, T.

Paget, R. T.

Coldrick, W.

Hudson, James (Ealing, N.)

Paling, Rt. Hon. Wilfred (Dearne Vally)

Collick, P.

Hughes, Emrys, (S. Ayrshire)

Paling, Will T. (Dewsbury)

Collindridge, F.

Hughes, Hector (Aberdeen, N.)

Pannell, T. C.

Cook, T. F.

Hynd, H. (Accrington)

Pargiter, G. A.

Cooper, Geoffrey (Middlesbrough, W.)

Hynd, J. B. (Attercliffe)

Parker, J.

Cooper, John (Deptford)

Irvine, A. J. (Edge Hill)

Paton, J.

Corbet, Mrs. Freda (Peckham)

Irving, W. J. (Wood Green)

Pearson, A.

Cove, W. G.

Isaacs, Rt. Hon. G. A.

Popplewell, E.

Craddock, George (Bradford, S.)

Janner, B.

Porter, G.

Crawley, A.

Jay, D. P. T.

Price, Philips (Gloucestershire, W.)

Crosland, C. A. R

Jeger, George (Goole)

Proctor, W. T.

Crossman, R. H. S

Jenkins, R. H.

Pryde, D. J.

Cullen, Mrs. A.

Johnson, James (Rugby)

Pursey, Cmdr. H.

Daines, P.

Johnston, Douglas (Paisley)

Rankin, J.

Dalton, Rt. Hon. H

Jones, David (Hartlepool)

Rees, Mrs. D.

Darling, George (Hillsborough)

Jones, Frederick Elwyn (W. Ham, S.)

Reeves, J.

Davies, A. Edward (Stoke, N.)

Jones, Jack (Rotherham)

Reid, Thomas (Swindon)

Davies, Harold (Leek)

Jones, William Elwyn (Conway)

Reid, William (Camlachie)

Davies, Stephen (Merthyr)

Keenan, W.

Rhodes, H.

de Freitas, Geoffrey

Kenyon, C.

Richards, R.

Deer, G.

Key, Rt. Hon. C. W.

Robens, Rt. Hon. A.

Dodds, N. N.

King, Dr. H. M.

Roberts, Goronwy (Caernarvonshire)

Donnelly, D.

Kinghorn, Sqn. Ldr. E.

Robertson, J. J. (Berwick)

Driberg, T. E. N.

Kinley, J.

Robinson, Kenneth (St. Pancras, N.)

Dugdale, Rt. Hon. John (W. Bromwich)

Lang, Gordon

Rogers, George (Kensington, N.)

Dye, S.

Lee, Frederick (Newton)

Ross, William (Kilmarnock)

Ede, Rt. Hon. J. C.

Lee, Miss Jennie (Cannock)

Shawcross, Rt. Hon. Sir Hartley

Edelman, M.

Lever, Harold (Cheetham)

Shinwell, Rt. Hon. E.

Edwards, John (Brighouse)

Lever, Leslie (Ardwick)

Shurmer, P. L. E.

Edwards, Rt. Hon. Ness (Caerphilly)

Lewis, Arthur (West Ham, N.)

Silverman, Julius (Erdington)

Edwards, W. J. (Stepney)

Lewis, John (Bolton, W.)

Silverman, Sydney (Nelson)

Evans, Albert (Islington, S. W.)

Lindgren, G. S.

Simmons, C. J.

Evans, Edward (Lowestoft)

Lipton, Lt.-Col. M.

Slater, J.

Evans, Stanley (Wednesbury)

Logan, D. G.

Smith, Ellis (Stoke, S.)

Smith, Norman (Nottingham, S.)

Thurtle, Ernest

Wilkins, W. A.

Snow, J. W.

Timmons, J.

Willey, Frederick (Sunderland)

Sorensen, R. W.

Tomney, F.

Willey, Octavius (Cleveland)

Soskice, Rt. Hon. Sir Frank

Ungoed-Thomas, Sir Lynn

Williams, David (Neath)

Sparks, J. A.

Usborne, H.

Williams, Rev. Llywelyn (Abertillery)

Steele, T.

Vernon, W. F.

Williams, Ronald (Wigan)

Stewart, Michael (Fulham, E.)

Viant, S. P.

Williams, Rt. Hon. Thomas (Don V'lly)

Stokes, Rt. Hon. R. R.

Wallace, H. W.

Williams, W. T. (Hammersmith, S.)

Strachey, Rt. Hon. J.

Watkins, T. E.

Wilson, Rt. Hon. Harold (Huyton)

Strauss, Rt. Hon. George (Vauxhall)

Webb, Rt. Hon. M. (Bradford, C.)

Winterbottom, Ian (Nottingham, C.)

Stross, Dr. Barnett

Weitzman, D.

Winterbottom, Richard (Brightside)

Summerskill, Rt. Hon. Edith

Wells, Percy (Faversham)

Wise, F. J.

Sylvester, G. O.

Wells, William (Walsall)

Woodburn, Rt. Hon. A

Taylor, Bernard (Mansfield)

West, D. G.

Wyatt, W. L.

Taylor, Robert (Morpeth)

Wheatley, Rt. Hon. John (Edinb'gh E.)

Yates, V. F.

Thomas, David (Aberdare)

White, Mrs. Eirene (E. Flint)

Younger, Rt. Hon. K.

Thomas, George (Cardiff)

White, Henry (Derbyshire, N. E.)

Thomas, Iorwerth (Rnondda, W.)

Whiteley, Rt. Hon. W.

TELLERS FOR THE AYES:

Thomas, Ivor Owen (Wrekin)

Wilcock, Group Capt. C. A. B.

Mr. Royle and Mr. Delargy.

Thorneycroft, Harry (Clayton)

Wilkes, L.

NOES

Aitken, W. T.

Davidson, Viscountess

Hutchinson, Geoffrey (Ilford, N.)

Alport, C. J. M.

Davies, Nigel (Epping)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Angry, Julian (Preston, N.)

de Chair, Somerset

Hutchison, Colonel James (Glasgow)

Amory, Heathcoat (Tiverton)

De la Bère, R.

Hyde, Lt.-Col. H. M.

Arbuthnot, John

Deedes, W. F.

Hylton-Foster, H. B.

Ashton, H. (Chelmsford)

Dodds-Parker, A. D.

Jennings, R.

Assheton, Rt. Hon. R. (Blackburn, W.)

Donner, P. W.

Johnson, Howard (Kemptown)

Astor, Hon. M. L.

Douglas-Hamilton, Lord Malcolm

Jones, A. (Hall Green)

Baker, P. A. D.

Drayson, G. B.

Joynson-Hicks, Hon. L. W.

Baldock, Lt.-Cmdr. J. M.

Drewe, C.

Kaberry, D.

Baldwin, A. E.

Dugdale, Maj. Sir Thomas (Richmond)

Kerr, H. W. (Cambridge)

Banks, Col. C.

Duncan, Capt. J. A. L.

Kingsmill, Lt.-Col. W. H.

Baxter, A. B.

Dunglass, Lord

Lambert, Hon. G.

Beamish, Major Tufton

Duthie, W. S.

Lancaster, Col. C. G.

Bell, R. M.

Eccles, D. M.

Langford-Holt, J.

Bennett, Dr. Reginald (Gosport)

Eden, Rt. Hon. A.

Law, Rt. Hon. R. K.

Bennett, William (Woodside)

Elliot, Rt. Hon. W. E.

Leather, E. H. C.

Bevins, J. R. (Liverpool, Toxteth)

Erroll, F. J.

Legge-Bourke, Maj. E. A. H.

Birch, Nigel

Fisher, Nigel

Lennox-Boyd, A. T.

Bishop, F. P.

Fort, R.

Lindsay, Martin

Black, C. W.

Foster, John

Linstead, H. N.

Boles, Lt.-Col. D. C. (Wells)

Fraser, Hon. Hugh (Stone)

Llewellyn, D.

Boothby, R.

Fraser, Sir I. (Morecambe & Lonsdale)

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Bossom, A. C.

Fyfe, Rt. Hon. Sir David Maxwell

Lloyd, Maj. Guy (Renfrew, E.)

Bowen, E. R. (Cardigan)

Gage, C. H.

Lloyd, Selwyn (Wirral)

Boyd-Carpenter, J. A.

Galbraith, Cmdr. T. D. (Pollok)

Lockwood, Lt.-Col. J. C.

Boyle, Sir Edward

Galbraith, T. G. D. (Hillhead)

Longden, Gilbert (Herts, S. W.)

Bracken, Rt. Hon. B.

Gammans, L. D.

Low, A. R. W.

Braine, B. R.

Garner-Evans, E. H. (Denbigh)

Lucas, Sir Jocelyn (Portsmouth, S.)

Braithwaite, Sir Albert (Harrow, W.)

Gomme-Duncan, Col. A.

Lucas, P. B. (Brentford)

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Gridley, Sir Arnold

Lucas-Tooth, Sir Hugh

Bromley-Davenport, Lt.-Col. W.

Grimston, Hon. John (St. Albans)

Lyttelton, Rt. Hon. O.

Brooke, Henry (Hampstead)

Grimston, Robert (Westbury)

McAdden, S. J.

Browne, Jack (Govan)

Harden, J. R. E.

McCorquodale, Rt. Hon. M. S.

Buchan-Hepburn, P. G. T.

Hare, Hon. J. H. (Woodbridge)

Macdonald, Sir Peter (I. of Wight)

Bullock, Capt. M.

Harris, Frederic (Croydon, N.)

Mackeson, Brig. H. R.

Bullus, Wing Commander E. E.

Harris, Reader (Heston)

McKibbin, A.

Burden, F. A.

Harvey, Air Cdre. A. V. (Macclesfield)

McKie, J. H. (Galloway)

Butcher, H. W.

Harvey, Ian (Harrow, E.)

Maclay, Hon. John

Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)

Harvie-Watt, Sir George

Maclean, Fitzroy

Carr, Robert (Mitcham)

Hay, John

MacLeod, Iain (Enfield, W.)

Carson, Hon. E.

Head, Brig. A. H.

MacLeod, John (Roes and Cromarty)

Channon, H.

Heald, Lionel

Macmillan, Rt. Hon. Harold (Bromley)

Churchill, Rt. Hon. W. S.

Henderson, John (Cathcart)

Macpherson, Major Niall (Dumfries)

Clarke, Col. Ralph (East Grinstead)

Hicks-Beach, Maj. W. W.

Maitland, Cmdr. J. W.

Clarke, Brig. Terence (Portsmouth, W.)

Higgs, J. M. C.

Manningham-Buller, R. E.

Clyde, J. L.

Hill, Dr. Charles (Luton)

Marlowe, A. A. H.

Colegate, A.

Hill, Mrs. E. (Wythenshawe)

Marples, A. E.

Conant, Maj. R. J. E.

Hinchingbrooke, Viscount

Marshall, Douglas (Bodmin)

Cooper, Sqn Ldr. Albert (Ilford, S.)

Hirst, Geoffrey

Marshall, Sidney (Sutton)

Cooper-Key, E. M.

Hollis, M. C.

Maude, Angus (Ealing, S.)

Corbett, Lt.-Col. Uvedale (Ludlow)

Holmes, Sir Stanley (Harwich)

Maude, John (Exeter)

Craddock, Beresford (Spelthorne)

Hope, Lord John

Maudling, R.

Cranborne, Viscount

Hopkinson, Henry

Medlicott, Brig. F.

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

Hornsby-Smith, Miss P.

Mellor, Sir John

Crosthwaite-Eyre, Col. O. E.

Horsbrugh, Rt. Hon. Florence

Molson, A. H. E.

Crouch, R. F.

Howard, Gerald (Cambridgeshire)

Monckton, Sir Walter

Crowder, Capt. John (Finchley)

Howard, Greville (St. Ives)

Moore, Lt.-Col. Sir Thomas

Crowder, Petre (Ruislip-Northwood)

Hudson, Sir Austin (Lewisham, N.)

Morrison, John (Salisbury)

Cundiff, F. W.

Hudson, Rt. Hon. Robert (Southport)

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

Cuthbert, W. N.

Hudson, W. R. A. (Hull, N.)

Mott-Radclyffe, C. E.

Darling, Sir William (Edinburgh, S.)

Hurd, A. R.

Nabarro, G.

1982

1983

Nicholls, Harmar

Ropner, Col. L.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Nicholson, G.

Russell, R. S.

Thorneycroft, Peter (Monmouth)

Nield, Basil (Chester)

Ryder, Capt. R. E. D.

Thornton-Kemsley, Col. C. N.

Noble, Cmdr. A. H. P.

Salter, Rt. Hon. Sir Arthur

Thorp, Brig. R. A. F.

Nugent, G. R. H.

Sandys, Rt. Hon. D.

Tilney, John

Nutting, Anthony

Shepherd, William

Turner, H. F. L.

Oakshott, H. D.

Smiles, Lt.-Col. Sir Walter

Turton, R. H.

Odey, G. W.

Smithers, Peter (Winchester)

Tweedsmuir, Lady

Ormsby-Gore, Hon. W. D.

Smithers, Sir Waldron (Orpington)

Vane, W. M. F.

Orr, Capt. L. P. S.

Smyth, Brig. J. G. (Norwood)

Vaughan-Morgan, J. K.

Orr-Ewing, Charles Ian (Hendon, N.)

Snadden, W. McN.

Vosper, D. F.

Orr-Ewing, Ian L. (Weston-super-Mare)

Soames, Capt. C.

Wakefield, Edward (Derbyshire, W.)

Osborne, C.

Spearman, A. C. M.

Wakefield, Sir Wavell (Marylebone)

Peake, Rt. Hon. O.

Spence, H. R. (Aberdeenshire, W.)

Walker-Smith, D. C.

Perkins, W. R. D.

Spens, Sir Patrick (Kensington, S.)

Ward, Hon. George (Worcester)

Peto, Brig. C. H. M

Stanley, Capt. Hon. Richard (N. Fylde)

Ward, Miss I. (Tynemouth)

Pickthorn, K.

Stevens, G. P.

Waterhouse, Capt. Rt. Hon. C.

Pitman, I. J.

Steward, W. A. (Woolwich, W.)

Watkinson, H.

Powell, J. Enoch

Stewart, Henderson (Fife, E.)

Webbe, Sir H. (London & Westminster)

Price, Henry (Lewisham, W.)

Stoddart-Scott, Col. M.

Wheatley, Maj. M. J. (Poole)

Profumo, J. D.

Storey, S.

White, Baker (Canterbury)

Raikes, H. V.

Strauss, Henry (Norwich, S.)

Williams, Charles (Torquay)

Rayner, Brig. R.

Stuart, Rt. Hon. James (Moray)

Williams, Gerald (Tonbridge)

Redmayne, M.

Studholme, H. G.

Williams, Sir Herbert (Croydon, E.)

Remnant, Hon. P.

Summers, G. S.

Wills, G.

Renton, D. L. M.

Sutoliffe, H.

Wilson, Geoffrey (Truro)

Roberts, Maj. Peter (Heeley)

Taylor, Charles (Eastbourne)

Winterton, Rt. Hon. Earl

Robertson, Sir David (Caithness)

Taylor, William (Bradford, N.)

Wood, Hon. R.

Robinson, Roland (Blackpool, S.)

Teeling, W.

York, C.

Robson-Brown, W.

Teevan, T. L.

Rodgers, John (Sevenoaks)

Thomas, J. P. L. (Hereford)

TELLERS FOR THE NOES:

Roper, Sir Harold

Thompson, Kenneth Pugh (Walton)

Mr. Digby and Mr. Heath.

7.30 a.m.
Mr. Lyttelton: I beg to move, "That the Chairman do report Progress and ask leave to sit again."
I move this Motion for a number of reasons. First, night's candles are burned out, and if the day does not appear particularly jocund to any of us it seems a particularly good reason why we should report Progress. Secondly, we are credibly informed by watchers from the Victoria Tower that public transport is now running, and the pretext upon which the Government have obliged us to discuss this very vital Clause has, therefore, been removed.
Thirdly, we are still only half way through Clause 28, which, as it develops, shows what very great inroads it makes on the liberty of the subject. Fourthly, my reason is to ascertain the Government's intentions. The many bearded Members on all sides of the Committee will agree at least that, if to report Progress does nothing else, we shall learn at what time we are likely to reach the end of our labours.
Mr. Ede: I do not think we have yet very much progress to report, and I think the right hon. Gentleman is rather overestimating the progress that has been made with Clause 28 so far. He said that we were half way through it; but I rather doubt that. We are still far short of the progress that could have been made with this Bill if what was suggested
1984
earlier had proved acceptable. That being so, we must ask the Committee to continue with the task of getting on with the Clauses of the Bill, and I sincerely hope that we may be able to make a little more progress in the next few hours.
Mr. Churchill: The right hon. Gentleman has abruptly refused the suggestion of my right hon. Friend. I should have thought that in this morning light he ought to be feeling very uncomfortable. I do not mean physically but morally and mentally. When we look back at what has happened, and the long time that has been required by the Committee to discuss these Clauses, we can see how monstrously unfair was the proposal he made, which he tried through the usual channels to get us to adopt, that we should have finished Clause 31 by 12.15 last night.
No more gross attempt could be imagined, for a man of his honour and generosity, than to try and cozen us into accepting something so utterly detrimental to the rights of Members and so frustrating to the whole process of Parliamentary debate. Now the right hon. Gentleman asks us to continue with Clause 28. We are here under the Government's orders. The majority they have—10, 11, or 12—and which they would not have had if the present Foreign Secretary had not thought of the bright idea of breaking all his pledges, and the inter-party agreement, to which the Prime Minister was a party—[Interruption.]
The Prime Minister (Mr. Attlee): The right hon. Gentleman knows that there was no agreement to retain his pocket boroughs.
Mr. Churchill: I do not intend to refer to this matter except as an illustration. [HON. MEMBERS: "Oh."] The right hon. Gentleman has made a statement which is not, in my opinion—[Interruption.] The all-party agreement was against—
Mr. Scholefield Allen Mr. Scholefield Allen rose—
The Chairman: Order. I must be allowed to hear what the right hon. Gentleman, or any other hon. Gentleman, says.
Mr. Churchill: The all-party agreement was against abolishing university representation.
The Chairman: I must point out to the right hon. Gentleman that the debate must be limited to the question of reporting Progress and must not go on to other matters.
Mr. Churchill: Yes, and it is one of the reasons for reporting Progress that the majority which is being used to tyrannise over the House was obtained only by an after-thought and bad taste—
The Chairman: The argument is now getting too remote from the matter before the Committee.
Mr. Churchill: I shall not probe further into the painful topic of the mandate which the right hon. Gentleman had. But I return to the direct point of whether our affairs will be advantaged by causing the Committee to continue to sit. I must give the Home Secretary a warning. Revenge is a dangerous and costly motive. The idea of saying, "You did not let us finish up at a quarter to midnight, therefore we will give you a bigger dose than any you administered to us," shows that the right hon. Gentlemen on the Government Front Bench are allowing themselves to become a prey to degraded emotions.
It is a wicked world. If this is the mood and temper which prevails opposite, I can assure the Home Secretary we shall not be at all lacking in resolve to do our duty and continue. The great question which occurs to me is whether Parliamentary rights can be enjoyed by a minority, which is almost as big as the Government
1986
majority in the House and much bigger in the country, when the party opposite at all cost of reputation and character and dignity, are resolved to cling to office and drain the last dregs of that ill-gotten cup. When the facts are bluntly put the reaction of the pro-Chinese quarters below the Gangway is a very good indication of their sentiments.
I am glad my right hon. Friend the Member for Aldershot (Mr. Lyttelton) has moved this Motion. We shall do our utmost to sustain it. I do not consider that His Majesty's Government will be benefited by the rough way in which they have used the Committee, forcing us to continue to sit in order to get the business through. When we ask hon. Members opposite what it is that has made the matter so urgent, they will be utterly unable to give a reasonable or satisfactory answer.
Mr. Frederic Harris: I should definitely like to know when the Government intend to stop. Is it right what I hear hon. Members opposite mumbling to themselves—that we are going on to 10 p.m. tonight?
Mr. Eccles: I should like to say a word for those not in the Chamber. The Attorney-General pointed out that this Clause is a very drastic measure, and in the course of the debate it has become clear that every charge which is made against profits under this Clause may have to be investigated. That means that we are discussing the affairs of every single company in the country. I do not think hon. Gentlemen opposite can accuse us of not having directed our minds to the best of our abilities to each Amendment as it came forward.
7.45 a.m.
If we go on discussing the Bill, it is not fair to hundreds of thousands of people outside the House who are affected, let alone to us, though we are quite prepared, as my right hon. Friend says, to go on. We have something else to do besides standing up to the Government; we have also to think of the people outside. With great respect to the right hon. and learned Gentleman, who is the only voice from the Government benches on this Clause and has done exceedingly well, it is becoming rather difficult to understand the arguments. I do not think the Government are being fair to those people

1987
who affairs have to be discussed on this Clause.
Mr. Butcher: I should like to give an additional reason why the Committee should now report Progress and ask leave to sit again. I refer to the police, the attendants, the messengers and people like that, and—[Interruption.] Labour Members protest that they represent the interests of this community, but they impose additional hardship upon them—and they are the most inoffensive people—at a time when, by some more reasonable re-adjustment of our business they could be spared that hardship. [Interruption.] It is hardship, when they
could be spending the morning in pleasant—[HON. MEMBERS: "Sit down."] I speak as a Member who has not previously spoken during this sitting. If the Home Secretary disregards the reasonable comfort of the messengers, the police and the women in the Catering Department, he is neglecting his duty as Leader of the House.
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 289; Noes, 280.

Division No. 120.]

AYES

[7.48 a.m.

Acland, Sir Richard

Crostman, R. H. S.

Hastings, S.

Adams, Richard

Cullen, Mrs. A.

Hayman, F. H.

Albu, A. H.

Daines, P.

Henderson, Rt. Hon. Arthur (Tipton)

Allen, Arthur (Bosworth)

Dalton, Rt. Hon. H.

Herbison, Miss M.

Alien, Scholefield (Crewe)

Darling, George (Hillsborough)

Hewitson, Capt. M.

Anderson, Alexander (Motherwell)

Davies, A. Edward (Stoke, N.)

Hobson, C. R.

Anderson, Frank (Whitehaven)

Davies, Harold (Leek)

Holman, P.

Attlee, Rt. Hon. C. R.

Davies, Stephen (Merthyr)

Holmes, Horace (Hemsworth)

Awbery, S. S.

de Freitas, Geoffrey

Houghton, D.

Ayles, W. H.

Deer, G.

Hoy, J.

Bacon, Miss Alice

Dodds, N. N.

Hubbard, T.

Baird, J.

Donnelly, D.

Hudson, James (Ealing, N.)

Balfour, A.

Driberg, T. E. N.

Hughes, Emrys (S. Ayrshire)

Barnes, Rt. Hon. A. J.

Dugdale, Rt. Hon. John (W. Bromwich)

Hughes, Hector (Aberdeen, N.)

Bartley, P.

Dye, S.

Hynd, H. (Accrington)

Bellenger, Rt. Hon. F. J.

Ede, Rt. Hon. J. C.

Hynd, J. B. (Attercliffe)

Bonn, Wedgwood

Edelman, M.

Irvine, A. J. (Edge Hill)

Benson, G.

Edwards, John (Brighou)

Irving, W. J. (Wood Green)

Beswick, F.

Edwards, Rt. Hon. Ness (Caerphilly)

Isaacs, Rt. Hon. G. A.

Bevan, Rt. Hon. A. (Ebbw Vale)

Edwards, W. J. (Stepney)

Janner, B.

Bing, G. H. C.

Evans, Albert (Islington, S. W.)

Jay, D. P. T.

Blenkinsop, A.

Evans, Edward (Lowestoft)

Jeger, George (Goole)

Blyton, W. R.

Evans, Stanley (Wednesbury)

Jenkins, R. H.

Boardman, H.

Ewart, R.

Johnson, James (Rugby)

Booth, A.

Fernyhough, E.

Johnston, Douglas (Paisley)

Bottomley, A. G.

Field, Capt. W. J.

Jones, David (Hartlepool)

Bowden, H. W.

Finch, H. J.

Jones, Frederick Elwyn (West Ham, S.)

Bowles, F. G. (Nuneaton)

Fletcher, Eric (Islington, E.)

Jones, Jack (Rotherham)

Braddock, Mrs. Elizabeth

Follick, M.

Jones, William Elwyn (Conway)

Brook, Dryden (Halifax)

Foot, M. M.

Keenan, W.

Brooks, T. J. (Normanton)

Forman, J. C.

Kenyon, C.

Broughton, Dr. A. D. D.

Fraser, Thomas (Hamilton)

Key, Rt. Hon. C. W.

Brown, Rt. Hon. George (Belper)

Freeman, John (Watford)

King, Dr. H. M.

Brown, Thomas (Ince)

Freeman, Peter (Newport)

Kinghorn, Sqn. Ldr. E.

Burke, W. A.

Gaitskell, Rt. Hon. H. T. N.

Kinley, J.

Burton, Miss E.

Ganley, Mrs. C. S.

Lang, Gordon

Butler, Herbert (Hackney, S.)

Gibson, C. W.

Lee, Frederick (Newton)

Callaghan, L. J.

Gilzean, A.

Lee, Miss Jennie (Cannock)

Carmichael, J.

Glanville, James (Cornell)

Lever, Harold (Cheetham)

Castle, Mrs. B. A.

Gooch, E. G.

Lever, Leslie (Ardwick)

Champion, A. J.

Gordon-Walker, Rt. Hon. P. C.

Lewis, Arthur (West Ham, N.)

Chetwynd, G. R.

Greenwood, Anthony (Rossendate)

Lewis, John (Bolton, W.)

Clunie, J.

Greenwood, Rt. Hn. Arthur (Wakefield)

Lindgren, G. S.

Cooks, F. S.

Grenfell, D. R.

Lipton, Lt.-Col. M.

Coldrick, W.

Grey, C. F.

Logan, D. G.

Collick, p.

Griffiths, David (Rother Valley)

Longden, Fred (Small Heath)

Collindridge, F.

Griffiths, William (Exchange)

McAllister, G.

Cook, T. F.

Gutter, R. J.

MacColl, J. E.

Cooper, Geoffrey (Middlesbrough, W.)

Hale, Joseph (Rochdale)

McGhee, H. G.

Cooper, John (Deptford)

Hall, Rt. Hon. Glenvil (Colne Valley)

McGovern, J.

Corbet, Mrs. Freda (Peckham)

Hall, John (Gateshead, W.)

McInnes, J.

Cove, W. G.

Hamilton, W. W.

Mack, J. D.

Craddock, George (Bradford, S.)

Hannan, W.

McKay, John (Wallsend)

Crawley, A.

Hardman, D. R.

Mackay, R. W. G. (Reading, N.)

Crosland, C. A. R.

Hargreaves, A.

McLeavy, F.

MacMillan, Malcolm (Western Isles)

Proctor, W. T.

Thomas, Ivor Owen (Wrekin)

McNeil, Rt. Hon. H.

Pryde, D. J.

Thorneycroft, Harry (Clayton)

MacPherson, Malcolm (Stirling)

Pursey, Cmdr. H.

Thurtle, Ernest

Mainwaring, W. H.

Rankin, J.

Timmons, J.

Mallalieu, E. L. (Brigg)

Rees, Mrs. D.

Tomney, F.

Mallalieu, J. P. W. (Huddersfield, E.)

Reeves, J.

Ungoed-Thomas, Sir Lynn

Mann, Mrs. Joan

Reid, Thomas (Swindon)

Usborne, H.

Manuel, A. C.

Raid, William (Camlachie)

Vernon, W. F.

Marquand, Rt. Hon. H. A.

Rhodes, H.

Viant, S. P.

Mathers, Rt. Hon. G.

Richards, R.

Wallace, H. W.

Mellish, R. J.

Roberts, Rt. Hon. A.

Watkins, T. E.

Messer, F.

Roberts, Goronwy (Caernarvonshire)

Webb, Rt. Hon. M. (Bradford, C.)

Middleton, Mrs. L.

Robertson, J. J. (Berwick)

Weitzman, D.

Mikardo, Ian.

Robinson, Kenneth (St. Pancras, N.)

Wells, Percy (Faversham)

Mitchison, G. R.

Rogers, George (Kensington, N.)

Wells, William (Walsall)

Moeran, E. W.

Ross, William (Kilmarnock)

West, D. G.

Monslow, W.

Royle, C.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Moody, A. S.

Snawcross, Rt. Hon. Sir Hartley

White, Mrs. Eirene (E. Flint)

Morgan, Dr. H. B.

Shinwell, Rt. Hon. E.

White, Henry (Derbyshire, N. E.)

Morley, R.

Shurmer, P. L. E.

Whiteley, Rt. Hon. W.

Morris, Percy (Swansea, W.)

Silverman, Julius (Erdington)

Wilcock, Group Capt. C. A. B.

Mort, D. L.

Silverman, Sydney (Nelson)

Wilkes, L.

Moyle, A.

Simmons, G. J.

Wilkins, W. A.

Mulley, F. W

Slater, J.

Willey, Frederick (Sunderland)

Murray, J. D

Smith, Ellis (Stoke, S.)

Willey, Octavius (Cleveland)

Nally, W.

Smith, Norman (Nottingham, S.)

Neal, Harold (Bolsover)

Snow, J. W.

Williams, David (Neath)

Noel-Baker, Rt. Hon. P. J.

Sorensen, R. W.

Williams, Rev. Llywelyn (Abertillery)

O'Brien, T.

Soskice, Rt. Hon. Sir Frank

Williams, Ronald (Wigan)

Oldfield, W. H.

Sparks, J. A.

Williams, Rt. Hon. Thomas (Don V'lly)

Oliver, G. H.

Steele, T.

Williams, W. T. (Hammersmith, S.)

Orbach, M.

Stewart, Michael (Fulham, E.)

Wilson, Rt. Hon. Harold (Huyton)

Padley, W. E.

Stokes, Rt. Hon. R. R.

Winterbottom, Ian (Nottingham, C.)

Paget, R. T.

Strachey, Rt. Hon. J.

Winter bottom, Richard (Brightside)

Paling, Rt. Hon. Wilfred (Dearne Vally)

Strauss, Rt. Hon. George (Vauxhall)

Wise, F. J.

Paling, Will T. (Dewsbury)

Stross, Dr. Barnett

Woodburn, Rt. Hon. A.

Pannell, T. C.

Summerskill, Rt. Hon. Edith

Wyatt, W. L.

Pargiter, G. A.

Sylvester, G. O.

Yates, V. F.

Parker, J.

Taylor, Bernard (Mansfield)

Younger, Rt. Hon. K.

Paton, J.

Taylor, Robert (Morpeth)

Pearson, A.

Thomas, David (Aberdare)

Porter, G.

Thomas, George (Cardiff)

TELLERS FOR THE AYES:

Price, Philips (Gloucestershire, W.)

Thomas, Iorwerth (Rhondda, W.)

Mr. Popplewell and Mr. Delargy.

NOES

Aitken, W. T.

Butcher, H. W.

Duthie, W. S.

Alport, C. J. M.

Butler, Rt. Hn. R. A. (Saffron Walden)

Eccles, D. M.

Amery, Julian (Preston, N.)

Carr, Robert (Mitcham)

Eden, Rt. Hon. A.

Amory, Heathcoat (Tiverton)

Carson, Hon. E.

Elliot, Rt. Hon. W. E.

Arbuthnot, John

Channon, H.

Erroll, F. J.

Ashton, H. (Chelmsford)

Churchill, Rt. Hon. W. S.

Fisher, Nigel

Assheton, Rt. Hon. R. (Blackburn, W.)

Clarke, Col. Ralph (East Grinstead)

Fort, R.

Astor, Hon. M. L.

Clarke, Brig. Terence (Portsmouth, W.)

Foster, John

Baker, P. A. D.

Clyde, J. L.

Fraser, Hon. Hugh (Stone)

Baldock, Lt.-Cmdr. J. M.

Colegate, A.

Fraser, Sir I. (Morecambe & Lonsdale)

Baldwin, A. E.

Conant, Maj. R. J. E.

Fyfe, Rt. Hon. Sir David Maxwell

Banks, Col. C.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Gage, C. H.

Baxter, A. B.

Cooper-Key, E. M.

Galbraith, Cmdr. T. D. (Pollok)

Beamish, Major Tufton

Corbett, Lt.-Col. Uvedale (Ludlow)

Galbraith, T. G. D. (Hillhead)

Bell, R. M.

Craddock, Beresford (Spelthorne)

Gammans, L. D.

Bennett, Dr. Reginald (Gosport)

Cranborne, Viscount

Garner-Evans, E. H. (Denbigh)

Bennett, William (Woodside)

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

Gates, Maj. E. E.

Bevins, J. R. (Liverpool, Toxteth)

Crosthwaite-Eyre, Col. O. E.

Gomme-Duncan, Col. A.

Birch, Nigel

Crouch, R. F.

Gridley, Sir Arnold

Bishop, F. P.

Crowder, Capt. John (Finchley)

Grimston, Hon. John (St. Albans)

Black, C. W.

Crowder, Petre (Ruislip—Northwood)

Grimston, Robert (Westbury)

Boles, Lt.-Col. D. C. (Wells)

Cundiff, F. W.

Harden, J. R. E.

Boothby, R.

Cuthbert, W. N.

Hare, Hon. J. H. (Woodbridge)

Bossom, A. C.

Darling, Sir William (Edinburgh, S.)

Harris, Frederic (Croydon, N.)

Bowen, E. R. (Cardigan)

Davidson, Viscountess

Harris, Reader (Heston)

Boyd-Carpenter, J. A.

Davies, Nigel (Epping)

Harvey, Air Cdre. A. V. (Macclesfield)

Boyle, Sir Edward

de Chair, Somerset

Harvey, Ian (Harrow, E.)

Bracken, Rt. Hon. B.

De la Bère, R.

Harvie-Watt, Sir George

Braine, B. R.

Deedes, W. F.

Hay, John

Braithwaite, Sir Albert (Harrow, W.)

Digby, S. Wingfield

Head, Brig. A. H.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Dodds-Parker, A. D.

Heald, Lionel

Bromley-Davenport, Lt.-Col. W.

Donner, P. W.

Heath, Edward

Brooke, Henry (Hampstead)

Douglas-Hamilton, Lord Malcolm

Henderson, John (Catheart)

Browne, Jack (Govan)

Drayson, G.B.

Hicks-Beach, Maj. W. W.

Buchan-Hepburn, P. G. T.

Drewe, C.

Higgs, J. M. C.

Bullock, Capt. M.

Dugdale, Maj. Sir Thomas (Richmond)

Hill, Dr. Charles (Luton)

Bullus, Wing Commander E. E.

Duncan, Capt. J. A. L.

Hill, Mrs. E. (Wythenshawe)

Burden, F. A.

Dunglass, Lord

Hinchingbrooke, Viscount

1990

1991

Hirst, Geoffrey

Maitland, Cmdr. J. W.

Smiles, Lt.-Col. Sir Walter

Hollis, M. C.

Manningham-Buller, R. E.

Smithers, Peter (Winchester)

Holmes, Sir Stanley (Harwich)

Marlowe, A. A. H.

Smithers, Sir Waldron (Orpington)

Hope, Lord John

Marples, A. E.

Smyth, Brig. J. G. (Norwood)

Hopkinson, Henry

Marshall, Douglas (Bodmin)

Snadden, W. McN.

Hornsby-Smith, Miss P.

Marshall, Sidney (Sutton)

Soames, Capt. C.

Horsbrugh, Rt. Hon. Florence

Maude, Angus (Ealing, S.)

Spearman, A. C. M.

Howard, Gerald (Cambridgeshire)

Maude, John (Exeter)

Spence, H. R. (Aberdeenshire, W.)

Howard, Greville (St. Ives)

Maudling, R.

Spens, Sir Patrick (Kensington, S.)

Hudson, Sir Austin (Lewisham, N.)

Medlicott, Brig. F.

Stanley, Capt. Hn. Richard (N. Fylde)

Hudson, Rt. Hon. Robert (Southport)

Mellor, Sir John

Stevens, G. P.

Hudson, W. R. A. (Hull, N.)

Molson, A. H. E.

Steward, W. A. (Woolwich, W.)

Hurd, A. R.

Monckton, Sir Walter

Stewart, Henderson (Fife, E.)

Hutchinson, Geoffrey (Ilford, N.)

Moore, Lt.-Col- Sir Thomas

Stoddart-Scott, Col. M.

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Morrison, John (Salisbury)

Storey, S.

Hutchison, Colonel James (Glasgow)

Hyde, Lt.-Col. H. M.

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

Strauss, Henry (Norwich, S.)

Hylton-Foster, H. B.

Mott-Radclyffe, C. E.

Stuart, Rt. Hon. James (Moray)

Jennings, R.

Nabarro, G.

Summers, G. S.

Johnson, Howard (Kemptown)

Nicholls, Harmar

Sutcliffe, H.

Jones, A. (Hall Green)

Nicholson, G.

Taylor, Charles (Eastbourne)

Joynson-Hicks, Hon. L. W.

Nield, Basil (Chester)

Taylor, William (Bradford, N.)

Kaberry, D.

Noble, Cmdr. A. H. P.

Teeling, W.

Kerr, H. W. (Cambridge)

Nugent, G. R. H.

Teevan, T. L.

Kingsmill, Lt.-Col. W. H.

Nutting, Anthony

Thomas, J. P. L. (Hereford)

Lambert, Hon. G.

Oakshott, H. O.

Thompson, Kenneth Pugh (Walton)

Lancaster, Col. C. G

Odey, G. W.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Langford-Holt, J.

Ormsby-Gore, Hon. W. D.

Thorneycroft, Peter (Monmouth)

Law, Rt. Hon. R. K.

Orr, Capt. L. P. S.

Thornton-Kemsley, Col. C. N.

Leather, E. H. C.

Orr-Ewing, Charles Ian (Hendon, N.)

Thorp, Brig. R. A. F.

Legge-Bourke, Maj. E. A. H.

Orr-Ewing, Ian L. (Weston-super-Mare)

Tilney, John

Lennox-Boyd, A. T.

Osborne, C.

Turner, H. F. L.

Lindsay, Martin

Peake, Rt. Hon. O.

Turton, R. H.

Linstead, H. N.

Perkins, W. R. D.

Tweedsmuir, Lady

Llewellyn, D.

Peto, Brig. C. H. M.

Vane, W. M. F.

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Pickthorn, K.

Vaughan-Morgan, J. K.

Lloyd, Maj. Guy (Renfrew, E.)

Pitman, I. J.

Vosper, D. F.

Lloyd, Selwyn (Wirral)

Powell, J. Enoch

Wakefield, Edward (Derbyshire, W.)

Lockwood, Lt.-Col. J. C.

Price, Henry (Lewisham, W.)

Wakefield, Sir Wavell (Marylebone)

Longdon, Gilbert (Herts, S. W.)

Profumo, J.D.

Walker-Smith, D. C.

Low, A. R. W.

Raikes, H. V.

Ward, Hon. George (Worcester)

Lucas, Sir Jocelyn (Portsmouth, S.)

Rayner, Brig. R.

Ward, Miss I. (Tynemouth)

Lucas, P. B. (Brentford)

Redmayne, M.

Waterhouse, Capt. Rt. Hon. C.

Lucas-Tooth, Sir Hugh

Remnant, Hon. P.

Watkinson, H.

Lyttelton, Rt. Hon. O.

Renton, D. L. M.

Webbe, Sir H. (London & Westminster)

McAdden, S. J.

Roberts, Major Peter (Heeley)

White, Baker (Canterbury)

McCorquodale, Rt. Hon. M. S.

Robertson, Sir David (Caithness)

Williams, Charles (Torquay)

Macdonald, Sir Peter (I. of Wight)

Robinson, Roland (Blackpool, S.)

Williams, Gerald (Tonbridge)

Mackeson, Brig. H. R.

Robson-Brown, W.

Williams, Sir Herbert (Croydon, E.)

McKibbin, A.

Rodgers, John (Sevenoaks)

Wills, G.

McKie, J. H. (Galloway)

Roper, Sir Harold

Wilson, Geoffrey (Truro)

Maclay, Hon. John

Ropner, Col. L.

Winterton, Rt. Hon. Earl

Maclean, Fitzroy

Russell, R. S.

Wood, Hon. R.

MacLeod, Iain (Enfield, W.)

Ryder, Capt. R. E. D.

York, C.

MacLeod, John (Ross and Cromarty)

Salter, Rt. Hon. Sir Arthur

Macmillan, Rt. Hon. Harold (Bromley)

Sandys, Rt. Hon. D.

TELLERS FOR THE NOES:

Macpherson, Major Niall (Dumfries)

Shepherd, William

Mr. Studholme and Major Wheatley

Question put accordingly, "That the Chairman do report Progress and ask leave to sit again."
The Commitee divided: Ayes, 280; Noes, 290.

Division No. 121.]

AYES

[7.58 a.m.

Aitken, W. T.

Birch, Nigel

Bullus, Wing Commander E. E.

Alport, C. J. M.

Bishop, F. P.

Burden, F. A.

Amery, Julian (Preston, N.)

Black, C. W.

Butcher, H. W.

Amory, Heathcoat (Tiverton)

Boles, Lt.-Col. D. C. (Wells)

Butler, Rt. Hn. R. A. (Saffron Walden)

Arbuthnot, John

Boothby, R.

Carr, Robert (Mitcham)

Ashton, H. (Chelmsford)

Bossom, A. C.

Carson, Hon. E.

Assheton, Rt. Hon. R. (Blackburn, W.)

Bowen, E. R. (Cardigan)

Channon, H.

Astor, Hon. M. L.

Boyd-Carpenter, J. A.

Churchill, Rt. Hon. W. S.

Baker, P. A. D.

Boyle, Sir Edward

Clarke, Col. Ralph (East Grinstead)

Baldock, Lt.-Cmdr. J. M.

Bracken, Rt. Hon. B.

Clarke, Brig. Terence (Portsmouth, W.)

Baldwin, A. E.

Braine, B. R.

Clyde, J. L.

Banks, Col. C.

Braithwaite, Sir Albert (Harrow, W.)

Colegate, A.

Baxter, A. B.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Cooper, Sqn Ldr. Albert (Ilford, S.)

Beamish, Major Tufton

Bromley-Davenport, Lt.-Col. W.

Cooper-Key, E. M.

Bell, R. M.

Brooke, Henry (Hampstead)

Corbett, Lt.-Col. Uvedale (Ludlow)

Bennett, Dr. Reginald (Gosport)

Browne, Jack (Govan)

Craddock, Beresford (Spelthorne)

Bennett, William (Woodside)

Buchan-Hopburn, P. G. T.

Cranborne, Viscount

Bevins, J. R. (Liverpool, Toxteth)

Bullock, Capt. M.

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

Crosthwaite-Eyre, Col. O. E.

Jennings, R.

Price, Henry (Lewisham, W.)

Crouch, R. F.

Johnson, Howard (Kemptown)

Profumo, J. D

Crowder, Capt. John (Finchley)

Jones, A. (Hall Green)

Raikes, H. V.

Crowder, Petre (Ruislip—Northwood)

Joynson-Hicks, Hon. L. W.

Rayner, Brig. R.

Cundiff, F. W.

Kaberry, D.

Redmayne, M.

Cuthbert, W. N.

Karr, H. W. (Cambridge)

Remnant, Hon. P.

Darling, Sir William (Edinburgh, S.)

Kingsmill, Lt.-Col. W. H.

Renton, D. L. M.

Davidson, Viscountess

Lambert, Hon. G.

Roberts, Major Peter (Heeley)

Davies, Nigel (Epping)

Lancaster, Col. C. G.

Robertson, Sir David (Caithness)

de Chair, Somerset

Langford-Holt, J.

Robinson, Roland (Blackpool, S.)

De la Bère, R.

Law, Rt. Hon. R. K.

Robson-Brown, W.

Deedal, W. F.

Leather, E. H. C.

Rodgers, John (Sevenoaks)

Digby, S. Wingfield

Legge-Bourke, Maj. E. A. H.

Roper, Sir Harold

Dodds-Parker, A. D.

Lennox-Boyd, A. T.

Ropner, Col. L.

Donner, P. W.

Lindsay, Martin

Russell, R. S.

Douglas-Hamilton, Lord Malcolm

Linstead, H. N.

Ryder, Capt. R. E. D.

Drayson, G. B.

Llewellyn, D.

Salter, Rt. Hon. Sir Arthur

Drewe, C.

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Sandys, Rt. Hon. D.

Dugdale, Maj. Sir Thomas (Richmond)

Loyd, Maj. Guy (Renfrew, E.)

Shepherd, William

Duncan, Capt. J. A. L.

Lloyd, Solwyn (Wirral)

Smiles, Lt.-Col. Sir Walter

Dunglass, Lord

Lockwood, Lt.-Col. J. C.

Smithers, Peter (Winchester)

Duthie, W. S.

Longden, Gilbert (Herts, S. W.)

Smithers, Sir Waldron (Orpington)

Eccles, D. M.

Low, A. R. W.

Smyth, Brig. J. G. (Norwood)

Eden, Rt. Hon. A.

Lucas, Sir Jocelyn (Portsmouth, S.)

Snadden, W. McN.

Elliot, Rt. Hon. W. E.

Lucas, P. B. (Brentford)

Soames, Capt. C.

Erroll, F. J.

Lucas-Tooth, Sir Hugh

Spearman, A. C. M.

Fisher, Nigel

Lyttelton, Rt. Hon. O.

Spence, H. R. (Aberdeenshire, W.)

Fort, R.

McAdden, S. J.

Spens, Sir Patrick (Kensington, S.)

Foster, John

McCorquodale, Rt. Hon. M. S.

Stanley, Capt. Hn. Richard (N. Fylde)

Fraser, Hon. Hugh (Stone)

Macdonald, Sir Peter (I. of Wight)

Stevens, G. P.

Fraser, Sir I. (Morecambe & Lonsdale)

Mackeaon, Brig. H. R.

Steward, W. A. (Woolwich, W.)

Fyfe, Rt. Hon. Sir David Maxwell

McKibbin, A.

Stewart, Henderson (Fife, E.)

Gaga, C. H.

McKie, J. H. (Galloway)

Stoddart-Scott, Col. M.

Galbraith, Cmdr. T. D. (Pollok)

Maclay, Hon. John

Storey, S.

Galbraith, T. G. D. (Hillhead)

Maclean, Fitzroy

Strauss, Henry (Norwich, S.)

Gammans, L. D.

MacLeod, Iain (Enfield, W.)

Stuart, Rt. Hon. James (Moray)

Garner-Evans, E. H. (Denbigh)

MacLeod, John (Ross and Cromarty)

Studholme, H. G.

Gates, Maj. E. E.

Macmillan, Rt. Hon. Harold (Bromley)

Summers, G. S.

Gomme-Duncan, Col. A.

Macpherson, Major Niall (Dumfries)

Sutcliffe, H.

Gridley, Sir Arnold

Maitland, Cmdr. J. W.

Taylor, Charles (Eastbourne)

Grirmston, Hon. John (St. Albans)

Manningham-Buller, R. E.

Taylor, William (Bradford, N.)

Grimston, Robert (Wastbury)

Marlowe, A. A. H.

Teeling, W.

Harden, J. R. E.

Marplas, A. E.

Teevan, T. L.

Hare, Hon. J. H. (Woodbridge)

Marshall, Douglas (Bodmin)

Thomas, J. P. L. (Hereford)

Harris, Frederic (Croydon, N.)

Marshall, Sidney (Sutton)

Thompson, Kenneth Pugh (Walton)

Harris, Reader (Heston)

Mauda, Angus (Ealing, S.)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Harvey, Air-Codre. A. V. (Macclasfield)

Maude, John (Exeter)

Thornaycroft Peter (Monmouth)

Harvey, Ian (Harrow, E.)

Maudling, R.

Thornton-Kemsley, Col. C. N.

Harvie-Watt, Sir George

Medlicott, Brig. F.

Thorp, Brig. R. A. F.

Hay, John

Mellor, Sir John

Tilney, John

Head, Brig. A. H.

Molson, A. H. E.

Turner, H. F. L.

Heald, Lionel

Monckton, Sir Walter

Turton, R. H.

Henderson, John (Catheart)

Moore, Lt.-Col. Sir Thomas

Tweedsmuir, Lady

Hicks-Beach, Maj. W. W.

Morrison, John (Salisbury)

Vane, W. M. F.

Higgs, J. M. C.

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

Vaughan-Morgan, J. K.

Hill, Dr. Charles (Luton)

Mott-Radolyffe, C. E.

Vosper, D. F.

Hill, Mrs. E. (Wythenshawe)

Nabarro, G.

Wakefield, Edward (Derbyshire, W.)

Hinchingbrooke, Viscount

Nicholls, Hermar

Wakefield, Sir Wavell (Marylebone)

Hirst, Geoffrey

Nicholson, G.

Walker-Smith, D.

Hollis, M. C.

Nield, Basil (Chester)

Ward, Hon. George (Worcester)

Holmes, Sir Stanley (Harwich)

Noble, Cmdr. A. H. P.

Ward, Miss I. (Tynemouth)

Hope, Lord John

Nugent, G. R. H.

Waterhouse, Capt. Rt. Hon. C.

Hopkinson, Henry

Nutting, Anthony

Watkison, H.

Hornsby-Smith, Miss P.

Oakshott, H. D.

Webbe, Sir H. (London & Westminster)

Horsbrugh, Rt. Hon. Florence

Odey, G. W.

Wheatley, Major M. J. (Poole)

Howard, Gerald (Cambridgeshire)

Ormsby-Gore, Hon. W. D.

White, Baker (Canterbury)

Howard, Grevilla (St. Ives)

Orr, Capt. L. P. S.

Williams, Charles (Torquay)

Hudson, Sir Austin (Lewisham, N.)

Orr-Ewing, Charles Ian (Hendon, N.)

Williams, Gerald (Tonbridge)

Hudson, Rt. Hon. Robert (Southport)

Orr-Ewing, Ian L. (Weston-super-Mare)

Williams, Sir Herbert (Croydon, E.)

Hudson, W. R. A. (Hull, N.)

Osborne, C.

Wills, G.

Hurd, A. R.

Peaka, Rt. Hon. O.

Wilson, Geoffrey (Truro)

Hutchinson, Geoffrey (Ilford, N.)

Parkins, W. R. D.

Winterton, Rt. Hon. Earl

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Peto, Brig. C. H. M.

Wood, Hon. R.

Hutchison, Colonel James (Glasgow)

Pickthorn, K.

York, C.

Hyde, Lt.-Col. H. M.

Pitman, I. J.

TELLERS FOR THE AYES:

Hylton-Foster, H. B.

Powell, J. Enoch

Major Conant and Mr. Heath.

NOES

Acland, Sir Richard

Anderson, Alexander (Motherwell)

Bacon, Miss Alice

Adams, Richard

Anderson, Frank (Whitehaven)

Baird, J.

Albu, A. H.

Attlee, Rt. Hon. C. R.

Balfour, A.

Allan, Arthur (Bosworth)

Awbery, S. S.

Barnes, Rt. Hon. A. J.

Allen, Scholefield (Crewe)

Ayles, W. H.

Bartley, P.

1994

1995

Bellenger, Rt. Hen. F. J.

Grey, C. F.

Morgan, Dr. H. B.

Benn, Wedgwood

Griffiths, David (Rather Valley)

Morley, R.

Benson, G.

Griffiths, Rt. Hon. James (Llanelly)

Morris, Percy (Swansea, W.)

Beswick, F.

Griffiths, William (Exchange)

Mort, D. L.

Bevan, Rt. Hon. A. (Ebbw Vale)

Gunter, R. J.

Moyle, A.

Bing, G. H. C.

Hale, Joseph (Rochdale)

Mulley, F. W.

Blenkinsop, A.

Hall, Rt. Hon. Glenvil (Colne Valley)

Murray, J. D.

Blyton, W. R.

Hall, John (Gateshead, W.)

Nally, W.

Boardman, H.

Hamilton, W. W.

Neal, Harold (Bolsover)

Booth, A.

Hannan, W.

Noel-Baker, Rt. Hon. P. J.

Bottomley, A. G.

Hardman, D. R.

O'Brien, T.

Bowden, H. W.

Hargreaves, A.

Oldfield, W. H.

Bowles, F. G. (Nuneaton)

Hastings, S.

Oliver, G. H.

Braddock, Mrs. Elizabeth

Hayman, F. H.

Orbach, M.

Brook, Dryden (Halifax)

Henderson, Rt. Hon. Arthur (Tipton)

Padley, W. E.

Brooks, T. J. (Normanton)

Herbison, Miss M.

Paget, R. T.

Broughton, Dr. A. D. D.

Hewitson, Capt. M.

Paling, Rt. Hon. Wilfred (Dearne Vally)

Brown, Rt. Hon. George (Belper)

Hobson, C. R.

Paling, Will T. (Dewsbury)

Brown, Thomas (Ince)

Holman, P.

Pannell, T. C.

Burke, W. A.

Holmes, Horace (Hemsworth)

Pargiter, G. A.

Burton, Miss E.

Houghton, D.

Parker, J.

Butler, Herbert (Hackney, S.)

Hoy, J.

Paton, J.

Callaghan, L. J.

Hubbard, T.

Pearson, A.

Carmichael, J.

Hudson, James (Ealing, N.)

Popplewell, E.

Castle, Mrs. B. A.

Hughes, Emrys (S. Ayrshire)

Porter, G.

Champion, A. J.

Hughes, Hector (Aberdeen, N.)

Price, Philips (Gloucestershire, W.)

Chetwynd, G. R.

Hynd, H. (Accrington)

Proctor, W. T.

Clunie, J.

Hynd, J. B. (Attercliffe)

Pryde, D. J.

Cooks, F. S.

Irvine, A. J. (Edge Hill)

Pursey, Cmdr. H.

Coldrick, W.

Irving, W. J. (Wood Green)

Rankin, J.

Collick, P.

Isaacs, Rt. Hon. G. A.

Rees, Mrs. D.

Collindridge, F.

Janner, B.

Reeves, J.

Cook, T. F.

Jay, D. P. T.

Reid, Thomas (Swindon)

Cooper, Geoffrey (Middlesbrough, W.)

Jeger, George (Goole)

Reid, William (Camlachie)

Cooper, John (Deptford)

Jenkins, R. H.

Rhodes, H.

Corbet, Mrs. Freda (Peckham)

Johnson, James (Rugby)

Richards, R.

Cove, W. G.

Johnston, Douglas (Paisley)

Robens, Rt. Hon. A.

Craddock, George (Bradford, S.)

Jones, David (Hartlepool)

Roberts, Goronwy (Caernarvonshire)

Crawley, A.

Jones, Frederick EIwyn (West Ham, S.)

Robertson, J. J. (Berwick)

Crosland, C. A. R.

Jones, Jack (Rotherham)

Robinson, Kenneth (St. Pancras, N.)

Crossman, R. H. S.

Jones, William Elwyn (Conway)

Rogers, George (Kensington, N.)

Cullen, Mrs. A.

Keenan, W.

Ross, William (Kilmarnock)

Daines, P.

Kenyon, C.

Shawcross, Rt. Hon. Sir Hartley

Dalton, Rt. Hon. H.

Key, Rt. Hon. C. W.

Shinwell, Rt. Hon. E.

Darting, George (Hillsborough)

King, Dr. H. M.

Shurmer, P. L. E.

Davies, A. Edward (Stoke, N.)

Kinghorn, Sqn. Ldr. E.

Silverman, Julius (Erdington)

Davies, Harold (Leek)

Kinley, J.

Silverman, Sydney (Nelson)

Davies, Stephen (Merthyr)

Lang, Gordon

Simmons, C. J.

de Freitas, Geoffrey

Lee, Frederick (Newton)

Slater, J.

Deer, G.

Lee, Miss Jennie (Cannock)

Smith, Ellis (Stoke, S.)

Delargy, H. J.

Lever, Harold (Cheetham)

Smith, Norman (Nottingham, S.)

Dodds, N. N.

Lever, Leslie (Ardwick)

Snow, J. W.

Donnelly, D.

Lewis, Arthur (West Ham, N.)

Sorensen, R. W.

Driberg, T. E. N.

Lewis, John (Bolton, W.)

Soskice, Rt. Hon. Sir Frank

Dugdale, Rt. Hon. John (W. Bromwich)

Lindgren, G. S.

Sparks, J. A.

Dye, S.

Lipton, Lt.-Col. M.

Steele, T.

Ede, Rt. Hon J. C.

Logan, D. G.

Stewart, Michael (Fulham, E.)

Edelman, M.

Longden, Fred (Small Heath)

Stokes, Rt. Hon. R. R.

Edwards, John (Brighouse)

McAllister, G.

Strachcy, Rt. Hon. J.

Edwards, Rt. Hon. Ness (Caerphilly)

MacColl, J. E

Strauss, Rt. Hon. George (Vauxhall)

Edwards, W. J. (Stepney)

McGhee, H. G

Stross, Dr. Barnett

Evans, Albert (Islington, S. W.)

McGovern, J.

Summerskill, Rt. Hon. Edith

Evans, Edward (Lowestoft)

McInnes, J.

Sylvester, G. D.

Evans, Stanley (Wednesbury)

Mack, J. D.

Taylor, Bernard (Mansfield)

Ewart, R.

McKay, John (Wallsend)

Taylor, Robert (Morpeth)

Fernyhough, E.

Mackay, R. W. G. (Reading, N)

Thomas, David (Aberdare)

Field, Capt. W. J.

McLeavy, F.

Thomas, George (Cardiff)

Finch, H. J.

MacMillan, Malcolm (Western Isles)

Thomas, Iorwerth (Rhondda, W.)

Fletcher, Eric (Islington, E.)

McNeil, Rt. Hon. H.

Thomas, Ivor Owen (Wrekin)

Follick, M.

MacPherson, Malcolm (Stirling)

Thorneycroft, Harry (Clayton)

Foot, M. M.

Mainwaring, W. H.

Thurtle, Ernest

Forman, J. C.

Mallalieu, E. L. (Brigg)

Timmons, J.

Fraser, Thomas (Hamilton)

Mallalieu, J. P. W. (Huddersfield, E.)

Tomney, F.

Freeman, John (Watford)

Mann, Mrs. Jean

Ungoed-Thomas Sir Lynn

Freeman, Peter (Newport)

Manuel, A. C.

Usborne, H.

Gaitskell, Rt. Hon. H. T. N.

Marquand, Rt. Hon. H. A.

Vernon, W. F.

Ganley, Mrs. C. S.

Mathers, Rt. Hon. G.

Viant, S. P.

Gibson, C. W.

Mellish, R. J.

Wallace, H. W.

Gilzean, A.

Messer, F.

Watkins, T. E.

Glanville, James (Consett)

Middleton, Mrs. L.

Webb, Rt. Hon. M. (Bradford, C.)

Gooch, E. G.

Mikardo, Ian.

Weitzman, D.

Gordon-Walker, Rt. Hon. P. C.

Mitchison, G. R.

Wells, Percy (Faversham)

Greenwood, Anthony (Rossendale)

Moeran, E. W.

Wells, William (Walsall)

Greenwood, Rt. Hn. Arthur (Wakefield)

Monslow, W.

West, D. G.

Grenfell, D. R.

Moody, A. S.

Wheatley, Rt. Hon. John (Edinb'gh E.)

1996

1997

White, Mrs. Eirene (E. Flint)

Williams, Rev. Llywelyn (Abertillery)

Woodburn, Rt. Hon. A.

White, Henry (Derbyshire, N. E.)

Williams, Ronald (Wigan)

Wyatt, W. L.

Whiteley, Rt. Hon. W.

Williams, Rt. Hon. Thomas (Don V'lly)

Yates, V. F.

Wilcock, Group Capt. C. A. B

Williams, W. T. (Hammersmith, S.)

Younger, Rt. Hon. K.

Writes, L.

Wilson, Rt. Hon. Harold (Huyton)

Willey, Frederick (Sunderland)

Winterbottom, Ian (Nottingham, C.)

TELLERS FOR THE NOES:

Willey, Octavius (Cleveland)

Winterbottom, Richard (Brightside)

Mr. Wilkins and Mr. Royle.

Williams, David (Neath)

Wise, F. J.

Mr. Selwyn Lloyd: I beg to move, in page 20, line 33, after "tax," to insert:
"either by a reduction of the profits assessable to profits tax or the increase of a loss."
I do not think this is an Amendment on which feelings can really rise very high, and I apologise to the Attorney-General that I should be asking him to consider it when he has had such a trying night. The Amendment will have the effect of making the Clause read:
"Where the Commissioners are of opinion that the main purpose, or one of the main purposes for which any transaction, or transactions, was or were effected (whether before or after the passing of this Act) was the avoidance or reduction of liability to the profits tax either by a reduction of the profits assessable to profits tax or the increase of a loss, they may, if they think fit, direct, …"
I do not know whether the Attorney-General will agree with me but it does seem to me that there must be some relation between Clause 27 and Clause 28. Whoever it was who conceived these two Clauses, whether the hon. Member for Sowerby (Mr. Houghton) or somebody else, the purpose of Clause 27 was to deal with the transactions relating to distribution; that if profits were capitalised and later distributed by way of reduction of capital, then it was designed that they should fall under Clause 27 because we agree they should be liable to Profits Tax. That was a matter already agreed on this side of the Committee.
Clause 27 is designed to deal with tax evasion so far as distribution is concerned. Clause 28, I assume, is designed to deal with evasion of Profits Tax so far as the manipulation, if that is the proper word to use, of profits assessable to tax is concerned. If that is the purpose of Clause 28, it would be very much clearer to say so. We have Clause 27 dealing with tax evasion so far as distribution is concerned, and Clause 28 dealing with tax evasion so far as computation of the figures assessable to Profits Tax is concerned.
Of course, Profits Tax can be evaded, and I am not dealing with the case of tax evasion or avoidance. It seems to
1998
me that could be achieved, either by artificially reducing the Profits Tax assessable to tax, or by increasing a loss, in one of these two ways. If the object of Clause 28 is to deal with that sort of tax evasion, it would be very much clearer to say so. If there are other types of tax evasion which it is intended Clause 28 should deal with, the Committee should know what they are. As far as I can follow the examples given by the right hon. and learned Gentleman, it seems that they would be covered by Clause 27 or Clause 28. One cannot help being rather flattered by the attendance of hon. Members on the other side who have not been here much of the evening with us. I apologise for the rather dull nature of the Amendment.
8.15 a.m.
The Attorney-General: The difficulty in the way of the Amendment is that the avoidance of tax by reduction of profits, or the increasing of a loss, is not the only sort of avoidance that is within the scope of the Clause. As the hon. and learned Gentleman said. Clause 27 deals with capitalisation and repayment of capital, but Clause 28 is quite general in scope and, supposing the form of words which the hon. and learned Gentleman proposes were adopted, this kind of case would be excluded from the Clause.
The case of payment of excessive directors' remuneration would be the case of a director-controlled company where a director has put his shares in the name of a nominee and, therefore, is not technically a member of the company, with the result that the excess remuneration paid to him would not, under the law, attract the higher rate of Profits Tax. That would be a case in which there was an obvious manoeuvre which would have the result of preventing the company being director-controlled and, therefore, the limitation on the remuneration of the directors would not apply and the higher rates would not be imposed upon the excess remuneration. That would be a clear case of obvious avoidance, but it would not be within either of the limits

1999
of the formula which the hon. and learned Gentleman proposes. For that reason I think he will agree that the Amendment would not improve the Clause.
Sir John Mellor: May I ask the Attorney-General what he means by a director not being technically a member of the company? Surely he must be a member of the company?
The Attorney-General: I am stating the case of a person who has started off by being a director in a director-controlled company and then, in order to prevent the company remaining a director-controlled one he transfers his shares into the name of a nominee, with the result that the company ceases to be director-controlled, the director no longer having a controlling interest because he has transferred his shares into the name of a nominee.
Mr. Selwyn Lloyd: Does that not reduce the figures of the profits assessable to Profits Tax?
The Attorney-General: No, it reduces the figure of profits assessable to the higher rate of Profits Tax, but they are still assessable to Profits Tax.
The formula of the hon. and learned Gentleman is "reduction of the profits assessable to profits tax," without specifying whether it is the higher or lower rate. Such a manoeuvre has the result of preventing a certain proportion of the profits being taxable at the higher rate, although they still remain taxable at the lower rate. It is questionable, even if it is arguable, that upon one view one can say that was within the first part of the formula of the hon. and learned Gentleman. I should have thought probably the better view was that it would not. At least there is a doubt. That is simply an example of a case which I quote solely by way of illustration to show that there are a number of similar circumstances in which it is doubtful whether the formula applies.
Mr. J. Foster: Surely there can be no doubt in this case that profits would be reduced, because by this device of which the Attorney-General has given an instance, the director would reduce the profits assessable to tax. My recollection was—I am asking for information here—that the definition of "control" would
2000
cover a director controlling the company through a nominee holding. I may be wrong because I have not the books here to look it up, but my recollection is that a director controls a company either directly or indirectly through nominee shareholders.
Passing from that, would not the Attorney-General agree that the principle behind the Amendment is right? He used the argument a good deal earlier during this debate, that this was a very drastic Clause and that it provided a remedy which went' a very long way. If it is drastic, I think he will agree with me that it is necessary to cut it down as far as is compatible with the objects of the Clause. I do not think anyone can object to that. I would suggest that, even if this form of words is open to criticism, the Clause should be cut down to exclude the mischief covered by Clause 27.
The Attorney-General: I am most reluctant to accept all that the hon. Member has said. As I explained when I argued on the first Amendment, the whole object of adopting this particular form of Clause is because we shall be able to deal with a very large number of these types of transaction which are being enhanced and multiplied. I have given one case and one can give other cases, where it would be doubtful, and even further cases may appear in the future. I feel that once one has decided to use the Clause it would be a wrong thing to frustrate its object by limiting its classification so as to apply it only to a limited class of transaction, and not to be able to apply it whatever the transaction, wherever the main object was tax avoidance.
Mr. Selwyn Lloyd: I am very disappointed at the right hon. and learned Gentleman. He did put up the whole argument for a blank cheque. I think the proper way to draft the Clause is first of all to decide the categories of transaction at which the Government seek to aim, to list these and then to give power to the Commissioners to deal at their discretion with these categories of transactions at any time when, in their opinion they are for the purpose of evading, or avoiding, or reducing tax. These cases will be a great strain on the administration, and ultimately they will not be in

2001
the public interest. I hope he will reconsider this matter between now and the Report stage.
Amendment negatived.
Sir Patrick Spens: I beg to move, in page 20, line 33, after "fit," to insert:
"deliver to the persons concerned a statement in writing to that effect setting out the facts and reasons on which the opinion of the Commissioners is based and."
The Clause in its present form is closely reminiscent of war legislation. It is a Clause where, if the Commissioners form an opinion in a certain direction, they do not have to express it or explain any reasons for it. They are invited to proceed at once to action and give directions that may go to the length of charging any persons with the tax who have not previously been liable, or increasing the amount of tax to any amount they think Rt. It is possible that in a particular case the first thing a person might know that he had become liable under this Clause was the receiving of a direction charging him with tax. I do not say it is likely, but it is possible that that would take place.
The reason why I put down this Amendment was directly concerned with the appeal subsection—subsection (4). Of course, the Clause itself obviously contemplates that there will be very doubtful cases where the subject will exercise the right given to him of going before the Special Commissioners. The Special Commissioners are given certain powers to deal with the direction given by the Commissioners. One has known, both at the Bar and elsewhere, how difficult it is, where it is merely a question of a Minister's or a Commissioner's opinion, to find out exactly what were the facts and reasons that led to the forming of an opinion.
It is highly desirable that there should be some express provision that the Commissioners, when they have formed their opinion, with their very wide discretion, and made up their minds to give a direction, should at the same time that they give the direction deliver to the persons or individual concerned, in writing, the facts on which the opinion is based. This Amendment is followed by another, authorising an appeal if the subject can show that the Commissioners
2002
have been misinformed on any fact or reason on which the opinion was based.
It is not really asking of the Commissioners any more than in all probability they would do in an informal manner after the subject had extracted the information from them by writing for it. In a case of such importance, and with a Clause so far reaching as this, it is not asking very much. [Interruption.]
Sir J. Mellor: On a point of order. Will you be so good, Sir, as to instruct that hon. Member to discontinue his conversation, which makes it very difficult to listen to a reasoned argument.
Mr. Pannell: Further to that point of order. Will you also take into consideration that we suffer continually from the right hon. Gentleman the Leader of the Opposition?
Mr. Sydney Silverman: Further to that point of order. May I call your attention to the fact that I am sitting much farther away from the hon. and learned Gentleman than the hon. Member who complained, and the hon. and learned Member seems to me to be speaking, at any rate vocally, with the greatest possible lucidity? I have no difficulty in hearing at all.
Sir P. Spens: I was quite unaware that there was any talking going on; I was concentrating on addressing the Chair with special reference to the Attorney-General in the hope that I should be found convincing.
To conclude: in the obvious case—the sort of case that one or two hon. Members have discussed earlier this morning—there would be no difficulty at all in the Commissioners' putting on paper the facts on which they are basing their opinion and the reasons for it. In the more difficult cases, there is obviously a possibility of the Commissioners—against whom I would not make any kind of suggestion, on the ground of fairness, but they are, after all, human—not having all the evidence available when they come to their decision. They may not have evaluated the various factors properly, they may have decided that tax avoidance was the principal purpose, whereas it may not even have been a serious motive.
In these circumstances, I suggest it would be much more satisfactory and

2003
helpful to everybody if some such machinery could be adopted. This Debate, continuing on this Clause for some hours, shows that there is serious anxiety in many quarters about its effect. It would be far better for everybody who has to suffer under this Clause to be told exactly for what reasons they are being brought within it.
8.30 a.m.
The Attorney-General: If one considers what happens, there is no need for the statement of reasons which the hon. and learned Gentleman suggests. The direction which has to be served will, from the very nature of things—and it is apparent from the Clause that it has so to do—set out the transactions which it says were for tax avoidance purposes and the adjustments which in the view of the Commissioners are necessary for the purpose of restoring the tax position. That direction must tell the taxpayer practically all that he needs to know. It is not as though one were talking about things of which one has no experience. We have had experience of how this works out in excess profits cases.
The direction is a fairly full document. What it does not do—and should not do—is to contain general reasoning on the evidence. Supposing the Commissioners were suspicious, and had no doubt in their minds that a particular transaction was not what it purported to be but concealed a tax avoidance motive. It would not only be unnecessary but undesirable that the Commissioners should have to prepare a detailed judgment analysing the evidence which led to their conclusions.
If we had not this right of appeal to the Special Commissioners which subsection (4) provides, there might be a greater need for a fairly full statement of claim, a pleading in the true sense. But it is the simplest and easiest thing to get before the Special Commissioners. If the Commissioners had to serve a statement of claim on the company, equally, when the company goes to appeal it should serve grounds of appeal on the Commissioners. It is done on a more informal basis before the Special Commissioners, for there we have a hearing in which all the reasons are deployed.
2004
I submit that there is no room for this detailed statement of claim. All we want is a direction setting out what the transactions are of which the Commissioners complain and what adjustments are to be made in respect of those transactions. In a very large number of cases there will have been a number of interviews between the company and the Commissioners, there will have been discussions and correspondence; and the way the thing works out in connection with Excess Profits Tax liability is in the result we get a full direction which gives the company everything which at that stage it wants to know.
Anything beyond what appears in the direction would be somewhat like the full analytical judgment a judge delivers on a consideration of the evidence deployed before him. I should have thought that was not necessary or desirable. Direction having been given, if there was disagreement, there is quick procedure by way of appeal before the Special Commissioners, who hear the full argument on behalf of both parties and the issues are crystallised. I should have thought that the direction as at present served was adequate and that anything beyond that would lead to a great deal of unnecessary duplication, possibly delays and would serve no useful purpose.
Mr. Selwyn Lloyd: Is subsection (3) a repetition of the previous subsection (3)?
The Attorney-General: It is.
Mr. Lloyd: In that case, may I ask whether direction has been made in cases to which subsection (3) applies? As I read it, subsection (3) provides that where there has been a reduction of the liability for tax, that is deemed to be one of the main benefits of the transaction. If I am wrong, I should like to be corrected.
The Attorney-General: The mere fact that there has been a reduction is not enough: it has to be a main part of the transaction. The Crown Betting Case shows that the test to apply is to look at the transaction from outside and just what is the main benefit to be expected.
Mr. Lloyd: I accept the right hon. and learned Gentleman's explanation. Suppose it has been decided that tax reduction is the main benefit, does it follow automatically that the reduction in liability for tax is deemed to be one of the main benefits of the transaction?

2005
In such cases, it may be that the direction will not contain very full particulars. If it is the practice that the direction should contain most of what my hon. and learned Friend is asking, there would not be great harm in writing into the Clause, if not the actual words put forward, at least something similar.
Mr. Lionel Heald: It may be my denseness, due to the events of the last 12 hours, but I was left in considerable difficulty about what the right hon. and learned Gentleman said about the direction that had to be given. I understood him to say that the directions refer to the nature of the transactions and so on, but on looking at the wording I find only one word, "Direction."
8.45 a.m.
My experience is that if an Act of Parliament says that someone is to direct something, there is nothing whatever laid down about the manner in which it is to be done. There is not the slightest use the right hon. and learned Gentleman saying that we usually do this or always do that. Parliament is enacting the law and, if it is to be done, let it be done in plain language. I submit that there is not the slightest justification for the right hon. and learned Gentleman not acceding to the request made to him because he has said, "That is right, that is what will have to be done." Why not, therefore, let Parliament say, "That is what shall be done "?
The Attorney-General: If I may supplement what I said, I feel that the hon. and learned Member for Kensington, South (Sir P. Spens), misunderstands the subsection. He concedes that subsection (1) can be satisfied if I say, "I direct"; but from the very nature of things one cannot apply that subsection unless one gives a direction which says certain things. One cannot direct that such adjustments are to be made unless one says what the adjustments are. From the clearly expressed service of the subsection, one would have to state what the transactions are of which complaint is made, what adjustments are to be made in respect of them, the terms of the tax claimed and so on. Under subsection (3) one would have to indicate whether it is a transfer of shares, or what is the subject of the complaint, and also what is the main benefit expected from the transaction.
2006
From the very nature of things, therefore, the direction cannot be given unless it contains very nearly all the information—though not entirely all of it—which the hon. and learned Member had in mind. If one goes beyond that one embarks on the realm of argument. One can argue a case and set out the reasons why a certain conclusion is drawn. That is argumentative and the sort of thing a judge does when he delivers a full judgment. Clearly we do not want that when we are initiating this procedure by direction. It is something which has to come in for consideration when and if the matter comes to appeal.
Mr. Heald: Before the right hon. and learned Gentleman sits down, would he not agree to look at this once more? He has referred to information which would be given about the transaction. If it were not given, he said, there could not be adjustments. But it is not the transaction which is adjusted but the tax liability. The right hon. and learned Gentleman, assisted by those we see in another place, could very quickly draft a document adjusting the liability without giving any information at all, simply saying, "You pay so much more and you pay so much less."
Mr. Pitman: That was the gist of what I intended to say. It seems to me that it is a statement on the tax computation which underlay the direction that is wanted, not a statement on the direction. If the right hon. and learned Gentleman is prepared to say that he wishes the Commissioners to give the information with regard to computation, then some Amendment, if not this one, is clearly desirable. I think my hon. and learned Friend is to be congratulated on putting his finger on an important issue and also to be congratulated on his helpful Amendment.
Mr. Maudling: I think the right hon. and learned Gentleman might be a little more sympathetic in his attitude on this. This Clause, after all, cannot be a Clause of which he is proud. He may say that it is necessary, but I cannot help feeling that it must be thoroughly out of keeping with his views as a member of the legal profession. Surely he will go out of his way to do everything he can to assist the Committee to improve the Clause. If he feels, as he does, that the Amendment goes a little too far, very well; he has

2007
conceded the major part of my hon. and learned Friend's case by saying that in practice the directions issued by the Commissioners will contain this information, but that is not what the Clause says.
However one reads the Clause, it does not say more than that a direction may be issued which will adjust the liability. Certainly that does not include anything like the major part of my hon. and learned Friend's case, which the right hon. and learned Gentleman himself conceded. Having said that that sort of information would be in the directions in practice, it would be only reasonable to attempt to improve the Clause by including it in the words, making it quite clear that, as a matter of Statute, that is what shall and must happen.
Sir Arthur Salter: The right hon. and learned Gentleman has clearly indicated in his reply to my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) that the Commissioners would in practice give more information as to why they are making the adjustment than they would have to give under the wording of the Clause as it stands. In explaining what he thought they would give, what in practice they would have to give, he said it covered practically everything covered in the Amendment. He feared that perhaps the exact interpretation of the Amendment might seem to imply that they would have to give some things which the right hon. and learned Gentleman thought it undesirable that they should give, but he said that the greater part of what is covered by the Amendment would have to be given or ought to be given.
Surely a very slight Amendment to the Amendment, if any indeed is required, would be quite acceptable to my hon. and learned Friend and would give effect to what the right hon. and learned Gentleman thought ought to be done in this case. Would he therefore undertake to consider this matter before Report?
The Attorney-General: I will certainly consider the point. Perhaps I have too many of these directions in my mind and I am rather taking it that automatically they will have to contain what the Clause does not insist that they shall contain. I want to guard myself against holding out
2008
any sort of promise that I will provide for including in the direction anything of what I might call the judgment a judge would deliver. I think it would be most dangerous and undesirable to start going as far as that when the outline, the indication of what the transactions are, and what adjustments are to be made, is different.
If the hon. and learned Gentleman will give me the opportunity of so doing, I will consider this between now and the Report stage. I say that without commitment because, on promising to go into things, one finds that all sorts of considerations are urged. Therefore, without commitment, I will sympathetically consider it to see whether anything can be done to go, not perhaps the whole way, but at any rate some way to meet the point.
Sir P. Spens: The yardstick I want to apply is that the company or individual concerned shall get a statement which will tell him what the Commissioners have decided, and thus give him an opportunity of making up his mind whether he ought to appeal. That is the important thing. He has got a right of appeal, but if he merely gets a bald adjustment of tax liability he may not have the slightest idea whether the grounds on which the Commissioners have decided are good or bad, or whether he agrees with them. That is what I have in mind. After studying the appeal Clause I looked at the main Clause and said: "If it is a straightforward direction and nothing more, how is the man to know whether to appeal or not"? He will have to appeal in order to find out why the Commissioners decided to say that.
The Attorney-General: I will certainly consider that, but, as I have said, without any definite commitment.
Sir P. Spens: I understand that. In those circumstances, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Bell: I beg to move, in page 20, line 33, to leave out from "fit," to "so," in line 35, and to insert:
"at any time within three years of the end of a specified chargeable accounting period adjust the liability to the profits tax therein."

2009
The effect of this Amendment is to limit the period within which the Commissioners may exercise their power under this Clause. It seems only fair that, when a re-adjustment of an already completed transaction is to be met, the taxpayer should know in a shorter time than the normal six years exactly what his final liability for tax will be, and this Amendment is designed to bring about that effect.
When the right hon. and learned Gentleman was speaking on earlier proposed Amendments to this Clause he referred to the difficult task which the Special Commissioners would have in ascertaining whether or not a transaction fell within the purview of this Clause, and what is difficult for the Commissioners would be equally difficult, if not more difficult, for the taxpayer himself.
We must remember that this new law will present a new problem to the businessman. He will have to consider whether arrangements which he is advised to make, and transactions which he is advised to enter into, may in fact be caught by the terms of this Clause. It will often be a very difficult decision for him to take. At was said earlier, one motive for doing a thing in a particular way may very easily be the avoidance of Profits Tax, or a diminution of liability to Profits Tax. Of course, there may be other motives.
The original motive may have been a commercial one, nothing to do with the avoidance of tax at all, but a subsequent motive may very well be the avoidance of Profits Tax. That is to say, he may choose to do a transaction in a particular way in order to diminish his liability to Profits Tax, and he then will not know, and it might be extremely difficult to estimate, whether it would be held that that was a main motive, or a main purpose of the transaction into which he had entered. Until that was finally decided for or against him by the Commissioners of Inland Revenue the taxpayer would not know whether his liability to Profits Tax was a quite small figure or a very much larger figure, to which it had been adjusted by a direction under this Clause.
I hope that the Attorney-General will feel that this Amendment proposes something for the relief of the taxpayer in facing a novel and difficult situation,
2010
which he should think it a matter of justice to apply. I hope that he will give sympathetic consideration to this Amendment, and will see whether he cannot accept it. If he feels that some other period than three years is desirable, I hope he will at least meet the principle of the Amendment by undertaking to introduce an Amendment to the same effect on the Report stage.
The Amendment does not limit the ambit of the Clause. It merely allows the taxpayer to know where he is within what I suggest is a reasonable period of time. It would be a great hardship if for six years after embarking upon a business transaction the taxpayer did not know where he stood and how much Profits Tax he owed to the Exchequer. Six years is a very long time in the life of a business. Indeed, one has known businesses whose whole life was comprised of less than that period. It is quite obvious that to be practical in drafting the law some shorter period than six years ought to be written into this Clause, and I hope that the right hon. and learned Gentleman will be able to accept the Amendment.
The Attorney-General: This is an Amendment with which, at first sight, I confess that I have a lot of sympathy, but the difficulty is that in this class of transaction one is dealing, not infrequently, with cases of downright dishonesty. If one has a time limit of this sort, the longer a person—
Notice taken that 4 Members were not present; Committee counted, and 40 Members being present—
The Attorney-General: When we were momentarily diverted by the incident which, I think, has just been brought to a close, I was explaining that my difficulty about this Amendment was that one would not infrequently be dealing with dishonest persons. If one had a time limit, one would be giving the most dishonest persons the most chance of avoiding the tax. One would be disadvantaging others more honestly minded.
There is, as a matter of fact, no time limit in the Profits Tax assessments, quite independently of this Clause. That, of course, is not necessarily a conclusive reason why there should not be a time

2011
limit in this Clause, and the hon. Gentleman has suggested reasons which would seem to point to the desirability of such a time limit. But, on balance, I hope that he will agree that, having regard to the type of transactions which, generally speaking, one would be dealing with, it would be to the interest of persons who were honestly minded that there should not be given an opportunity to the dishonest to escape paying tax by, as it were, lying low until the six or five years, or the three which, I think, the hon. Member has in mind. On balance, therefore, I would advise the Committee not to accept this Amendment for the reasons I have given.
Experience will, I think, show that difficulty does not, in general, arise over these things. Where a question has emerged whether a direction should be given there will have been consultation, discussion and negotiations, and the matter will have been cleared up one way or the other. In practice, any person who has no tax-avoidance motive would have little to fear. If there is doubt the matter could be cleared up, and he will know whether he is in danger of having a direction served upon him.
9.0 a.m.
Mr. Eccles: I think that I should have some sympathy with the Attorney-General if the transactions against which the Clause is aimed were really well defined; because, in that case, the honest taxpayer would not have anything to fear from the extension of the three years to six years. But part of our submission is that this Clause does not define the transactions clearly. That being so, a whole range of taxpayers will be suspicious that what they have done may, or may not, come under this review. In weighing up the advantage to the honest taxpayer, it is, I agree, to his gain that as many as possible of the crooks are caught.
The Attorney-General: I would remind the hon. Member that I have undertaken to see if I cannot make the nature of the transactions more specific; that is, to insert some provision to make it obligatory for the taxpayer to be given some clearer information about the transaction.
Mr. Eccles: I am grateful to the Attorney-General for that, but the whole tenor of his argument previously was that
2012
it was impossible to produce a hundred different Clauses for stopping up all the leaks, which are always growing, and always appearing somewhere; and so, he wanted wide powers. However he may try to amend this Clause, there will be a whole series of transactions in which the taxpayer does not know if he is going to be proceeded against.
The honest taxpayer will be at an advantage if the crooked ones are caught, but he will be at a disadvantage because of the certainty in his own mind as to whether some of the things he has done may possibly be brought under review by the Commission. A period of three years is enough at any rate to see how we get along, and to see what sort of transactions, in fact, the Commissioners will proceed against. They will learn from experience and proceed on that experience. There is more in it than the Attorney-General thought, judging by his argument.
Mr. Molson: It is no part of our desire that this limitation of time should not prevent someone doing something dishonest. What I gather from the explanation of the Attorney-General is that it is possible under this Clause for an accounting period of several years ago to be opened up at any time in the future. That might mean that after the profits have been assessed over a number of years it would occur to the Commissioners that something which did not appear to be improper at the time had resulted in a substantial reduction in tax, it then being possible for them to go back five or six years and say, "We thought there was nothing wrong in this at the time, but our experience now suggests something which did not appear at that time." The Commissioners could then propose to take a number of years and re-open the whole case. That, I think, the Attorney-General would agree is unreasonable.
The Attorney-General: It would not be unreasonable. Supposing there had been a concealed fraud, the case would have been perfectly reasonable and proper.
Mr. Molson: I thought I made it plain that I am not asking that this provision shall protect a case of fraud, but after all the Attorney-General earlier today has said that the purpose is that this Clause should be so wide in its scope that

2013
it is able to deal with cases that he has not yet been able to think of. There is nothing improper in financial arrangements being made in order reasonably to reduce the incidence of taxation. I personally would be entirely happy if the Attorney-General would undertake to look at this matter again to exclude any case of fraud, but at the same time to rule out the case I have suggested—the Commissioners opening up the question of a liability for tax which apparently had been satisfactorily settled some four or five years before.
Mr. Keenan: I intervene because this Clause strikes me—[HON. MEMBERS: "Divide."] Most of the hours we have spent during the night have been to get from the Attorney-General certain promises that he will do something to make it easier to dodge taxes. I suggest to him that, judging by the number of questions raised on this particular Clause, he might seriously consider drawing up a book of rules so that hon. Members on the other side of the Committee might know how far to go beyond the point they have already gone in this matter. I should like to draw attention to the great fight there is on behalf of profits taxpayers by hon. Members opposite compared with the fellow who works for his living—in a word, P.A.Y.E.
Mr. Maudling: I think the Attorney-General's arguments really are quite unacceptable on a major point of principle, in that he imported into the consideration of this Clause something which does not arise—the question of wilful evasion. I was surprised when, even with his knowledge, the hon. Member for Sowerby (Mr. Houghton) appeared to be confusing evasion with avoidance. I tried to interrupt him, but I was unsuccessful.
The most important point of this Clause is that here we are not dealing with fraud or dishonesty. We are dealing with transactions which at the time they were carried out were perfectly legal transactions. That is, as I understand it, the meaning of avoiding liability to tax. Therefore, it is wrong, in considering this proposal about limits of time available to the Commissioners, to talk about dishonesty. That is not dishonesty, but a person acting within his legal right. With fraud, quite different considerations
2014
arise and Clause 34 deals with an extension of time for proceedings for penalties in case of fraud or wilful default.
This Clause deals with a man who has done something which it was perfectly legal to do at the time, but which was subsequently and restrospectively decided by the Commissioners in the exercise of their powers to be liable to tax. No question of dishonesty comes into it, and in those circumstances I think it is only reasonable to say that there should be some time limit. In tax matters there must be some ending to things.
There is a clear distinction in dealing with Income Tax, that the Revenue can go back up to six years, to reopen an assessment but that where there has been fraud there is no time limit. That should apply here. Where there is fraud there should be no time limit, and where there is no fraud, as there is not in cases arising under this Clause, the taxpayer is entitled to say, "If I am liable to have the legality of my transactions subsequently challenged and the freedom from tax subsequently changed, then I am entitled to say that if these changes are to be applied retrospectively I ought to know that this must be done within a stated period of years."
Mr. Pitman: I support what has been said by my hon. Friend the Member for Barnet (Mr. Maudling), because the Amendment has been more clearly shown to be necessary by what the learned Attorney-General has said, in that he has made it quite clear that the whole of the assessments for Profits Tax for this Kingdom will be unfinal, that they will never be finally certain. That seems to me to be an intolerable situation. My hon. Friend the Member for Chippenham (Mr. Eccles) rightly said that this was a balance, that both sides of the Committee wish to prevent fraud. On the other hand, we want to give that degree of certainty and finality to the honest taxpayer whom we are seeking to protect.
My hon. Friend the Member for Barnet has proposed a middle course which is reasonable. Might I, as a constructive suggestion, put up yet another? It is instanced by the arrangements which apply to companies where there is a requirement of high dividend distribution. I believe that those companies run under the risk that at

2015
any time they can be required to distribute the whole of their earned profits during the past years in order to bring the proprietors under Surtax.
I think I am right in saying, however, that there is a Section in the Finance Act which enables somebody who might come within the mischief of that Section to submit his accounts to the Commissioners and say to them, "Here are the facts, complete disclosure, ask any questions you like, and tell me whether I am all right for the future with any degree of certainty, or whether I must watch out and live under the Sword of Damocles which I cannot see and the precise nature of which I cannot predict." I think the Attorney-General has accepted the principle that there ought to be some degree of certainty in good cases.
Lieut.-Colonel Sir Walter Smiles: The Royal Commission Report of a few years ago produced legislation which made it difficult for company directors to carry on their businesses. They had to be extremely careful that they did not go beyond the law in any way. Earlier this morning the Attorney-General mentioned general and specific instances, and many things seemed to be left to the view of the Commissioners.
The Attorney-General said he could not make rules and laws for every specific instance. Take, for instance, the directors of some of these investment trusts. They are in a very delicate and difficult situation today. Even today, I am told, a great many of them are considering the selling of rubber shares that have reached heights and which are paying dividends today they have not paid for the last 30 years. At the present moment these directors of investment trusts may well be thinking of selling their rubber shares that are getting 10 per cent. or even more today, and putting them into shares that will give them less return. By doing that they will be avoiding Profits Tax. What view will the Commissioners take of that?
9.15 a.m.
We can take private companies—many of them are almost family controlled companies. Some of these companies have existed for 100 years, and in the past one senior partner or a member of the family reached the age of 70 and
2016
was prepared to retire. In the old days nothing was thought about it. He handed on the business to his eldest son and other members of his family and they carried it on, but he himself would be avoiding Profits Tax by doing that. If he lives for five, years, incidentally, he will also escape tax by way of Death Duties.
I certainly think this Amendment should be accepted. In addition to the things I have mentioned, it is rendering it liable for an indefinite period of time for the Commissioners to go back to what might have been a perfectly legal action three or four years ago, and is now declared to be illegal and makes a company liable to a very serious fine.
Mr. Selwyn Lloyd: I would ask the right hon. and learned Gentleman to believe that we are not altogether happy about this Clause. It is clear that some hon. Members, for instance the hon. Gentleman the Member for Kirkdale (Mr. Keenan) think that this Clause will catch only fraudulent people or deliberate tax dodgers.
Mr. Keenan: What I got up to protest against was the time spent to protect tax dodgers, and to try to get from the Attorney-General some promise that something will be done to help those people. That is why I suggested tax dodgers' rules so that it would help hon. Gentlemen opposite.
Mr. Lloyd: Knowing the hon. Gentleman as I do and have done, I do not think he really meant it, especially the latter part.
Mr. Keenan: I meant every word of it.
Mr. Lloyd: There is no sympathy at all on these benches with the person who endeavours to avoid tax, and I entirely agree that no time limit should be imposed on that class of case. There is another class of case which might be described as the wilful evasion. I have not much sympathy with that.
There is another type of case. Supposing a company know that an initial allowance is still to be permitted to the end of the year and decides to buy another motorcar this year instead of next year in order to obtain the benefit of the initial allowance and reduce its liability to Profits Tax. That is avoiding tax liability. To buy a car in December instead of January

2017
is a perfectly honest and reasonable transaction. If the hon. Member were in charge of business and did not take that opportunity to protect his shareholders, he would be guilty of a breach of duty. That kind of action is caused by this Clause.
Mr. S. Silverman: Surely such a transaction is not covered by this Clause at all, because by the buying of the motorcar it could not be shown that the main purpose was to avoid taxation.
Mr. Lloyd: I am indebted to the hon. Gentleman's intervention because under subsection (3) the Clause says: "the main benefit which might have been expected to accrue." Well, the main benefit of buying that car in December and not in January was to evade the liability to Profits Tax. There could be many wholly innocent and reasonable transactions whose effect would be a reduction of liability to tax. The Attorney-General has admitted that much. He said that as a matter of practice honest people will be all right; they will have nothing to worry about. That is a paraphrase.
I take it that the Attorney-General was including in honest people the sort of transaction I have referred to. It is not good enough to leave a sort of discretion to the executive which will simply have the effect of ensuring, as a matter of practice, that innocent people are going to be safeguarded. If that was the Attorney-General's intention, he should write into the Clause considerably greater safeguards. One safeguard he must certainly put in, if only for a trial period, is a time limit of three years. We should be very much happier if people who had avoided tax in reasonable and honest circumstances were not at the mercy of the Commissioners ad infinitum. I ask the right hon. Gentleman not to close his mind to that.
Mr. Arthur Colegate: I have frequently heard from the benches opposite doubt cast upon whether any Clause that provides machinery to deal with the genuine tax evader can in no circumstances be used against innocent people. If the Attorney-General will look up his records at the Treasury he will find that we had a very similar case with Sir John Anderson, I think in 1944—the celebrated whisky case. What Sir John Anderson rightly did was to break up the ramp by which unscrupulous people bought
2018
from innocent shareholders distillery shares, then liquidated all the companies concerned, and sold at enhanced prices the stock of whisky. The result was that had it not been for Sir John Anderson they would have got away with enormous profit, no Income Tax, and no Excess Profits Tax.
When I and some of my colleagues brought this matter to the attention of Sir John Anderson he made a similar reply at first to that we have heard today, but being a man of great judgment and fairness he promised to look into it. The result was that he found that literally hundreds, if not thousands, of perfectly innocent shareholders had sold their shares utterly legally and were unaware of what was going on. The Clause was modified so that he succeeded in doing what we are try to get today—a Clause that would catch the real tax offenders and would not bother or catch the innocent in any way.
Mr. Manningham-Buller: I would ask the right hon. and learned Gentleman to give further consideration to this point in view of the arguments that have been advanced. There seems to be great force behind them. No one on either side of the Committee wishes to do injustice as a result of debate at this hour on a complicated Clause like this. The Attorney-General, I appreciate, may want further time to consider this, and I ask him to say that he will look further into the matter.
Amendment negatived.
Mr. H. Strauss: I beg to move, in page 20, line 41, at the end, to insert:
Provided that this section shall not apply where the transaction or, if there are more than one, all the transactions falls or fall within the scope of section thirty-two of this Act and Treasury consent has been given to it or them under proviso (ii) of subsection (1) of that section.
The object of this Amendment is to bring Clauses 28 and 32 into proper relationship. Both of them purport to deal with avoidance of liability. Clause 28 deals with transactions designed to avoid liability to the Profits Tax. Clause 32 deals with the restriction of certain transactions leading to avoidance of Income Tax or Profits Tax. The Amendment I am moving seeks to make certain that the Commissioners do not treat as improper under Clause 28 anything for which the

2019
Treasury has given permission under Clause 32. In the absence of this Amendment, there will be nothing to stop their doing so. I think the Amendment is so unanswerably logical that I cannot help having some hope that the right hon. and learned Gentleman may announce the Government's decision to accept it. If he does not do so, it will be necessary to have further discussion, but if he does, we can pass on to subsequent Amendments.
9.30 a.m.
The Attorney-General: I cannot accept this Amendment. When consent is being given under Clause 32, it may transpire that the full facts were not before the Treasury at all, or that the consent was obtained by some kind of misstatement on the part of the applicant. If that were so, and the transaction was one also within Clause 28, there could be no possible reason for the powers which Clause 28 confers not being exercised. Therefore, I could not accept the Amendment as it is on the Order Paper. Not only is that the case, but we may have a transaction to which consent can be given under Clause 32 and it transpires that there is some subsidiary feature of the transaction which would bring it within Clause 28.
However, on behalf of the Inland Revenue, I am prepared to give the assurance to the Committee that once permission has been given for a transaction under Clause 32, the Revenue would not operate Clause 28 in regard to that transaction, provided that the full facts of the transaction had been before the Treasury when consent was given. That proviso is an important one. If it is complied with, then I think the taxpayer can rest assured that if he has consent under Clause 32, he will be in no danger of further direction under Clause 28.
Mr. Selwyn Lloyd: Who would be judge as to whether the full facts had been put before the Treasury—the Treasury or the Inland Revenue?
The Attorney-General: The Inland Revenue would have to decide in considering whether to make a direction.
Mr. Boyd-Carpenter: It follows from what the right hon. and learned Gentleman the Attorney-General has said in reply to my hon. Friend that the unfortunate person concerned is not going to
2020
have any real security, even when he has obtained the consent of the Treasury, because it will be open to the Inland Revenue to reopen the whole matter under this Clause, if, in the apparently unfettered opinion of the Inland Revenue, he has not given the full facts. For a moment it seemed as if the right hon. and learned Gentleman was making a concession of real value, but the more one considers it, the less value it has. The matter appears to be still back in the position that it is the unfettered discretion of the Inland Revenue which governs it.
I hope that the right hon. and learned Gentleman has not said his last word. In the first place he is assuming that if the applicant makes a misstatement, he may not be able to obtain consent. That seems to convey some reflection on the competence of the officials of the Treasury.
I notice that, perhaps by happy coincidence, there is no representative of the Treasury with the right hon. and learned Gentleman on the Front Bench, other than the technical presence of the Deputy Chief Whip. They certainly should not give their consent under Clause 32 until they have satisfied themselves that they have obtained the necessary information. It would be quite wrong for them to give that consent, vested in them by the Committee under Clause 32, if that Clause becomes law, without making it their business to obtain the full facts.
It seems that the right hon. and learned Gentleman, inadvertently perhaps, is casting some reflection on the Treasury, but the more important point is that it is surely essential in the conduct of any business that those conducting it should be able to obtain some secure and stable basis for their activities. Surely, when a firm has gone to the Treasury and has given them such facts as the Treasury seek to obtain, and has, as a result, obtained Treasury permission and has gone ahead with his plan—it should be quite intolerable that some considerable time afterwards, the Inland Revenue, as a result of the last Amendment, could say, "The Treasury has not obtained the full facts and we are going to re-adjust your affairs." The right hon. and learned Gentleman cannot expect a commercial community to conduct its business on a basis of such insecurity and instability and

2021
I think, in his scrupulous care for the interests of the revenue, he is a little inclined to overlook the practical necessities of those who conduct business and commercial affairs in this country.
It is very dangerous—I am sure he appreciates it—to those business enterprises upon which the country depends for its bread and butter to introduce all these instabilities and insecurities which cannot but induce those responsible for business not to indulge in the new enterprises and the new efforts which are in the national interest. I hope he has not said his last word.
I hope he is prepared to have a little more confidence in the competence of the Treasury and I hope he will be prepared to have a little more regard for the financial and commercial interests of this country. If he is, I am sure he will be willing to put something in the Bill which, without including fraud, none the less would give security to the honest man, who has given the Treasury what he thought they requested, against having the matter re-opened by a separate organ of the State years after the most important Department of the State has given him the permission which he sought.
Mr. Nigel Birch: We should bear in mind that under Clause 32 (3) very heavy penalties can be imposed on people taking action without the consent of the Treasury—two years' imprisonment and a fine not exceeding £10,000. That is the sort of Clause which often appeals to hon. Gentlemen below the Gangway, when they see the possibility of a few people in jail. The question of fraud on the Revenue is therefore fully covered by such penalties. It seems to me wholly unreasonable and wrong that the Treasury can re-open the whole transaction in a case which does not involve fraud.
The second point of criticism is this. As far as I can see, it is not for a court to decide whether information was fraudulently withheld. It appears to be for the Treasury to take the decision. They will be judge and jury in their own case and will decide whether a transaction should be re-opened. That seems to put a good deal of unnecessary temptation in the way of the Treasury and this Clause is, therefore, not one which the Committee should accept.
The Attorney-General: Perhaps I may reply to the speeches made so far, because probably I may have introduced a certain amount of misconception. I am sure I am responsible for it.
The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said I was casting a reflection on the Treasury, but I was not doing that at all. The Treasury and the Commissioners are very largely dependent on the information which they receive from the applicants seeking permission. They can apply certain checks, but they cannot insist upon the production of documents and, therefore, they are very much at the mercy of the person seeking permission—and I hope that is not over-stating the case. Although they may take every possible precaution and may sift the information according to the means available to them to the best of their ability, it may well be that facts are not disclosed to them which would materially influence their judgment.
Supposing there has been a request for a certificate under Clause 32, which has been granted. The person concerned goes abroad and is not liable to any penalty. Then a situation arises in which the Commissioners, looking further into the transaction, find something new upon which they say, "This was not at all reflected in what was represented to us." When one uses the word "fraud" one is talking about an indefinable thing—a sort of sharp dealing, which is perhaps all right at one end of the scale but which is downright dishonest at the other end of the scale. Hon. Members complain that it is not right that the Commissioners should be able to judge whether they have been fully informed. But who else can?
What would happen if the applicant were granted his permission and then the Commissioners obtained knowledge of the transaction—brought before them for some reason or other? Who else could be made judge in the case? It is not as if it can be submitted to the courts. It is simply a case between the Commissioners and the applicant, so that the only person who can decide must be the Commissioners.
Suppose they make a direction under Clause 28, the court may come in in the shape of the Special Commissioners, and, as hon. Members who have examined subsection (4) know, the powers of the

2023
Special Commissioners on hearing an appeal are extremely wide. They have the power simply to say that they do not think a direction ought to have been made in the circumstances, even though there may have been motive, and all the rest of it. They can say, "In all the circumstances we do not think a direction should have been made," so that they can cure anything which requires curing, looked at from that point of view.
They were the only points I wanted to emphasise in reply to the two speeches made from the Opposition. To begin with, the Commissioners and the Treasury must, of necessity, be very much dependent upon the information which is supplied to them by the applicant, and, even if they use the utmost discretion in dealing with that information, they may still be misled unless the person giving the information does so with complete candour and fullness.
Secondly, from the very nature of things the Commissioners must be the judges of whether they think they have been given the full information, because nobody has by then come on the scene; no court has yet come on the scene; it is only when we get to the Special Commissioners that there is some, as it were, outside arbiter who can judge whether they have given full information or not.
Bearing that in mind, I submit to the Committee that the assurance I give on behalf of the Inland Revenue is not a valueless assurance. The assurance is carefully worded, and perhaps I might read it out again: Once permission had been given for a transaction under Clause 32 the Revenue would not operate Clause 28 in regard to the transaction, provided the full facts of the transaction had been before the Treasury when consent was given. I hope the Committee will not think that is a valueless assurance, and that it does afford a reasonable measure of protection.
Mr. Boyd-Carpenter: Before sitting down, would the right hon. and learned Gentleman deal with this point? He said that the court does not come into the picture. Under the present scheme of the Bill that is undoubtedly true. But, in view of the fact that he himself appeared to appreciate the difficulty which arises from its being left to the Commissioners,
2024
in the first place to decide whether the full facts had or had not been given to the Treasury, and therefore whether they were barred by the right hon. and learned Gentleman's assurance from re-opening the matter, would it not be possible, in these circumstances, to introduce at a subsequent stage an Amendment under which the Commissioners were not invited to do so without leave of the court? That would put the matter in wholly independent and impartial hands, and I think would meet certain of my apprehensions.
9.45 a.m.
Mr. H. Strauss: I thank the right hon. and learned Gentleman for the exposition he has given in answer to the Amendment, and I only want to make two or three points quite clear. The first is that we who framed the Amendment have not the slightest objection to the Government taking any reasonable steps against fraud or anything in the nature of fraud. The second point is that what we designed this Amendment to do was to see that a transaction, if approved by the Treasury after consideration, in the absence of culpable non-disclosure, should not be questioned by a different organ of the Government under a different Clause. Because at any rate some part of that demand appeared to the right hon. and learned Gentleman to be reasonable he carefully read out his considered undertaking.
I hope the right hon. and learned Gentleman will not misunderstand me. I do not, of course, treat that undertaking as negligible; nor do I make the slightest charge against the Inland Revenue. Nevertheless, I hope he may consider that the matter is of such importance that, if he asks us to attach value—as I do attach value—to the undertaking that he read out, he will see that it would be even more proper to insert that undertaking in suitable language in the statute. After all, his undertaking, though nobody questions it or doubts it, is an undertaking which is wholly without legal force; it cannot be quoted in the courts; it can be ignored, and, if it is ignored, the subject has no remedy.
I beg the right hon. and learned Gentleman to consider whether he could not put the language in the statute, perhaps in some slightly different form of words from that which he has given the Committee.

2025
No reason of any sort has been given why, if it is reasonable to ask us to place reliance on this undertaking, that undertaking should not be given legal force in the ordinary way by being embodied in the statute.
I feel certain that if the right hon. and learned Gentleman would give some hope that the proposal I have made will be properly considered between now and the Report stage with a view to the Government inserting, in its own language, a proper undertaking to prevent the evil of duplication and lack of consistency between two Clauses in the Bill, that would be very much more satisfactory. I wonder whether, in the light of that, the right hon. and learned Gentleman would add anything to what he has said.
Mr. Charles Williams: As we have not had an answer to the very reasonable request of my hon. and learned Friend, may I, as a layman, ask the right hon. and learned Gentleman to reconsider the position? How are we, as laymen, having only the assurance of the right hon. and learned Gentleman—which we know is completely and utterly valueless in a court of law—to explain to our constituents exactly what this means and where they stand?
This is an effort by the Government to prevent evasion. If they are to get the support of the Committee in this matter they must make plain, in that legislation, that the matter with which it is dealing so that the ordinary business people understand it. I am not asking the right hon. and learned Gentleman to accept the Amendment now, but I beg him to tell us that he will go into this matter between now and the Report stage. I am sure that there are other Members who take the view which I do, that we ought to have something more. Would the learned Attorney-General be so kind as to do that?
The Attorney-General: I will undertake, without commitment, to look into this matter, but it may be that I can do nothing to meet the wishes expressed. There are difficulties, and, supposing that nothing comes of my examination, I hope that hon. Members will not think that I have not implemented my promise.
Mr. H. Strauss: I am sure that the right hon. and learned Gentleman will fulfil
2026
that undertaking, and I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Eccles: I beg to move, in page 20, line 41, at the end, to insert:
Provided that this section shall not apply where the application of the section would conflict with the terms of any of the double taxation agreements authorised under section fifty-one of the Finance (No. 2) Act, 1945.
I think that these double taxation agreements, which are of great use to British business, were, on the whole, made at the instigation of H.M. Government. It is all the more necessary, therefore, that we should do nothing in our taxation legislation which might contravene these agreements, and even cause some of the other parties to wish that they had not made them. The purpose of the Amendment is to ensure that that shall not happen. I admit that it is not very likely to happen, and I admit that it is probably rather a small point in the matter of the amount of tax which may be involved. But I think that, from the standpoint of good relations with the countries with whom we have these treaties, that it ought to be put into the Bill.
These double taxation conventions generally provide that a business resident in one of the territories shall not be charged tax in the other territory unless it carries on activities in that other country through a permanent establishment therein. It may happen that with the consent of the Treasury, under Clause 32, a business here may either go abroad, or it may sell a part of its assets to a company overseas. Then at a later date, the Commissioners may come along and say, "Well, you did not sell that, you charged too little. We are going to assess your Profits Tax on the price which we think you ought to have got for that sale."
I am not disputing that that sort of transaction happens. For the sake of the argument, let us suppose that it has happened. If that is so, and a business which is being transferred no longer has an office in this country, and the tax is levied on the vendor, there will arise a situation in which the tax convention will be broken. To put that right, I think that the assurance which we want from the learned Attorney-General, which

2027
should be inserted into the Clause, is that there should be a compensating reduction in the amount allowed in respect of whatever dividends or interest it may receive from overseas.
In other words, we want to preserve the position in the double taxation conventions whereby a company's profits are only taxed in one place; and as the conventions are mostly drawn, profits tax does not, I believe, fall on profits earned overseas. That is why it seems to us that there is a possibility that, after a sale or transfer abroad has been effected, the Commissioners might, within the terms of Clause 28, come back and say, "You did not charge enough, and we shall assess Profits Tax." Then, the double convention would be broken. This is more a diplomatic—if I may use the phrase—than a financial Amendment.
We do not want to add to the strains that there are going to be as a result of this Finance Bill as a whole, between overseas Governments and His Majesty's Government. It will be bad enough unless Clause 32 is taken away, and we urge that it is of the greatest importance that we should not lay ourselves open to reproaches from foreign countries and foreign nationals. We should not encourage them to increase their spirit of nationalism, which is making overseas business more difficult; and if we are not carrying out a double taxation convention properly, they will be able to say, "Well, once again it is difficult to do business with these people." I hope that the learned Attorney will say that he is going to give this consideration.
The Attorney-General: The hon. Gentleman's anxiety lest the application of Clause 28 might result in a conflict with any of the double taxation countries is not well founded. He seeks to procure his desire by a proviso which he suggests should be incorporated in the Bill; but such proviso is unnecessary because Section 51 of the 1945 (No. 2) Finance Act—the exact part is subsection (1)—provides that these double taxation agreements must apply—and here I quote the exact words—
"notwithstanding anything in any taxing enactment."
That, I think, does what the hon. Member seeks to do by his proviso. It would
2028
be otiose to include his Amendment in the Bill.
Mr. Eccles: I apologise for not having looked up that particular subsection, and, in view of what the learned Attorney has said, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Sir P. Spens: I beg to move, in page 21, line 3, to leave out subsection (3).
During the hours that we have listened to discussion on this Clause, we have heard a number of references to this subsection, and in each case that it has been referred to by the learned Attorney-General, he has, I think, used all too much affection and good will. I will now endeavour to persuade him to postpone it, utterly and completely. He must forgive me if, in the course of it, I make some rather stringent criticisms of the manner in which it is drawn and the effect of it.
I do not want to keep the Committee any length of time and I think I can say what I have got to say fairly quickly. On the other hand, even now, after all these hours we have spent on the Clause, I am not at all sure that I really understand the part it plays and how it fits in with subsection (1). I am not certain whether it is anything more than merely a sort of addendum to subsection (1), bringing into the category of main purpose cases, a certain number more under this subsection.
10.0 a.m.
If so, it may be that the proviso to subsection (1) does govern to some extent the provisions of subsection (3), but if it does not, then the first and main criticism that I want to draw the attention of the Committee to is that apparently there is absolutely no time limit whatever during which the transactions or series of transactions referred to in subsection (3) may have occurred. That in itself seems to me a most condemnatory criticism of the subsection. It may possibly be capable of the earlier interpretation and that therefore transactions that have been completed before 10th April, 1951, may be outside the scope of subsection (3).
The next point I do ask for information on is why these three types of transactions are singled out for this special treatment by subsection (3):

(a) the transfer or acquisiton of shares in or debentures of a company; or

2029

(b) a change or changes in the person or persons carrying on a trade or business or part of a trade or business; or

(c) a change or changes in the directors of a company the directors whereof have a controlling interest therein.

Why these three transactions and no more? Would one be rash in speculating that the Commissioners have a certain number of cases in their mind which fall inside one or other of these three categories, and that this is a net laid to catch these specific cases? That has been done before.
Hon. Members have said a great deal about the lack of interest that the party on this side of the Committee takes in the matter of catching tax dodgers. On the contrary, from the very first moment I had the honour of coming into this House in 1933, every year we had subsections in the Finance Bill—I think without exception—aimed at people who in one way or another were tax dodging. A great deal of the difficulty of the subsections and the surprising form they took was often explained by the fact that they were drafted to catch a certain number of cases which the Revenue knew about and which they wanted to stop then and there, at once.
Unless that is the explanation, it does seem utterly unreasonable that three methods of evading this Profits Tax should be singled out for this special treatment. But when I get to the body of the case, I do want quite a lot of help. People have referred to this Clause as being a sort of arrangement under which if the transaction has resulted in the avoidance of taxation, then that fact is taken up by the Commissioners and relying on that fact, they then form the conclusion and the opinion that the main purpose of the transaction was to avoid taxes and all the consequences of the rest of the subsection coming into play. But that is not what the subsection says. The wording of it is quite extraordinary. It provides that if it appears in the case of certain transactions that, having regard to the provisions of the law relating to the Profits Tax
"other than this section which were in force at the time when the transaction or transactions was or were effected, the main benefit"—
not which accrued but—
"which might have been expected to accrue"—
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I ask, expected by whom, the Commissioners or the parties to the transaction?—
"from the transaction or transactions in the three years immediately following the completion thereof was the avoidance or reduction of liability to the tax. …"
then certain things are to result.
Therefore, the test is not what has happened during three years but what might have been expected by someone to accrue during three years immediately following the completion of the transaction, and irrespective altogether of what has happened. It is enough for someone—and I still do not know who it is—to say, "I should have expected avoidance of tax to have accrued during three years after these transactions were effected." That opinion or expectation having been formed, thereupon the rest of this subsection comes into play and the transaction is then deemed legally to be one of which the main purpose was the avoidance of tax.
I have never seen a subsection like it; I cannot see why the Commissioners should not have to deal with these transactions in exactly the same way as every other transaction. Why should these transactions be put on this special stool ready for punishment by the Revenue? It is utterly unfair, and under those circumstances I suggest that there is every reason in the world why this subsection should be struck from this Clause.
Mr. Joynson-Hicks: I want to add one or two words to what my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) has said. This is an exceedingly important and serious subsection, and because there is no way in which it can be sufficiently improved by Amendment, the only thing to do is to delete it. As my hon. and learned Friend has stressed, it is difficult to see what is the object of this, how it will fit into the general structure, and what will be its impact upon the companies which it may or may not affect.
I should like to come back to that point presently because it is an aspect of the matter which does not seem to have been taken into account by the Treasury—the doubt which these provisions will throw upon the operations of perfectly good companies which are trying to get on with the job, to carry on their business or trade. They are becoming increasingly

2031
tied up by legislation such as this, and it is becoming increasingly difficult for them to see their way to plan ahead along the lines which it is necessary for them to do if they are to carry on the business of the country satisfactorily.
We probably all recall a speech made some hours ago by the right hon. and learned Gentleman on one of the earlier Amendments to this Clause, in the course of which he quoted, by way of illustration, some four classes of case which he hoped and believed this Clause was designed to catch. In the event of these cases resulting in transactions which would reduce or avoid Profits Tax to these companies. As he went through these cases, it occurred to me—and I may be wrong—that these classes of cases he was quoting were intended to fit in to those three classes of cases that are quoted under (a), (b) and (c) in this subsection.
The frame-work of this subsection had been more or less designed to catch this or other similar classes of cases in which he was anticipating the possibility of the avoidance or reduction of Profits Tax. At that point I came to the conclusion that we were receiving one of the very few mercies we can anticipate in this Bill by having avoided the right hon. and learned Gentleman putting in the most heinous type of provision in this clause by adding a further paragraph, (d), saying, "and such other forms of transaction as the Treasury may prescribe."
If we look at (a), (b) and (c) and these three categories of transactions, it immediately strikes us what an exceedingly wide range of transactions are involved. We have to bear in mind the fact that, if a company enters into not one transaction, but a whole series of them, of which only one falls within the category (a), (b) or (c), then that subsection comes into operation. Therefore I feel, to begin with, it is putting an unreasonable burden upon the directorate of companies to have to interpret all these subsections in order to see whether any transaction or series of transactions in which they may be involved, falls within any of these particular categories.
With regard to the actual effect, as my hon. and learned Friend has said, the point about this subsection is not whether or not there is any intention of avoiding
2032
the incidence of Profits Tax either in whole or in part, but whether one of these subsidiary transactions does be found to benefit the company in that particular way. In the event of it benefiting other people in quite another way and having little benefit to the company save, possibly, in some ways the saving of Profits Tax itself, I think it will be caught by this Clause.
It is difficult to quote an illustration, but it can be illustrated by the hypothetical case of the superannuation fund. I am not suggesting that a company would, necessarily, be caught by the subsection, but it is a good type of case to take because, if it were to be within one of the transactions in the three categories, the setting up the superannuation fund, itself would be of benefit to the workers of the company and other people outside, but for the first three years of it coming into operation, it would be very unlikely to be of any substantial benefit to the company, save in regard to avoidance or reduction of Profits Tax.
Therefore, that type of transaction which obviously must be beneficial and to the advantage of all concerned in connection with a company—a perfectly bona fide transaction, much to be commended—will, if it falls within one of these three categories, immediately get caught, not for the intention of avoiding tax but for the fact that its main benefit during the first three years after the transaction is completed will have been found to have had that result.
10.15 a.m.
May I call attention again to those words
"the main benefit which might have been expected"?
Never can I recall having seen in any Bill such an invitation to be wise after the event. The circumstances in which a board of directors may enter into a transaction at the present time are exceedingly difficult to visualise in three years' time, when the circumstances have completely changed. But it is three years after the transaction has been entered into that those who decide this issue turn round and say, "In the light of the circumstances as we see them today, the main benefit which might possibly have been expected three years ago was the avoidance of tax."

2033
I most seriously stress that this subsection is unworkable. It is going to impose an unwarrantable brake upon the activities of commercial concerns, throw doubts upon commercial morality, and in the end be an exceedingly bad precedent for law, particularly because of its retrospective effect on what might have taken place three years before. The only possible thing to do is to delete the subsection entirely.
Viscount Hinchingbrooke: I cannot pretend to so erudite an explanation of this subsection as my hon. Friends who preceded me. But, looking at it as a layman, it does appear that it is the most important and operative section in the whole Clause. The first subsection is not so widely defined and is limited in extent, in that it comes to an end on 10th April, or all transactions completed before 10th April are null and void as regards this Clause.
With subsection three there is no time limit at all. It is wide in extent, because of the definitions given in (a), (b), or (c). I do not know of any sort of transaction involving a capital structure, the managers and directors of a corporation or company, that cannot be classed in one or other of those three definitions. Any tax dodging device involving persons, shares, or debentures is liable to be called in question under them. Therefore, it is subsection three which has the widest implication and anything that has been attempted in the past is likely to be covered.
Secondly, the subsection seems to go back in time over an enormous range of years. It speaks of a transaction or transactions in the three years immediately following the completion of whatever scheme there was and that means that it takes you right back into the past and is violently retrospective in effect. All sorts of innocent schemes which might have been started three or four years ago, initially involving no attempt at evasion of tax, are likely to be caught. I am entirely at one with my hon. Friends in thinking that this subsection is by far the most dangerous of all subsections in this Clause. It must certainly be deleted.
Mr. Pickthorn: I want to ask the right hon. and learned Gentleman two questions which might clarify the discussion of this subsection. It is now generally
2034
agreed that transactions, in the plural, means a series of transactions. A question which has not been answered, explicitly or implicitly is: Would any competent lawyer know what are the earmarks of a series for this purpose? If not, can we be given any rule of thumb for knowing what constitutes a series? The second question is this: Is the Attorney-General sure, even from his point of view, that the words in line 16:
"… might have been expected …"
are the appropriate words? It seems to me there are two objections to that. One is the general objection to putting these things in the passive—it leaves it dubious who is to do the expecting. The other reason is that it is a very indefinite expression, and does not seem appropriate in connection with the definite article in:
"… the main benefit."
Nor does it seem to be appropriate to the fact that we do not know who is to do the expecting. Am I wrong in thinking that in laymen's language it means that "the Inland Revenue now think that a sensible person would then have expected"? I think that is what it means to the eye of common sense, if I may use that expression without being accused of arrogance—if that is what it is meant to mean, can we be told so, and can we be told whether the Attorney-General is satisfied that this form of words is the best for putting that meaning in the statute.
The Attorney-General: In reply to the hon. and learned Member for Kensington, South (Sir P. Spens), we had discussed on an earlier Amendment the question whether there was a time limit to subsection (3), and the opinion I had expressed is that undoubtedly there is a time limit. It is to be found in the words of the third line from the end of the subsection:
"… shall be deemed for the purposes of this section to have been the main purpose."
Deeming something to be the main purpose has no effect unless it is within the time limit laid down in subsection (1), so that the time limits in subsection (1) in my view also apply to subsection (3).
The hon. and learned Gentleman asked why it was that the three types of transaction specified in subsection (3) had been selected. The answer is that they are

2035
considered typical of the kind of transaction resorted to for this kind of tax evasion. I gave certain examples earlier. Take paragraph (a). That category would include the sort of case in which the director of a director controlled company transfers sufficient of his shares to his wife to bring his personal holding below 5 per cent. of the ordinary shares, thus qualifying himself as a whole-time service director. So there is no limit to the remuneration which can be paid to him which does not count for tax purposes.
Mr. Lyttelton: Or by sale to any other party—they can equally be caught.
The Attorney-General: They cannot equally be caught. They can be caught if the further qualification can be fulfilled, that the main benefit to be expected is a tax benefit.
The third question was: Who was the person who was to do the expecting? The words used come from E.P.T. legislation and have been construed often in the courts. The particular reference to this part of the wording in the analagous section of E.P.T. legislation is a passage in a judgment of a former Master of the Rolls, Lord Greene, in the case to which I have referred, the Crown Bedding Case, in All England Report, 1946, I. The relevant passage reads:
"The main benefit was the main benefit which might have been expected by a person surveying all the facts and knowing all the law on the subject at the time."
In other words, the person who is to do the expecting is a person who stands as it were outside the transaction who is conscious of what is going on and knows all the circumstances of the law.
Mr. Joynson-Hicks: Is there anyone who fulfils all these qualifications except Lord Greene himself?
The Attorney-General: I can assure the hon. Gentleman that that was a careful judgment of Lord Greene, who has done many cases of this sort. He is perhaps one of our most experienced judges, particularly in this sort of legislation. He was giving a workable meaning of the Section of the Act. I should have thought that out of respect for Lord Greene the hon. Gentleman
2036
would have been better to have left that remark unsaid.
Mr. Joynson-Hicks: I think the hon. and learned Gentleman misunderstood me. I assure him there was nothing disrespectful in what I said. Recognising the supreme qualifications called for, I asked if there was anyone except Lord Greene, for whom I have the highest respect, who could fulfill these qualifications.
The Attorney-General: We all have respect and affection for Lord Greene and I am sure the hon. Gentleman did not intend any disrespect. The hon. Gentleman said he had never seen a Clause like this, but it has been part of our legislation for no fewer than seven years, and has been constantly explained. Anybody who has anything to do with tax matters knows this very nearly by heart. There have been very many cases in the courts.
The hon. Member for Chichester (Mr. Joynson-Hicks) expressed a number of apprehensions. He thought the Clause was unworkable, that it might throw doubts on the validity of the business community, and that it would cause fear and anxiety. I should think the answer to that is that apparently many members of this Committee who are members of the business community are not even aware that there was already such a section in our existing legislation which has been operating for seven years, and really has not caused any inconvenience and anxiety in the business community.
I never heard complaints about the operation of this Section and so far as I know there are no such complaints. It has operated with dignity and with no inconvenience except to people who wish to avoid paying their proper share of Profits Tax. I think the hon. Gentleman should not have the anxieties which he expressed.
I think I answered the question of the hon. Member for Dorset, South (Viscount Hinchingbrooke) and my answer was that there is a time limit in subsection (1).
Viscount Hinchingbrooke: Would it not be safer to put some proviso to subsection (3) in the Bill on the Report stage, because even the right hon. and learned Gentleman has not been able to show any direct link between subsection (1) and subsection (3).
10.30 a.m.
The Attorney-General: I do not think there can be much doubt about it, but between now and the Report stage I will consider what the hon. Gentleman has said.
The hon. Member for Carlton (Mr. Pickthorn) asked whether it was possible to say in more precise terms what was meant by a series of transactions or a scheme of transactions. I do not think there is a definition in any Act of what is meant by that expression. There have been references to what is a transaction, and again in judgments in the courts that question has been considered, although not very exhaustively considered, in relation to this kind of context. One cannot get much further than saying that transaction means no more and no less than an ordinary person would understand it to mean.
That is the only answer I can give to the hon. Gentleman because there is no other answer. Some ordinary English terms carry their own meaning on their face, and one does not improve matters very much by trying to get some kind of formal definition. It does not add to their meaning, which ordinary people clearly understand. I think I should use the same observations about the word "scheme," which also carries its meaning on its face.
Those were the questions put to me, and perhaps I may now give the reasons why we thought it necessary to have this subsection. The history of the Excess Profits Tax legislation is that it began in 1941 with Section 35, which simply made this kind of provision in relation to transactions whose main purpose was tax avoidance or reduction. Between 1941 and 1944 it was found that the Section was nothing like strong enough. It was almost impossible to bring people within it.
If anybody said to the Special Commissioners that he had some other plausible motive—other than a tax motive or in addition to it—the Commissioners found that they were obliged to conclude that the Section did not apply to him. They found themselves very nearly powerless, because whether that kind of statement was genuine or false, in practice it was very difficult for them to test it. They had no evidence against it, because it rested very much upon the word of the
2038
taxpayer himself and those who gave evidence for him.
It was found necessary in 1944 to strengthen the Section by Section 33 of the 1944 Act, which added to the words "main purpose" the words "or one of the main purposes" and which incorporated a subsection very similar to, although not exactly the same as subsection (3) of this Clause. Subsection (3) is almost word for word the same, although it contains some changes. We thought it was necessary, if the Clause was to operate at all, to strengthen it in exactly the same way as experience has shown that it was necessary to strengthen Section 35 of the 1941 Act.
Lieut.-Commander Braithwaite: I confess that I felt a mild alarm when I discovered that in the nineteenth hour of our deliberations we were entering such difficult legal waters as those through which we have just been navigating and it was, therefore, comforting to see piling up behind the right hon. and learned Gentleman some of the legal luminaries of his party, especially the hon. and learned Member for Islington, North (Mr. Moelwyn Hughes) and the hon. and learned Member for Ilkeston (Mr. Oliver). The hon. and learned Member for Gloucester (Mr. Turner-Samuels) is regrettably absent. In the event of either of the hon. and learned Gentlemen flagging or failing, beside one of them sits the former Financial Secretary to the Treasury whose lucidity I though we should need a few minutes ago.
My hon. and learned Friend the Member for Kensington, South (Sir P. Spens) deployed his Amendment to such effect that the learned Attorney-General conceded many of the points. I congratulate the right hon. and learned Gentleman on the extraordinary clarity which he still retains after his very long ordeal and on his good temper; and indeed, on his conciliatory words, although I thought he had a minor lapse when reference was made to the late Master of the Rolls. I thought the right hon. and learned Gentleman felt he must possess the qualities referred to by my hon and learned Friend, and I endorse that; and I hope there is no ill-feeling left after that incident.
I should like to pay tribute to a fellow layman, for I thought the most gifted speech on this Amendment was by my

2039
hon. Friend the Member for Carlton (Mr. Pickthorn), to whose penetrating words even the right hon. and learned Gentleman was unable to reply.
Mr. Houghton: Is this the annual prize-giving?
Lieut.-Commander Braithwaite: We are, alas, a very long way from that. When the hon. Gentleman has been in the House a little longer he will know that the annual prize-giving comes on the occasion of the Third Reading, and his interventions have not yet qualified him for a prize. If I may say so, he has still time to restore the position and to earn a few good marks, for he has all today. I thought he should have spoken on this Amendment by way of making his way to the prize-giving, but if not on this Amendment perhaps he will speak on later Amendments. I understand that some 40 new Clauses are to be called and I hope the hon. Gentleman will address us on 35 of them. If he does, then by his diligence and good conduct he may well appear at the prize table in due course, when the Third Reading takes place.
I apologise for that digression, which was entirely due to the interruption. I always endeavour to be courteous to my opponents and to give them such information as they may desire. The Committee is now fortified by the entry of the right hon. Member for Dunbartonshire. East (Mr. Kirkwood) who, if I may say so, is one of the best loved of our Parliamentary colleagues. He at least should have decided views on whether subsection (3) should be deleted. I only regret that the right hon. Gentleman is just too late by the twinkling of an eye to hear the speech of his right hon. and learned Friend which, in view of his past activities in the House, he would have found profoundly unsatisfactory. We very much missed the right hon. Gentleman's outbursts. I am told that he has entered the ranks of capitalism and has mellowed somewhat.
We must, however, confine ourselves to the Amendment. I thought my hon. and learned Friend the Member for Kensington, South, made an unanswerable case which was not shaken by the right hon. and learned Gentleman's reply. I feel that the right hon. and learned Gentleman himself seemed dissatisfied with the
2040
position because in reply to my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) he said he would give further thought to the matter between now and the Report stage—and thought on the part of a Socialist Government is always encouraging, even after an all-night Sitting.
I confess that on studying this subsection I had difficulty with its punctuation. I read it with care and studied its semi-colons, intertwined with commas. The grammar is so difficult and varied that I hope the timely arrival of the hon. Member for Stetchford (Mr. Jenkins) will enable us to get extracted from our difficulties. He is always regarded on this side of the Committee as one of the most intellectual if most misguided hon. Gentlemen opposite. When it comes to making our way through somewhat abstruse Clauses—I hope the hon. Gentleman has the Bill in his hand: we are discussing subsection (3) of Clause 28—it is a little difficult to understand the drafting. I was, therefore, comforted when the Law Officer said that he would give further attention to this matter.
In the meantime, we are confronted with the stern decision on what should be done about subsection (3) standing part of the Bill, and I am bound to say that, after listening to all the arguments with the greatest care—it is a little difficult to follow them after this very lengthy Sitting, conscientious though I always am in attending the Committee; I always regard myself as one of the best attenders; I congratulate myself upon that fact, and I followed all the arguments with care—the balance of evidence not only comes down on the side of my hon. and learned Friend, but comes down with such weight that, should he take his views into the Division Lobby, I shall feel it my duty to accompany him thither.
Mr. Lyttelton: I can hardly hope to make such an amusing contribution as that of my hon. and gallant Friend the Member for Bristol, North-West (Lieut.-Commander Braithwaite). I wish, first, to say something about the E.P.T. analogy. We have to remember that when talking about legislation dealing with Excess Profits Tax we are dealing with only a portion of the profits of a company which exceed the datum line of the brokerage period, and, therefore, with only one or two small sections of profits

2041
—and profits earned in war-time at that. But when it is sought to put into the statute these kinds of provisions, which cover the whole range of profits which may be earned in peace-time, then I suggest that the E.P.T. analogy is by no means a comprehensive answer to our objections to this subsection.
I also am encouraged by the presence of the hon. Member for Stechford (Mr. Jenkins), and I ask him whether he agrees that we are now taking a flight into the pluperfect subjunctive. Is any hon. Member prepared to contradict me when I say that that might be excepted as the pluperfect subjunctive? Certainly it is a pluperfect howler in the statute, because the thing need never have happened at all. Yet, on the presumption that it is even three years, if the effect were to reduce the liability to tax the main purpose is deemed to be to avoid.
These are very dangerous things to have in a statute in peace-time, and I very much hope that the Attorney-General will give us a little more assurance than he gave to my hon. Friend, and that he will look at this, what I might almost call, metaphysical Clause, because there was a moment when I detected the feet of the right hon. and learned Gentleman taking off from the terrestrial sphere and gradually being surrounded by a sort of nimbus of metaphysics. But, after all, we are dealing with a very mundane affair, and I hope that he will look again at this subsection and give us a little more assurance than he has done so far.
10.45 a.m.
Sir W. Smiles: I wish to call the attention of the Attorney-General to a comparison of two similar companies, one registered in the United Kingdom and the other registered in the Union of South Africa. Those two companies might have identical capital, be pursuing exactly the same interests and have exactly the same directors, but the difference in law under subsection (3) will certainly discourage capital from the United States of America coming to the company registered in the United Kingdom, for those in America would very much prefer to go to the company registered in the Union of South Africa, as they are doing today.
Paragraph (a) says:
"the transfer or acquisition of shares in or debentures of a company."
2042
These big financial mining corporations are continually selling shares in mines that are past their best, and are putting their money into mines which are just developing, as in the Orange Free State at the present moment. We all know that those mines will take some 10 years to develop, during which time no Profits Tax will come into the Chancellor here. The Commissioners of Inland Revenue might read into that transaction that they were dodging Profits Tax—which they are. Their business consists of taking these risks in mines, because they do not know whether they will be successful profitable concerns 10 years hence.
At present, the Clause lays them open to very serious charges. Paragraph (b) says:
"a change or changes in the person or persons carrying on a trade or business."
Directors change; they are bound to from time to time. One has only to read the financial newspapers to see that directors change. They may change for one reason or another, one reason being that their policy is wrong. But the Commissioners of Inland Revenue can read anything they like into it.
I will not now touch on private companies, to which we shall come later, because I believe that most of the laws against them are already well covered. We talk about wanting fresh capital and more commerce in this country, and about developing our Colonies, but this sort of Clause in this sort of Bill will discourage investment in the British Commonwealth.
Mr. Pitman: Before we leave this Amendment I wish to clear up a possible misunderstanding, and that is in regard to what the Attorney-General said about the 1944 Finance Act. He gave the Committee the impression that the wording of subsection (3) was, word for word, a replica of what appeared in that Act. I do not think he meant that.
The Attorney-General: I did not say word for word. I said it was nearly word for word, with one or two changes.
Mr. Pitman: The particular change I had in mind is this. I imagine that the words:
"the transfer or acquisition of shares in or debentures of a company."
were not in the 1944 Act. That is a change from that Act, to which no doubt

2043
the right hon. and learned Gentleman wishes us to devote attention.
The Attorney-General: That is so.
Mr. Pitman: That, at any rate, has cleased up that point, and I am most grateful to the right hon. and learned Gentleman for having made it clear. However, it still leaves the question raised by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks) of the superannuation fund. It will be within the knowledge of the Committee that a superannuation fund, when founded, has got to have investments, and it is perfectly clear that the investments of the superannuation fund are likely, at any rate, to be within
"the transfer or acquisition of shares in or debentures of a company."
That seems to me an added reason why we should delete this subsection, because it brings still further within the net of this Clause as a whole any superannuation scheme in the country.
It is perfectly clear that such a superannuation scheme, since its annual payments are a matter of charge against the profits of the company, must inevitably "reduce" or diminish the profits of the company which are subject to Profits Tax. The real trouble, which the learned Attorney-General has not yet faced up to, is the point raised by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks), who asked whether it was not the case that this would inescapably bring within the mischief of this Clause something which we all know in our hearts is right, and which we would not wish this subsection to bring within the Clause.
Sir William Darling: I do not want to detain the Committee longer than to give an example of what might happen under subsection (3, b) of the Clause. Any action arising under that paragraph may make one liable to special taxation. I have in mind a man who has a business which makes a net profit of £10,000 a year. He proposes to make his five employees profit sharers
and partners by getting rid of the £10,000 a year, which he finds embarrassing because of taxation, by handing it over to those five people who will have £2,000 a year each. But he will not be credited with having put up an entirely altruistic scheme because, under this subsection, it will be considered to be a transaction designed to avoid liability for Profits Tax.
Does the Attorney-General not know of the great march of development in business whereby profit sharing is becoming general in every direction? Does he not think that subsection (3, b) will definitely hinder the philanthropic action which I suggest is possible? Many men in business nowadays have to choose between two things. They cannot keep their profits for themselves.
The Government sees to that. They have to choose between giving them to the Chancellor or to their employees, and so they prefer to give their profits to their employees by distributing their profits under such a scheme as subsection (3, b) seems to prohibit. I know a man running a women's business, of which I have some knowledge, who informed me that he had to choose between giving it to Gertie or Gaitskell. He said, "I will give it to Gertie." I do not blame that gentleman because she has a singularly attractive figure and is a competent business woman.
I may have misread the Clause, but it seems to me that this subsection is capable of wide interpretation. Who can say what is the design which lies behind a single action? It may be desired bona fide to give a larger share of the business to employees. It is true that there will be less tax paid by the owner, but it may well be held against him that he did not do this out of goodwill—no good intentions are ever admitted to members of the capitalist class—but from a desire to poke the Chancellor in the eye. If that is so, it would be very unfortunate.
Question put, "That the words proposed to be left out stand part of the Clause."
The Committee divided: Ayes, 285; Noes, 270.

Division No. 122.]

AYES

[10.55 a.m.

Acland, Sir Richard

Attlee, Rt. Hon. C. R

Barnes, Rt. Hon. A. J.

Adams, Richard

Awbery, S. S.

Bartley, P.

Alien, Arthur (Bosworth)

Ayles, W. H.

Bellenger, Rt. Hon. F. J.

Allen, Scholefield (Crewe)

Bacon, Miss Alice

Benn, Wedgwood

Anderson, Alexander (Motherwell)

Baird, J.

Benson, G.

Anderson, Frank (Whitehaven)

Balfour, A.

Beswick, F.

Bevan, Rt. Hon. A. (Ebbw Vale)

Griffiths, William (Exchange)

Mulley, F. W.

Bing, G. H. C.

Gunter, R. J.

Murray, J. D.

Blenkinsop, A.

Hale, Joseph (Rochdale)

Nally, W.

Blyton, W. R.

Hale, Leslie (Oldham, W.)

Neal, Harold (Bolsover)

Boardman, H.

Hall, Rt. Hon. Glenvil (Colne Valley)

Noel-Baker, Rt. Hon. P. J.

Booth, A.

Hall, John (Gateshead, W.)

O'Brien, T.

Bottomley, A. G.

Hamilton, W. W.

Oldfield, W. H.

Bowden, H. W.

Hannan, W.

Oliver, G. H.

Bowles, F. G. (Nuneaton)

Hardman, D. R.

Orbach, M.

Braddock, Mrs. Elizabeth

Hargreaves, A.

Padley, W. E.

Brook, Dryden (Halifax)

Hastings, S.

Paling, Will T. (Dewsbury)

Brooks, T. J. (Normanton)

Hayman, F. H.

Pannell, T. C.

Broughton, Dr. A. D. D.

Henderson, Rt. Hon. Arthur (Tipton)

Pargiter, G. A.

Brown, Rt. Hon. George (Belper)

Herbison, Miss M.

Parker, J.

Brown, Thomas (Ince)

Hewitson, Capt. M.

Paton, J.

Burke, W. A.

Hobson, C. R.

Pearson, A.

Burton, Miss E.

Holman, P.

Popplewell, E.

Butler, Herbert (Hackney, S.)

Holmes, Horace (Hemsworth)

Porter, G.

Callaghan, L. J.

Houghton, D.

Price, Philips (Gloucestershire, W.)

Carmichael, J.

Hoy, J.

Proctor, W. T.

Castle, Mrs. B. A.

Hubbard, T.

Pryde, D. J.

Champion, A. J.

Hudson, James (Ealing, N.)

Pursey, Cmdr. H.

Chetwynd, G. R.

Hughes, Emrys (S. Ayrshire)

Rankin, J.

Clunie, J.

Hughes, Hector (Aberdeen, N.)

Rees, Mrs. D.

Cocks, F. S.

Hughes, Moelwyn (Islington, N.)

Reeves, J.

Coldrick, W.

Hynd, H. (Accrington)

Reid, Thomas (Swindon)

Cook, T. F.

Hynd, J. B. (Attercliffe)

Reid, William (Camlachie)

Cooper, Geoffrey (Middlesbrough, W.)

Irvine, A. J. (Edge Hill)

Rhodes, H.

Cooper, John (Deptford)

Irving, W. J. (Wood Green)

Richards, R.

Corbet, Mrs. Freda (Peckham)

Isaacs, Rt. Hon. G. A.

Robens, Rt. Hon. A.

Cove, W. G.

Janner, B.

Roberts, Emrys (Merioneth)

Craddock, George (Bradford, S.)

Jay, D. P. T.

Roberts, Goronwy (Caernarvonshire)

Crawley, A.

Jeger, George (Goole)

Robertson, J. J. (Berwick)

Crosland, C. A. R.

Jenkins, R. H.

Rogers, George (Kensington, N.)

Crossman, R. H. S.

Johnson, James (Rugby)

Ross, William

Cullen, Mrs. A.

Johnston. Douglas (Paisley)

Royle, C.

Daines, P.

Jones, Jack (Rotherham)

Shawcross, Rt. Hon. Sir Hartley

Dalton, Rt. Hon. H.

Jones, William Elwyn (Conway)

Shinwell, Rt. Hon. E.

Darling, George (Hillsborough)

Keenan, W.

Shurmer, P. L. E.

Davies, A. Edward (Stoke, N.)

Kenyon, C.

Silverman, Julius (Erdington)

Davies, Rt. Hn. Clement (M'ntg'mery)

Key, Rt. Hon. C. W.

Silverman, Sydney (Nelson)

Davies, Harold (Leek)

King, Dr. H. M.

Simmons, C. J.

Davies, Stephen (Merthyr)

Kinghorn, Sqn. Ldr. E.

Slater, J.

de Freitas, Geoffrey

Kinley, J.

Smith, Norman (Nottingham, S.)

Deer, G.

Kirkwood, Rt. Hon. D.

Snow, J. W.

Delargy, H. J.

Lang, Gordon

Sorensen, R. W.

Dodds, N. N.

Lee, Frederick (Newton)

Soskice, Rt. Hon. Sir Frank

Donnelly, D.

Lee, Miss Jennie (Cannock)

Sparks, J. A.

Driberg, T. E. N.

Lever, Harold (Cheetham)

Steele, T.

Dugdale, Rt. Hon. John (W. Bromwich)

Lever, Leslie (Ardwick)

Stewart, Michael (Fulham, E.)

Dye, S.

Lewis, Arthur (West Ham, N.)

Stokes, Rt. Hon. R. R.

Ede, Rt. Hon. J. C.

Lewis, John (Bolton, W.)

Strachey, Rt. Hon. J.

Edelman, M.

Lindgren, G. S.

Strauss, Rt. Hon. George (Vauxhall)

Edwards, John (Brighouse)

Lipton, Lt.-Col. M.

Stross, Dr. Barnett

Edwards, Rt. Hon. Ness (Caerphilly)

Logan, D. G.

Summerskill, Rt. Hon. Edith

Edwards, W. J. (Stepney)

Longden, Fred (Small Heath)

Sylvester, G. O.

Evans, Albert (Islington, S. W.)

McAllister, G.

Taylor, Bernard (Mansfield)

Evans, Edward (Lowestoft)

MacColl, J. E.

Taylor, Robert (Morpeth)

Evans, Stanley (Wednesbury)

McGhee, H. G.

Thomas, David (Aberdare)

Ewart, R.

McInnes, J.

Thomas. George (Cardiff)

Fernyhough, E.

Mack, J. D.

Thomas, Iorwerth (Rhondda, W.)

Field, Capt. W. J.

McKay, John (Wallsend)

Thomas, Ivor Owen (Wrekin)

Finch, H. J.

McLeavy, F.

Thorneycroft, Harry (Clayton)

Fletcher, Eric (Islington, E.)

MacMillan, Malcolm (Western Isles)

Thurtle, Ernest

Follick, M.

McNeil, Rt. Hon. H

Timmons, J.

Foot, M. M.

Mainwaring, W. H.

Tomney, F.

Forman, J. C.

Mallalieu. J. P. W. (Huddersfield, E.)

Fraser, Thomas (Hamilton)

Mann, Mrs. Jean

Ungoed-Thomas, Sir Lynn

Freeman, John (Watford)

Manuel, A. C.

Usborne, H.

Freeman, Peter (Newport)

Marquand, Rt. Hon. H. A.

Vernon, W. F.

Gaitskell, Rt. Hon. H. T. N.

Mathers, Rt. Hon. G.

Viant, S. P.

Ganley, Mrs. C. S.

Mellish, R. J.

Wallace, H. W.

Gibson, C. W.

Messer, F.

Watkins, T. E.

Gilzean, A.

Middleton, Mrs. L.

Webb, Rt. Hon. M. (Bradford, C.)

Glanville, James (Consett)

Mikardo, Ian

Wells, Percy (Faversham)

Gooch, E. G.

Mitchison, G. R.

Wells, William (Walsall)

Gordon-Walker, Rt. Hon. P. C.

Moeran, E. W.

West, D. G.

Granville, Edgar (Eye)

Monslow, W.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Greenwood, Anthony (Rossendale)

Moody, A. S.

White, Mrs. Eirene (E. Flint)

Greenwood, Rt. Hn. Arthur (Wakefield)

Morgan, Dr. H. B.

White, Henry (Derbyshire. N. E.)

Grenfell, D. R.

Morley, R.

Whiteley, Rt. Hon. W.

Grey, C. F.

Morris, Percy (Swansea, W.)

Wilcock, Group Capt. C. A.

Griffiths, David (Rother Valley)

Mort, D. L.

Wilkes, L.

Griffiths, Rt. Hon. James (Llanelly)

Moyle, A.

Wilkins, W.

2046

2047

Willey, Frederick (Sunderland)

Williams, W. T. (Hammersmith, S.)

Wyatt, W. L.

Willey, Octavius (Cleveland)

Wilson, At, Hon. Harold (Huyton)

Yates, V. F.

Williams, David (Neath)

Winterbottom, Ian (Nottingham, C.)

Younger, Rt. Hon. K.

Williams, Rev. Llywelyn (Abertillery)

Winterbottom, Richard (Brightside)

Williams, Ronald (Wigan)

Wise, F. J.

TELLERS FOR THE AYES:

Williams, Rt. Hon. Thomas (Don V'lly)

Woodburn, Rt. Hon. A.

Mr. Collindridge and

Mr. Kenneth Robinson.

NOES

Aitken, W. T.

Dunglass, Lord

Lucas, Sir Jocelyn (Portsmouth, S.)

Alport, C. J. M.

Duthie, W. S.

Lucas-Tooth, Sir Hugh

Amery, Julian (Preston, N.)

Eccles, D. M.

Lyttelton, Rt. Hon. O.

Amory, Heathcoat (Tiverton)

Eden, Rt. Hon. A.

McCorquodale, Rt. Hon. M. S.

Arbuthnot, John

Elliot, Rt. Hon. W. E

Macdonald, Sir Peter (I. of Wight)

Ashton, H. (Chelmsford)

Erroll, F. J.

Mackeson, Brig. H. R.

Assheton, Rt. Hon. R. (Blackburn, W.)

Fisher, Nigel

McKibbin, A.

Astor, Hon. M. L.

Fort, R.

McKie, J. H. (Galloway)

Baker, P. A. D.

Fraser, Hon. Hugh (Stone)

Maclay, Hon. John

Baldock, Lt.-Cmdr. J. M.

Fraser, Sir I. (Morecambe & Lonsdale)

Maclean, Fitzroy

Baldwin, A. E.

Fyfe, Rt. Hon. Sir David Maxwell

MacLeod, Iain (Enfield, W.)

Banks, Col. C.

Galbraith, Cmdr. T. D. (Pollok)

MacLeod, John (Ross and Cromarty)

Baxter, A. B.

Galbraith, T. G. D. (Hillhead)

Macmillan, Rt. Hon. Harold (Bromley)

Beamish, Maj. Tufton

Gammans, L. D.

Macpherson, Major Niall (Dumfries)

Bell, R. M.

Garner-Evans, E. H. (Denbigh)

Maitland, Cmdr. J. W.

Bennett, Sir Peter (Edgbaston)

Gates, Maj. E. E.

Manningham-Buller, R. E.

Bennett, Dr. Reginald (Gosport)

Gomme-Duncan, Col. A.

Marlowe, A. A. H.

Bennett, William (Woodside)

Grimston, Hon. John (St. Albans)

Marples, A. E.

Bevins, J. R. (Liverpool, Toxteth)

Grimston, Robert (Westbury)

Marshall, Douglas (Bodmin)

Birch, Nigel

Harden, J. R. E.

Marshall, Sidney (Sutton)

Bishop, F. P.

Hare, Hon. J. H. (Woodbridge)

Maude, Angus (Ealing, S.)

Black, C. W.

Harris, Frederic (Croydon, N.)

Maudling, R.

Boles, Lt.-Col. D. C. (Wells)

Harris, Reader (Heston)

Medlicott, Brig. F.

Boothby, R.

Harvey, Air Codre. A. V. (Macclesfield)

Bossom, A. C.

Harvey, Ian (Harrow, E.)

Mellor, Sir John

Bowen, E. R. (Cardigan)

Harvie-Watt, Sir George

Molsan, A. H. E.

Boyd-Carpenter, J. A.

Hay, John

Moore, Lt.-Col. Sir Thomas

Boyle, Sir Edward

Head, Brig. A. H.

Morrison, John (Salisbury)

Bracken, Rt. Hon. B.

Heald, Lionel

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

Braine, B. R.

Heath, Edward

Mott-Radclyffe, C. E.

Braithwaite, Sir Albert (Harrow, W.)

Henderson, John (Cathcart)

Nabarro, G.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Hicks-Beach, Maj. W. W.

Nicholls, Harmar

Bromley-Davenport, Lt.-Col. W.

Higgs, J. M. C.

Nicholson, G.

Brooke, Henry (Hampstead)

Hill, Dr. Charles (Luton)

Nield, Basil (Chester)

Browne, Jack (Govan)

Hill, Mrs. E. (Wythenshawe)

Noble, Cmdr. A. H. P.

Buchan-Hepburn, P. G. T.

Hinchingbrooke, Viscount

Nugent, G. R. H.

Bullock, Capt. M.

Hirst, Geoffrey

Nutting, Anthony

Bullus, Wing Commander E. E.

Hollis, M. C.

Oakshott, H. D.

Burden, F. A.

Hope, Lord John

Odey, G. W.

Butcher, H. W.

Hopkinson, Henry

Ormsby-Gore, Hon. W. D.

Butler, Rt. Hn. R. A. (Saffron Walden)

Hornsby-Smith, Miss P.

Orr, Capt. L. P. S.

Carr, Robert (Mitcham)

Horsbrugh, Rt. Hon. Florence

Orr-Ewing, Charles Ian (Hendon, N.)

Carson, Hon. E.

Howard, Greville (St. Ives)

Orr-Ewing, Ian L. (Weston-super-Mare)

Channon, H.

Hudson, Sir Austin (Lewisham, N.)

Osborne, C.

Churchill, Rt. Hon. W. S.

Hudson, Rt. Hon. Robert (Southport)

Peake, Rt. Hon. O

Clarke, Col. Ralph (East Grinstead)

Hudson, W. R. A. (Hull, N.)

Perkins, W. R. D.

Clarke, Brig. Terence (Portsmouth, W.)

Hurd, A. R.

Peto, Brig. C. H. M.

Clyde, J. L.

Hutchinson, Geoffrey (Ilford, N.)

Pickthorn, K.

Colegate, A.

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Pitman, I. J.

Conant, Maj. R. J. E.

Hutchison, Colonel James (Glasgow)

Powell, J. Enoch

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Hyde, Lt.-Col. H. M.

Price, Henry (Lewisham, W.)

Cooper-Key, E. M.

Hylton-Foster, H. B.

Prior-Palmer, Brig. O.

Corbett, Lt.-Col. Uvedale (Ludlow)

Jennings, R.

Profumo, J. D.

Craddock, Beresford (Spelthorne)

Johnson, Howard (Kemptown)

Raikes, H. V.

Cranborne, Viscount

Jones, A. (Hall Green)

Rayner, Brig. R.

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

Joynson-Hicks, Hon. L. W.

Redmayne, M.

Crosthwaite-Eyre, Col. O. E.

Kaberry, D.

Remnant, Hon. P.

Crouch, R. F.

Kerr, H. W. (Cambridge)

Renton, D. L. M.

Crowder, Capt. John (Finchley)

Kingsmill, Lt.-Col. W. H.

Roberts, Maj. Peter (Heeley)

Crowder, Petre (Ruislip—Northwood)

Lambert, Hon. G.

Robertson, Sir David (Caithness)

Cundiff, F. W.

Lancaster, Col. C. G

Robinson, Roland (Blackpool, S.)

Cuthbert, W. N.

Langford-Holt, J.

Robson-Brown, W.

Darling, Sir William (Edinburgh, S.)

Law, Rt. Hon. R. K.

Rodgers, John (Sevenoaks)

Davidson, Viscountess

Leather, E. H. C.

Roper, Sir Harold

Davies, Nigel (Epping)

Legge-Bourke, Maj. E. A. H.

Russell, R. S.

De la Bère, R.

Lennox-Boyd, A. T.

Ryder, Capt. R. E. D.

Deedes, W. F.

Lindsay, Martin

Salter, Rt. Hon. Sir Arthur

Digby, S. Wingfield

Linstead, H. N.

Sandys, Rt. Hon. D.

Dodds-Parker, A. D.

Llewellyn, D.

Scott, Donald

Donner, P. W.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Shepherd, William

Douglas-Hamilton, Lord Malcolm

Lloyd, Maj. Guy (Renfrew, E.)

Smiles, Lt.-Col. Sir Walter

Drayson, G. B.

Lloyd, Selwyn (Wirral)

Smithers, Peter (Winchester)

Drews, C.

Lockwood, Lt.-Col. J. C.

Smithers, Sir Waldron (Orpington)

Dugdale, Maj. Sir Thomas (Richmond)

Longden, Gilbert (Herts, S. W.)

Smyth, Brig. J. G. (Norwood)

Duncan, Capt. J. A. L.

Low, A. R. W.

Snadden, W. McN.

2048

2049

Soames, Capt. C.

Teevan, T. L.

Ward, Hon. George (Worcester)

Spearman, A. C. M.

Thomas, J. P. L. (Hereford)

Ward, Miss I. (Tynemouth)

Spence, H. R. (Aberdeenshire, W.)

Thompson, Kenneth Pugh (Walton)

Waterhouse, Capt. Rt. Hon. C.

Spens, Sir Patrick (Kensington, S.)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Watkinson, H.

Stanley, Capt. Hon. Richard (N. Fylde)

Thorneycroft Peter (Monmouth)

Webbe, Sir H. (London & Westminster)

Stevens, G. P.

Thornton-Kemsley, Col. C. N.

White, Baker (Canterbury)

Steward, W. A. (Woolwich, W.)

Thorp, Brig. R. A. F

Williams, Charles (Torquay)

Stewart, Henderson (Fife, E.)

Tilney, John

Williams, Gerald (Tonbridge)

Stoddart-Scott, Col. M.

Turner, H. F. L

Williams, Sir Herbert (Croydon, E.)

Storey, S.

Turton, R. H.

Wills, G.

Strauss, Henry (Norwich, S.)

Tweedsmuir, Lady

Wilson, Geoffrey (Truro)

Summers, G. S.

Vane, W. M. F.

Winterton, Rt. Hon. Earl

Sutcliffe, H.

Vaughan-Morgan, J. K

Wood, Hon. R.

Taylor, Charles (Eastbourne)

Vosper, D. F.

York, C.

Taylor, William (Bradford, N.)

Wakefield, Edward (Derbyshire, W.)

Teeling, W.

Wakefield, Sir Wavell (Marylebone)

TELLERS FOR THE NOES:

Mr. Studholme and Major Wheatley

Mr. Churchill: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
If we continue as the Government are forcing us to do we shall kill the Sitting of this day. As I once heard Mr. Thomas Gibson Bowles observe, "This day will never come"—a serious fact to be considered. Questions will all be lost; the Government are deliberately killing the Questions. I do not know whether there are any particularly awkward ones—I have not been able to make a study of them to know whether there are some that they particularly dislike or dread, but at any rate this valuable part of Parliamentary procedure will be entirely destroyed; yet the Ministers will be given no relaxation, because they have had to mug up beforehand the answers which have been written out by their Departments. All that will happen is that they will be deprived of the interest and excitement of showing their ability in rejoinder and repartee, wherever those valuable qualities exist. In addition, I draw your attention, Sir Charles, with great respect, to the fact that we shall also miss the Prayers with which our proceedings are sustained every 24 hours. All this will happen.
If we were to report Progress now, there would be a sufficient interval for the Committee to separate and prepare itself for the meeting of the second day, which would go on in a regular manner, and discussion on the Bill could be resumed exactly where we leave it at the moment we separate. We would then have before us the whole afternoon and evening and night, and the whole of tomorrow up to the present moment, when, perhaps, it would be suitable to make another break.
Mr. S. Silverman: And Thursday.
Mr. Churchill: Yes, Thursday—very good. I am sure that that would be the best way for the Committee.
I have been asking myself what good the Government get out of going on indefinitely and killing the Tuesday as a Parliamentary day. One does not see that they gain anything, because, obviously, they will not succeed in making any more rapid progress with the course of business and they will have killed a day. If we are to be released, as some have suggested, at an earlyish hour tonight, in order to catch up arrears of sleep and to balance the human budget in a satisfactory manner, then this arrangement would be very convenient and I suggest it to the right hon. Gentleman—not that I expect him to agree, because he is paying off a grudge because he did not get to the end of Clause 31 by a quarter to midnight last night.
The more one has considered the proceedings of the Committee and what has happened since, and the many complicated matters that have to be disposed of, the more one perceives what an unfair and absurd proposal he made. If it were any man but he, I should use the word "dishonest," but in his case I shall simply say that it was grossly out of relation to anything that could be considered as fair play.
Then there is the question, which has been mentioned, of the servants of the House. A break is very valuable to them now. From now until 2.30 would allow over three hours, which would have highly beneficial effects and enable the preparations to be made for the renewal of our discussions. The Government gain nothing by going on continuously. They are not going to weary us or exhaust us on this side. We are not called upon to produce any given number of votes at any given moment.

2051
I remember—and I should like the Committee to consider this carefully—that before the 1914 war, when I was First Lord of the Admiralty, we had 16 battleships which had to be always ready to meet 10 of the potential enemy—the Germans. One would have no idea how difficult it is to maintain an average of 16 to meet the selected moment of only 10. All sorts of things happen. They have to undergo refits; sometimes they collide with one another, and injuries are done. Generally speaking, it is a very great strain, which cannot possibly be measured.
The Government seem to have the idea that they have the advantage in this matter. I do not think that that is so, because nothing happens to us if we turn up 100 short in any Division—we should be having a needed rest by what I am suggesting—whereas much would happen to the party opposite if they turned up only 10 short; they might get an even longer rest.
I hope, therefore, that the Government will consider very carefully this well-meant suggestion of mine, and that when he replies the Leader of the House will be able to tell us, so that we can understand the manner in which his mind is working what advantage he gains by not having a break now. I do not see what advantage he gains by cutting out all the Questions and by continuing until a late hour tonight or whenever he chooses to release us. I should have thought it would be very much better to break now and to begin where we leave off after Questions are over. That is the course, I suggest, which would be in every way most convenient.
There is another great advantage which we would gain. The present Clause, Clause 28, is an extremely important one, and owing to the fact that we have had all the morning to discuss it and will have all the afternoon also, whatever is done, the arguments which are set forth can be fully reported and meditated upon by those whose servants and representatives we are. I therefore ask the Leader of the House to accept the Motion which I now move.
11.15 a.m.
Mr. Ede: The right hon. Gentleman has only repeated in rather more stately language the famous speech that was
2052
made by the hon. Member for Aberdeen-shire, East (Mr. Boothby) at Banstead a few months ago. After all, we were promised this kind of thing, and therefore we have not been taken completely by surprise this time. The right hon. Gentleman asks me what I shall gain if we continue and, owing to the continual moving of Amendments, the Sitting normally fixed for 2.30 this afternoon does not take place. In the first place we shall gain somewhere about four hours.
Mr. Churchill: That has nothing to do with it.
Mr. Ede: It seems to me that even if I accepted the Motion of the right hon. Gentleman I could not be better off when I came to 3,30 than I shall be if we continue. I have been hoping that there would be some counter suggestion from the right hon. Gentleman with regard to the future timing of the discussions on this Bill. He was very careful to choose a large number of words in order to say that he had some doubts of my honesty, although he did not like to say it quite so directly.
I hope it is known that in matters of negotiation on affairs of this kind I am always willing to listen to reasonable propositions which are put forward; and if my propositions are not regarded as reasonable I am always prepared to consider counter suggestions. All I got on this occasion was a statement that my offer was not repudiated, was not rejected, but a performance along its lines could not be guaranteed. Quite frankly, that was not—
Mr. Churchill Mr. Churchill indicated dissent.
Mr. Ede: I do not think I have even paraphrased it. I believe the exact words were burned into my memory. We have to live together and it is well that we should try to live together in an atmosphere of friendly forbearance and tolerance. If the proposals that I put forward from time to time are not acceptable—and after all one rarely finds that the first proposition put forward in negotiations entirely satisfactory to the other side—I am willing to consider what counter suggestions and modifications, or even new proposals altogether, can be put forward.

2053
I do not think that after the Committee has spent this time on Clause 28 and we have the various matters concerned with it still fresh in our memories that it would be advisable now to break off consideration. When the right hon. Gentleman assures me that further discussion of this Clause will take the whole of the afternoon and hints that it may even run into the evening, it means that, if we start again at 3.30 we shall embark on that continued discussion four hours later than would otherwise be the case, and in view of all that has gone forward I do not think that is a reasonable proposition.
The Deputy-Chairman: The Question is, "That I do report Progress, and ask leave to sit again."
Mr. L. Heald Mr. L. Heald rose—
Hon. Members: Order!
The Deputy-Chairman: I have not yet collected the voices. Mr. Heald.
Mr. Heald: The right hon. Gentleman has said that he would be prepared to consider new proposals. I am going to make one. Since I came into the House not very long ago, I, in common with other hon. Members, have had the greatest respect for the right hon. Gentleman, particularly since he has undertaken his present task. I have been surprised at the way in which he has reacted during the last 24 hours. I am afraid the inference is only too plain. He has been affected by the fact that his party, which six years ago proudly proclaimed, "We are the masters" are no longer the masters in the country; and he thinks it necessary, unfortunately, to presume upon his rights here in order to maintain that position. I would ask him—and this is the practical suggestion for which he asked—whether he cannot put his pride and that of his party in his pocket and think of the country.
Mr. Boyd-Carpenter: There were two significant omissions from the short speech made by the Leader of the House. In the first place, he gave no explanation to the Committee for the necessity of proceeding with the Bill in this manner. He gave no statement of any public necessity which compelled the Committee to conclude the Committee stage during the present week. The fact that so skilled a parliamentarian as the right hon.
2054
Gentleman did not bother to include any such argument in his speech makes it pretty clear, I think, that no such necessity exists.
The second omission was that the right hon. Gentleman made no reference whatever to the public interest, which it would seem to me on this Measure is the proper discussion of the major financial proposals of the Government for the year. Once again the right hon. Gentleman, it seems to me, made no attempt to argue that proposition because he knows himself that it is un-arguable. It must be the case that a detailed, complex and vitally important measure of this sort cannot be discussed properly or effectively in a continuous marathon performance hour after hour. I rise, therefore, only to ask the Committee to note—and if the majority of the Committee do not note it to ask the country to note—the fact that in this matter the national interest was not thought worthy even of a mention by the right hon. Gentleman.
Mr. Deedes: There is one point on which I should like an assurance from the right hon. Gentleman. Last night he indicated that the reason for us continuing here was in some way connected with transport difficulties. In the statement which he made just now he indicated it might have something to do with a response to the tactics described by the hon. Member for Aberdeenshire, East (Mr. Boothby). If we are to continue, may we know for which reason we are remaining?
Mr. C. S. Taylor: As there have been frequent comparisons with a situation which arose a few weeks ago over the question of Prayers, it would, I think, be fair to draw a distinction between the late night Sitting of last week and the late night Sitting we have just had, and the situation which occurred when some of us were moving Prayers. At that time all of us who were the movers of these Prayers wished and hoped that the Government would give us reasonable time in which to discuss our Motions. We had to discuss them late at night because Government business came first. This situation is entirely different.
There is absolutely no excuse whatever for the Government to seek to take their revenge on quite innocent back benchers, who were only performing their proper

2055
Parliamentary function in vetting these hundreds of Orders which are turned out by Government Departments. I would reinforce the plea already made that in this matter the Government should think more of the public interest and the public welfare than their own party.
Mr. Angus Maude: Listening to the Leader of the House it has struck me that we have progressed beyond his original enunciation of the doctrine of Government by the time of the last bus. I hope, if he is looking for practical propositions, that he may consider giving us some reason why we cannot be given another two, three or, if necessary, four days in which to discuss this Measure.
Mr. H. Strauss: My hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) drew attention to certain omissions from the speech of the Leader of the House. I rise only to call attention to something he included by way of explaining his conduct and the necessity for this Committee sitting continuously. He said, in a complaining voice, that we were moving Amendment after Amendment. It would have been difficult for him to describe with greater precision his hatred of Parliamentary government. There is one method, and one method alone, by which this Committee stage of the Finance Bill can be concluded much more speedily, and that is if the Finance Bill is not discussed. That is what the right hon. Gentleman desires.
It is entirely in keeping with the attitude of one of his predecessors in the last few years as Leader of the House. He, I remember, at a time when hon. Members on both sides of the House desired a three-day debate on the worsening economic position used these words, "I thought that I erred on the side of generosity in allowing a two-day debate." I asked then, as I think it appropriate to ask now, whether the right hon. Gentleman really thinks that it is by the generosity of the Government that the Commons of England discuss national survival or the Finance Bill?
It will not be the Conservative Party that will be injured if the right hon. Gentleman persists in his present course. I think there may be some who wonder—[HON. MEMBERS: "Cheer up."] I cheer up quite considerably when I remember
2056
how short-lived will be the Government that at present sits upon the benches opposite—united in nothing except their determination to avoid a General Election. It will not be the Conservative Party that is injured by the Government's attempts to bring this House into ridicule and contempt—[Interruption.] I have no intention of stopping. I know that these pretended Social Democrats share the view, so strongly held by the Communists, that Parliamentary discussion is a mistake. I am delighted that they should take such trouble to prove their substantial identity of aim.
11.30 a.m.
Mr. David Renton: It is customary on the Committee stage of the Finance Bill for the work on the Treasury Bench to be shared by the Chancellor of the Exchequer, the Financial Secretary, and the Economic Secretary, aided if and when necessary by the Attorney-General or the Solicitor-General. Hon. Gentlemen will have observed that during the past 12 hours the Attorney-General has been carrying on valiantly but unaided. It is understandable that he himself is beginning to nod. I do not blame him. The last thing we would wish to see is that he should become hors de combat. He is much too much of a gentleman ever to complain to his own colleagues, to whom he is always so loyal, but in his interests I do beseech the Leader of the House to take note of the tremendous task the Attorney-General has performed in the last 12 hours, and to pay heed to the Motion of the Leader of the Opposition, if only to spare the right hon. and learned Gentleman.
Mr. Michael Astor: It is nothing to do with me what takes place between the usual channels, but the Leader of the House has indicated that he is waiting coyly for some proposal and is ready to have some reasonable suggestion made. He should give the Committee some indication of what he thinks a reasonable proposal is going to be, bearing in mind that at 10 p.m. last night he thought it reasonable to reach Clause 31 by midnight. If that was reasonable, I can only suggest that he is losing his reason.
Sir W. Darling: There are two sides to this Committee, and it seems to

2057
me that the voices of public opinion have not been adequately represented by the Leader of the House. I should like to tell him, because it is my good fortune to speak for the poor, dumb and driven cattle, that during the last three hours I have been asked to pair with five or six hon. Gentlemen opposite. I have been asked to share a bath in the Serpentine, to share a barber's chair, to walk on the terrace, and to stroll in the park. Is he aware of the powerful backing from his own side for my view and that of the Leader of the Opposition? Are his ears stopped to the voice of protest behind him and in front of him? I should be happy to give him the constituencies and the names of at least half a dozen of his loyal supporters who share our views.
Mr. Baker White: May I put one point very strongly to the Leader of the House? In the outside world events are moving with an amazing speed. Since we came to this Chamber yesterday afternoon at 2.30 p.m. the Persian flag has been hoisted over the Anglo-Iranian Oil Company's wells at Abadan.
The Deputy-Chairman: I cannot see that this has anything to do with reporting Progress.
Mr. Baker White: Not only has that happened, but a beginning of a third attempt to enforce the economic blockade of Berlin has started. We shall have no opportunity of asking the Government about these events as would have been the case normally.
Mr. Jennings: I should like to make an appeal to the Leader of the House, and to point out that there has been already a very reasonable proposition put to him. There is no need to rush the Finance Bill through this week. The Government have no major legislation in view. We have heard a proposal asking for two or more days next week so that the Bill can receive full and adequate discussion. I see no reason at all, if the right hon. Gentleman and his colleagues want to stop any further ridicule in the country, why they cannot accept that proposition.
Mr. Godfrey Nicholson: We are faced not only with an interesting constitutional problem but a psychological one in the form of the cerebral processes of the Leader of the House. It may be known that he has a passion for making records. In the 1929–31 Parliament he obtained almost a 100 per cent. Division record. I remind him now of what happened then. His constituents might have thought him not a very good Member of Parliament politically, but at least a diligent attender. On the other hand, they slung him out by an enormous majority. I venture to warn him of that if he is trying to make an all-time, all-distance record for the length of Sitting for the House of Commons.
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 287; Noes, 272.

Division No. 123.]

AYES

[11.39 a.m.

Acland, Sir Richard

Booth, A.

Cooper, John (Deptford)

Adams, Richard

Bottomley, A. G.

Corbet, Mrs. Freda (Peckham)

Albu, A. H.

Bowden, H. W.

Cove, W. G.

Allen, Arthur (Bosworth)

Bowles, F. G. (Nuneaton)

Craddock, George (Bradford, S.)

Allen, Scholefield (Crewe)

Braddock, Mrs. Elizabeth

Crawley, A.

Anderson, Alexander (Motherwell)

Brook, Dryden (Halifax)

Crosland, C. A. R.

Anderson, Frank (Whitehaven)

Brooks, T. J. (Normanton)

Crossman, R. H. S.

Attlee, Rt. Hon. C. R.

Broughton, Dr. A. D. D.

Cullen, Mrs. A.

Awbery, S. S.

Brown, Rt. Hon. George (Belper)

Daines, P.

Ayles, W. H.

Brown, Thomas (Ince)

Dalton, Rt. Hon. H.

Bacon, Miss Alice

Burke, W. A.

Darling, George (Hillsborough)

Baird, J.

Burton, Miss E.

Davies, A. Edward (Stoke, N.)

Balfour, A.

Butler, Herbert (Hackney, S.)

Davies, Rt. Hon. C. (Montgomery)

Barnes, Rt. Hon. A. J.

Callaghan, L. J.

Davies, Harold (Leek)

Bartley, P.

Carmichael, J.

Davies, Stephen (Merthyr)

Bellenger, Rt. Hon. F. J.

Castle, Mrs. B. A.

de Freitas, Geoffrey

Benn, Wedgwood

Champion, A. J.

Deer, G.

Benson, G.

Chetwynd, G. R.

Dodds, N. N.

Beswick, F.

Clunie, J.

Donnelly, D.

Bevan, Rt. Hon. A. (Ebbw Vale)

Cocks, F. S.

Driberg, T. E. N.

Bing, G. H. C.

Coldrick, W.

Dugdale, Rt. Hon. John (W. Bromwich)

Blenkinsop, A.

Collindridge, F.

Dye, S.

Blyton, W. R.

Cook, T. F.

Ede, Rt. Hon. J. C.

Boardman, H.

Cooper, Geoffrey (Middlesbrough, W.)

Edelman, M.

Edwards, Rt. Hon. Ness (Caerphilly)

Kirkwood, Rt. Hon. D.

Robertson, J. J. (Berwick)

Edwards, W. J. (Stepney)

Lang, Gordon

Rogers, George (Kensington, N.)

Evans, Albert (Islington, S. W.)

Lee, Frederick (Newton)

Ross, William

Evans, Edward (Lowestoft)

Lee, Miss Jennie (Cannock)

Royle, C.

Evans, Stanley (Wednesbury)

Lever, Harold (Cheetham)

Shawcross, Rt. Hon. Sir Hartley

Ewart, R.

Lever, Leslie (Ardwick)

Shinwell, Rt. Hon. E.

Field, Capt. W. J.

Lewis, Arthur (West Ham, N.)

Shurmer, P. L. E.

Finch, H. J.

Lewis, John (Bolton, W.)

Silverman, Julius (Erdington)

Fletcher, Erie (Islington, E.)

Lindgren, G. S.

Silverman, Sydney (Nelson)

Follick, M.

Lipton, Lt.-Col. M.

Simmons, C. J.

Foot, M. M.

Logan, D. G.

Slater, J.

Forman, J. C.

Longden, Fred (Small Heath)

Smith, Ellis (Stoke, S.)

Fraser, Thomas (Hamilton)

McAllister, G.

Smith, Norman (Nottingham, S.)

Freeman, John (Watford)

MacColl, J. E.

Snow, J. W.

Freeman, Peter (Newport)

McGhee, H. G.

Sorensen, B. W.

Gaitskell, Rt. Hon. H. T. N.

McInnes, J.

Soskice, Rt. Hon. Sir Frank

Ganley, Mrs. C. S.

Mack, J. D.

Sparks, J. A.

Gibson, C. W.

McKay, John (Wallsend)

Steele, T.

Gilzean, A.

McLeavy, F.

Stewart, Michael (Fulham, E.)

Glanville, James (Consett)

MacMillan, Malcolm (Western Isles)

Stokes, Rt. Hon. R. R.

Gooch, E. G.

McNeil, Rt. Hon. H.

Strachey, Rt. Hon. J.

Gordon-Walker, Rt. Hon. P. C.

MacPherson, Malcolm (Stirling)

Strauss, Rt. Hon. George (Vauxhall)

Granville, Edgar (Eye)

Mainwaring, W. H.

Stross, Dr. Barnett

Greenwood, Anthony (Rossendale)

Mallalieu, J. P. W. (Huddersfield, E.)

Summerskill, Rt. Hon. Edith

Greenwood, Rt. Hn. Arthur (Wakefield)

Mann, Mrs. Jean

Sylvester, G. O.

Grenfell, D. R.

Manuel, A. C.

Taylor, Bernard (Mansfield)

Grey, C. F.

Marquand, Rt. Hon. H. A.

Taylor, Robert (Morpeth)

Griffiths, David (Bother Valley)

Messer, F.

Thomas, David (Aberdare)

Griffiths, Rt. Hon. James (Llanelly)

Middleton, Mrs. L.

Thomas, George (Cardiff)

Griffiths, William (Exchange)

Mikardo, Ian.

Thomas, Iorwerth (Rhondda, W.)

Gunter, R. J.

Mitchison, G. B.

Thomas, Ivor Owen (Wrekin)

Hale, Joseph (Rochdale)

Moeran, E. W.

Thorneycroft, Harry (Clayton)

Hate, Leslie (Oldham, W.)

Monslow, W.

Thurtle, Ernest

Mall, Rt. Hon. Glenvil (Colne Valley)

Moody, A. S.

Timmons, J.

Hail, John (Gateshead, W.)

Morgan, Dr. H. B.

Tomney, F.

Hamilton, W. W.

Morley, R.

Ungoed-Thomas, Sir Lynn

Hardman, D. R.

Morris, Percy (Swansea, W.)

Usborne, H.

Hargreaves, A.

Mort, D. L.

Vernon, W. F.

Hastings, S.

Moyle, A.

Viant, S. P.

Hayman, F. H.

Mulley, F. W.

Wallace, H. W.

Henderson, Rt. Hon. Arthur (Tipton)

Murray, J. D.

Watkins, T. E.

Herbison, Miss M.

Nally, W.

Webb, Rt. Hon. M. (Bradford, C.)

Hewitson, Capt. M.

Neal, Harold (Bolsover)

Wells, Percy (Faversham)

Hobson, C. R.

Noel-Baker, Rt. Hon. P. J.

Wells, William (Walsall)

Holman, P.

O'Brien, T.

West, D. G.

Holmes, Horace (Hemsworth)

Oldfield, W. H.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Houghton, D.

Oliver, G. H.

White, Mrs. Eirene (E. Flint)

Hoy, J.

Orbach, M.

While, Henry (Derbyshire, N. E.)

Hubbard, T.

Padley, W. E.

Whiteley, Rt. Hon. W.

Hudson, James (Ealing, N.)

Paling, Rt. Hon. W. (Dearne Valley)

Wilcock, Group Capt. C. A. B.

Hughes, Emrys (S. Ayrshire)

Paling, Will T. (Dewsbury)

Wilkes, L.

Hughes, Hector (Aberdeen, N.)

Pannell, T. C.

Wilkins, W. A.

Hynd, H. (Accrington)

Pargiter, G. A.

Willey, Frederick (Sunderland)

Hughes, Moelwyn (Islington, N.)

Parker, J.

Willey, Octavius (Cleveland)

Hynd, J. B. (Attercliffe)

Paton, J.

Williams, David (Neath)

Irving, W. J. (Wood Green)

Pearson, A.

Williams, Rev. Llywelyn (Abertillery)

Isaacs, Rt. Hon. G. A.

Popplewell, E.

Williams, Ronald (Wigan)

Janner, B.

Porter, G.

Williams, Rt. Hon. Thomas (Don V'lly)

Jay, D. P. T.

Price, Philips (Gloucestershire, W.)

Williams, W. T. (Hammersmith, S.)

Jeger, George (Goole)

Proctor, W. T.

Wilson, Rt. Hon. Harold (Huyton)

Jenkins, R. H.

Pryde, D. J.

Winterbottom, Ian (Nottingham, C.)

Johnson, James (Rugby)

Pursey, Cmdr. H.

Winterbottom, Richard (Brightside)

Johnston, Douglas (Paisley)

Rankin, J.

Wise, F. J.

Jones, David (Hartlepool)

Rees, Mrs. D.

Woodburn, Rt. Hon. A.

Jones, Jack (Rotherham)

Reeves, J.

Wyatt, W. L.

Jones, William Elwyn (Conway)

Reid, Thomas (Swindon)

Yates, V. F.

Keenan, W.

Reid, William (Camlachie)

Younger, Rt. Hon. K

Kenyon, C.

Rhodes, H.

Key, Rt. Hon. C. W.

Richards, R.

TELLERS FOR THE AYES:

King, Dr. H. M.

Robens, Rt. Hon. A.

Mr. Hannan and

Kinghorn, Sqn. Ldr. E.

Roberts, Emrys (Merioneth)

Mr. Kenneth Robinson.

Kinley, J.

Roberts, Goronwy (Caernarvonshire)

NOES

Aitken, W. T.

Baldock, Lt.-Cmdr J. M.

Bevins, J. R. (Liverpool, Toxteth)

Alport, C. J. M.

Baldwin, A. E

Birch, Nigel

Amery, Julian (Preston, N.)

Banks, Col. C.

Bishop, F. P.

Amory, Heathcoat (Tiverton)

Baxter, A. B.

Black, C. W.

Arbuthnot, John

Beamish, Maj. Tufton

Boles, Lt.-Col. D. C. (Wells)

Ashton, H. (Chelmsford)

Bell, R. M.

Boothby, R.

Assheton, Rt. Hon. R. (Blackburn, W.)

Bennett, Sir Peter (Edgbaston)

Bossom, A. C.

Astor, Hon. M. L.

Bennett, Dr. Reginald (Gosport)

Bowen, E. R. (Cardigan)

Baker, P. A. D.

Bennett, William (Woodside)

Boyd-Carpenter, J. A.

2060

2061

Boyle, Sir Edward

Hinchingbrooke, Viscount

Peaks, Rt. Hon. O.

Bracken, Rt. Hon. B.

Hirst, Geoffrey

Perkins, W. R. D.

Braine, B. R.

Hollis, M. C.

Peto, Brig. C. H. M.

Braithwaite, Sir Albert (Harrow, W.)

Holmes, Sir Stanley (Harwich)

Pickthorn, K.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Hope, Lord John

Pitman, I. J.

Bromley-Davenport, Lt.-Col. W.

Hopkinson, Henry

Powell, J. Enoch

Brooke, Henry (Hampstead)

Hornsby-Smith, Miss P.

Price, Henry (Lewisham, W.)

Browne, Jack (Govan)

Horsbrugh, Rt. Hon. Florence

Prior-Palmer, Brig. O.

Buchan-Hepburn, P. G. T.

Howard, Greville (St. Ives)

Profumo, J. D.

Bullock, Capt. M.

Hudson, Sir Austin (Lewisham, N.)

Raikes, H. V.

Bullus, Wing Commander E. E.

Hudson, Rt. Hon. Robert (Southport)

Rayner, Brig. R.

Burden, F. A.

Hudson, W. R. A. (Hull, N.)

Redmayne, M.

Butcher, H. W.

Hurd, A. R.

Remnant, Hon. P.

Butler, Rt. Hn. R. A. (Saffron Walden)

Hutchinson, Geoffrey (Ilford, N.)

Renton, D. L. M.

Carr, Robert (Mitcham)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Roberts, Maj. Peter (Heeley)

Carson, Hon. E.

Hutchison, Col. James (Glasgow)

Robertson, Sir David (Caithness)

Channon, H.

Hyde, Lt.-Col. H. M.

Robinson, Roland (Blackpool, S.)

Churchill, Rt. Hon. W. S.

Hylton-Foster, H. B.

Robson-Brown, W.

Clarke, Col. Ralph (East Grinstead)

Jennings, R.

Rodgers, John (Sevenoaks)

Clarke, Brig. Terence (Portsmouth, W.)

Johnson, Howard (Kemptown)

Roper, Sir Harold

Clyde, J. L.

Jones, A. (Hall Green)

Russell, R. S.

Colgate, A.

Joynson-Hicks, Hon. L. W.

Ryder, Capt. R. E. D.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Kaberry, D.

Salter, Rt. Hon. Sir Arthur

Cooper-Key, E. M.

Kerr, H. W. (Cambridge)

Sandys, Rt. Hon. D.

Corbett, Lt.-Col. Uvedale (Ludlow)

Kingsmill, Lt.-Col. W. H.

Scott, Donald

Craddock, Beresford (Spelthorne)

Lambert, Hon. G.

Shepherd, William

Cranborne, Viscount

Lancaster, Col. C. G.

Smiles, Lt.-Col. Sir Walter

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

Langford-Holt, J.

Smithers, Peter (Winchester)

Crosthwaite-Eyre, Col. O. E.

Law, Rt. Hon. R. K.

Smithers, Sir Waldron (Orpington)

Crouch, R. F.

Leather, E. H. C.

Smyth, Brig. J. G. (Norwood)

Crowder, Capt. John (Finchley)

Legge-Bourke, Maj. E. A. H.

Snadden, W. McN.

Crowder, Petre (Ruislip—Northwood)

Lennox-Boyd, A. T.

Soames, Capt. C.

Cundiff, F. W.

Lindsay, Martin

Spearman, A. C. M.

Cuthbert, W. N.

Linstead, H. N.

Spence, H. R. (Aberdeenshire, W.)

Darling, Sir William (Edinburgh, S.)

Llewellyn, D.

Spens, Sir Patrick (Kensington, S.)

Davidson, Viscountess

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Stanley, Capt. Hon. Richard (N. Fylde)

Davies, Nigel (Epping)

Lloyd, Maj. Guy (Renfrew, E.)

Stevens, G. P.

Do la Bère, R.

Lloyd, Selwyn (Wirral)

Steward, W. A. (Woolwich, W.)

Deedes, W. F.

Longden, Gilbert (Herts, S. W.)

Stewart, Henderson (Fife, E.)

Digby, S. Wingfield

Low, A. R. W.

Stoddart-Scott, Col. M.

Dodds-Parker, A. D.

Lucas, Sir Jocelyn (Portsmouth, S.)

Storey, S.

Conner, P. W.

Lucas-Tooth, Sir Hugh

Strauss, Henry (Norwich, S.)

Douglas-Hamilton, Lord Malcolm

Lyttelton, Rt. Hon. O.

Studholme, H. G.

Drayson, G. B.

McCorquodale, Rt. Hon. M. S.

Summers, G. S.

Drewe, C.

Macdonald, Sir Peter (I. of Wight)

Sutcliffe, H.

Dugdale, Maj. Sir Thomas (Richmond)

Mackeson, Brig. H. R.

Taylor, Charles (Eastbourne)

Duncan, Capt. J. A. L.

McKibbin, A.

Taylor, William (Bradford, N.)

Dunglass, Lord

McKie, J. H. (Galloway)

Teeling, W.

Duthie, W. S.

Maclay, Hon. John

Teevan, T. L.

Eccles, D. M.

Maclean, Fitzroy

Thomas, J. P. L. (Hereford)

Eden, Rt. Hon. A.

MacLeod, Iain (Enfield, W.)

Thompson, Kenneth Pugh (Walton)

Elliot, At. Hon. W. E.

MacLeod, John (Ross and Cromarty)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Erroll, F. J.

Macpherson, Major Niall (Dumfries)

Thorneycroft, Peter (Monmouth)

Fisher, Nigel

Maitland, Cmdr. J. W.

Thornton-Kemsley, Col. C. N.

Fort, R.

Manningham-Buller, R. E.

Thorp, Brig. R. A. F.

Fraser, Hon. Hugh (Stone)

Marlowe, A. A. H.

Tilney, John

Fraser, Sir Ian (Morecambe & Lonsdale)

Marples, A. E.

Turner, H. F. L

Fyfe, Rt. Hon. Sir David Maxwell

Marshall, Douglas (Bodmin)

Turton, R. H.

Galbraith, Cmdr. T. D. (Pollok)

Marshall, Sidney (Sutton)

Tweedsmuir, Lady

Galbraith, T. G. D. (Hillhead)

Maude, Angus (Eating S.)

Vane, W. M. F.

Gammans, L. D.

Maudling, R.

Vaughan-Morgan, J. K.

Garner-Evans, E. H. (Denbigh)

Medlicott, Brig. F.

Vosper, D. F.

Gates, Maj. E. E.

Mellor, Sir John

Wakefield, Edward (Derbyshire, W.)

Gomme-Duncan, Col. A.

Molson, A. H. E.

Wakefield, Sir Wavell (Marylebone)

Grimond, J.

Moore, Lt.-Col. Sir Thomas

Ward, Hon. George (Worcester)

Grimston, Hon. John (St. Albans)

Morrison, John (Salisbury)

Ward, Miss I. (Tynemouth)

Grimston, Robert (Westbury)

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

Waterhouse, Capt. Rt. Hon. C.

Harden, J. R. E.

Mott-Radclyffe, C. E.

Watkinson, H.

Hare, Hon. J. H. (Woodbridge)

Nabarro, G.

Webbe, Sir H. (London & Westminster)

Harris, Frederic (Croydon, N.)

Nicholls, Harmar

Wheatley, Maj. M. J. (Poole)

Harris, Reader (Heston)

Nicholson, G.

White, Baker (Canterbury)

Harvey, Air Cdre. A. V. (Macclesfield)

Nield, Basil (Chester)

Williams, Charles (Torquay)

Harvey, Ian (Harrow, E.)

Noble, Cmdr. A. H. P.

Williams, Gerald (Tonbridge)

Harvie-Watt, Sir George

Nugent, G. R. H.

Williams, Sir Herbert (Croydon, E.)

Hay, John

Nutting, Anthony

Wills, G.

Head, Brig. A. H.

Oakshott, H. D.

Wilson, Geoffrey (Truro)

Heald, Lionel

Odey, G. W.

Winterton, Rt. Hon. Earl

Henderson, John (Cathcart)

Ormsby-Gore, Hon. W. D.

Wood, Hon. R.

Hicks-Beach, Maj. W. W.

Orr, Capt. L. P. S.

York, C.

Higgs, J. M. C.

Orr-Ewing, Charles Ian (Hendon, N.)

Hill, Dr. Charles (Luton)

Orr-Ewing, Ian L. (Weston-super-Mare)

TELLERS FOR THE NOES:

Hill, Mrs. E. (Wythenshawe)

Osborne, C.

Major Conant and Mr. Heath.

Question put accordingly, "That the Chairman do report Progress, and ask leave to sit again."
The Committee divided: Ayes, 272; Noes, 289.

Division No. 124.]

AYES

[11.50 a.m.

Aitken, W. T

Eden, Rt. Hon. A.

Macdonald, Sir Peter (I. of Wight)

Alport, C. J. M.

Elliot, Rt. Hon. W. E.

Mackeson, Brig. H. R.

Amery, Julian (Preston, N.)

Erroll, F. J.

McKibbin, A.

Amory, Heathcoat (Tiverton)

Fisher, Nigel

McKie, J. H. (Galloway)

Arbuthnot, John

Fort, R.

Maclay, Hon. John

Ashton, H. (Chelmsford)

Fraser, Hon. Hugh (Stone)

Maclean, Fitzroy

Assheton, Rt. Hon. R. (Blackburn, W.)

Fraser, Sir I. (Morecambe & Lonsdale)

MacLeod, Iain (Enfield, W.)

Astor, Hon. M. L.

Fyfe, Rt. Hon. Sir David Maxwell

MacLeod, John (Ross and Cromarty)

Baker, P. A. D.

Galbraith, Cmdr. T. D. (Pollok)

Macmillan, Rt. Hon. Harold (Bromley)

Baldock, Lt.-Cmdr. J. M.

Gammans, L. D.

Macpherson, Major Niall (Dumfries)

Baldwin, A. E.

Garner-Evans, E. H. (Denbigh)

Maitland, Comdr. J. W.

Banks, Col. C.

Gates, Maj. E. E.

Manningham-Buller, R. E.

Baxter, A. B.

Gomme-Duncan, Col. A.

Marlowe, A. A. H.

Beamish, Maj. Tufton

Grimston, Hon. John (St. Albans)

Marples, A. E.

Bell, R. M.

Grimston, Robert (Westbury)

Marshall, Douglas (Bodmin)

Bennett, Sir Peter (Edgbaston)

Harden, J. R. E.

Marshall, Sidney (Sutton)

Bennett, Dr. Reginald (Gosport)

Hare, Hon. J. H. (Woodbridge)

Maude, Angus (Ealing, S.)

Bennett, W. G. (Woodside)

Harris, Frederic (Croydon, N.)

Maudling, R.

Bovine, J. R. (Liverpool, Toxteth)

Harris, Reader (Heston)

Medlicott, Brigadler F

Birch, Nigel

Harvey, Air Codre. A. V. (Macclesfield)

Mellor, Sir John

Bishop, F. P.

Harvey, Ian (Harrow, E.)

Molson, A. H. E.

Black, C. W.

Harvie-Watt, Sir George

Moore, Lt.-Col. Sir Thomas

Boles, Lt.-Col. D. C. (Wells)

Hay, John

Morrison, John (Salisbury)

Boothby, R.

Head, Brig. A. H

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

Bossom, A. C.

Heald, Lionel

Mott-Radclyffe, C. E.

Bowen, E. R. (Cardigan)

Heath, Edward

Nabarro, G.

Boyd-Carpenter, J. A.

Henderson, John (Cathcart)

Nicholls, Harmar

Boyle, Sir Edward

Hicks-Beach, Maj. W. W.

Nicholson, G.

Bracken, Rt. Hon. B.

Higgs, J. M. C.

Nield, Basil (Chester)

Braine, B. R.

Hill, Mrs. E. (Wythenshawe)

Noble, Comdr. A. H. P.

Braithwaite, Sir Albert (Harrow, W.)

Hill, Dr. Charles (Luton)

Nugent, G. R. H.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Hinchingbrooke, Viscount

Nutting, Anthony

Bromley-Davenport, Lt.-Col. W.

Hirst, Geoffrey

Oakshott, H. D.

Brooke, Henry (Hampstead)

Hollis, M. C.

Odey, G. W.

Browne, Jack (Govan)

Holmes, Sir Stanley (Harwich)

Ormsby-Gore, Hon. W. D.

Buchan-Hepburn, P. G. T.

Hope, Lord John

Orr, Capt. L. P. S.

Bullock, Capt. M.

Hopkinson, Henry

Orr-Ewing, Charles Ian (Hendon, N.)

Bullus, Wing Commander E. E.

Hornsby-Smith, Miss P.

Orr-Ewing, Ian L. (Weston-super-Mare)

Burden, F. A.

Horsbrugh, Rt. Hon. Florence

Osborne, C.

Butcher, H. W.

Howard, Greville (St. Ives)

Peake, Rt. Hon. O.

Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)

Hudson, Sir Austin (Lewisham, N.)

Perkins, W. R. D.

Carr, Robert (Mitcham)

Hudson, Rt. Hon. Robert (Southport)

Peto, Brig. C. H. M.

Carson, Hon. E.

Hudson, W. R. A. (Hull, N.)

Pickthorn, K.

Channon, H.

Hurd, A. R.

Pitman, I. J.

Churchill, Rt. Hon. W. S.

Hutchinson, Geoffrey (Ilford, N.)

Powell, J. Enoch

Clarke, Col. Ralph (East Grinstead)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Price, Henry (Lewisham, W.)

Clarke, Brig. Terence (Portsmouth, W.)

Hutchison, Colonel James (Glasgow)

Prior-Palmer, Brig. O.

Clyde, J. L.

Hyde, Lt.-Col. H. M.

Profumo, J. D.

Colegate, A.

Hylton-Foster, H. B.

Raikes, H. V.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Jennings, R.

Rayner, Brig. R.

Cooper-Key, E. M.

Johnson, Howard (Kemptown)

Redmayne, M.

Corbett, Lt.-Col. Uvedale (Ludlow)

Jones, A. (Hall Green)

Remnant, Hon. P.

Craddock, Beresford (Spelthorne)

Joynson-Hicks, Hon. L. W.

Renton, D. L. M.

Cranborne, Viscount

Kaberry, D.

Roberts, Maj. Peter (Heeley)

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

Kerr, H. W. (Cambridge)

Robertson, Sir David (Caithness)

Crosthwaite-Eyre, Col. O. E.

Kingsmill, Lt.-Col. W. H.

Robinson, Roland (Blackpool, S.)

Crouch, R. F.

Lambert, Hon. G.

Robson-Brown, W.

Crowder, Capt. John (Finchley)

Lancaster, Col. C. G.

Rodgers, John (Sevenoaks)

Crowder, Petre (Ruislip—Northwood)

Langford-Holt, J.

Roper, Sir Harold

Cundiff, F. W.

Law, Rt. Hon. R. K.

Russell, R. S.

Cuthbert, W. N.

Leather, E. H. C.

Ryder, Capt. R. E. D.

Darling, Sir William (Edinburgh, S.)

Legge-Bourke, Maj. E. A. H.

Salter, Rt. Hon. Sir Arthur

Davidson, Viscountess

Lennox-Boyd, A. T.

Sandys, Rt. Hon. D.

Davies, Nigel (Epping)

Lindsay, Martin

Scott, Donald

De la Bère, R.

Linstead, H. N.

Shepherd, William

Deedes, W. F.

Llewellyn, D.

Smiles, Lt.-Col. Sir Walter

Digby, S. Wingfield

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Smithers, Peter (Winchester)

Dodds-Parker, A. D.

Lloyd, Maj. Guy (Renfrew, E.)

Smithers, Sir Waldron (Orpington)

Donner, P. W.

Lloyd, Selwyn (Wirral)

Smyth, Brig. J. G. (Norwood)

Douglas-Hamilton, Lord Malcolm

Lockwood, Lt.-Col. J. C.

Snadden, W. McN.

Drayson, G. B.

Longden, Gilbert (Herts, S. W.)

Soames, Capt. C.

Drewe, C.

Low, A. R. W.

Spearman, A. C. M.

Dugdale, Maj. Sir Thomas (Richmond)

Lucas, Sir Jocelyn (Portsmouth, S.)

Spence, H. R. (Aberdeenshire, W.)

Duncan, Capt. J. A. L.

Lucas, P. B. (Brentford)

Spens, Sir Patrick (Kensington, S.)

Dunglass, Lord

Lucas-Tooth, Sir Hugh

Stanley, Capt. Hon. Richard (N. Fylde)

Duthie, W. S.

Lyttelton, Rt. Hon. O.

Stevens, G. P.

Eccles, D. M.

McCorquodale, Rt. Hon. M. S.

Steward, W. A. (Woolwich, W.)

Stewart, Henderson (Fife, E.)

Thornton-Kemsley, Col. C. N.

Webbe, Sir H. (London & Westminster)

Stoddart-Scott, Col. M.

Thorp, Brig. R. A. F.

Wheatley, Major M. J. (Poole)

Storey, S.

Tilney, John

White, Baker (Canterbury)

Strauss, Henry (Norwich, S.)

Turner, H. F. L.

Williams, Charles (Torquay)

Studholme, H. G.

Turton, R. H.

Williams, Gerald (Tonbridge)

Summers, G. S.

Tweedsmuir, Lady

Williams, Sir Herbert (Croydon, E.)

Sutcliffe, H.

Vane, W. M. F.

Wills, G.

Taylor, Charles (Eastbourne)

Vaughan-Morgan, J. K.

Wilson, Geoffrey (Truro)

Taylor, William (Bradford, N.)

Vosper, D. F.

Winterton, Rt. Hon. Earl

Teeling, W.

Wakefield, Edward (Derbyshire, W.)

Wood, Hon. R.

Teevan, T. L.

Wakefield, Sir Wavell (Marylebone)

York, C.

Thomas, J. P. L. (Hereford)

Ward, Hon. George (Worcester)

Thompson, Kenneth Pugh (Walton)

Ward, Miss I. (Tynemouth)

TELLERS FOR THE AYES:

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Waterhouse, Capt. Rt. Hon. C.

Major Conant and

Thorneycroft, Peter (Monmouth)

Watkinson, H.

Mr. T. G. D. Galbraith

NOES

Acland, Sir Richard

Dodds, N. N.

Irving, W. J. (Wood Green)

Adams, Richard

Donnelly, D.

Isaacs, Rt. Hon. G. A.

Albu, A. H.

Driberg, T. E. N.

Janner, B.

Allen, Arthur (Bosworth)

Dugdale, Rt. Hon. John(W. Bromwich)

Jay, D. P. T.

Allen, Scholefield (Crewe)

Dye, S.

Jeger, George (Goole)

Anderson, Alexander (Motherwell)

Ede, Rt. Hon. J. C.

Jenkins, R. H.

Anderson, Frank (Whitehaven)

Edelman, M.

Johnson, James (Rugby)

Attlee, Rt. Hon. C. R.

Edwards, John (Brighouse)

Johnston, Douglas (Paisley)

Awbery, S. S.

Edwards, Rt. Hon. Ness (Caerphilly)

Jones, David (Hartlepool)

Ayles, W. H.

Edwards, W. J. (Stepney)

Jones, Jack (Rotherham)

Bacon, Miss Alice

Evans, Albert (Islington, S. W.)

Jones, William Elwyn (Conway)

Baird, J.

Evans, Edward (Lowestoft)

Keenan, W.

Balfour, A.

Evans, Stanley (Wednesbury)

Kenyon, G.

Barnes, Rt. Hon. A. J.

Ewart, R.

Key, Rt. Hon. C. W.

Bartley, P.

Fernyhough, E.

King, Dr. H. M.

Bellenger, Rt. Hon. F. J.

Field, Capt. W. J.

Kinghorn, Sqn. Ldr. E.

Benn, Wedgwood

Finch, H. J.

Kinley, J.

Benson, G.

Fletcher, Eric (Islington, E.)

Kirkwood, Rt. Hon. D.

Beswick, F.

Follick, M.

Lang, Gordon

Bevan, Rt. Hon. A. (Ebbw Vale)

Foot, M. M.

Lee, Frederick (Newton)

Bing, G. H. C.

Forman, J. C.

Lee, Miss Jennie (Cannock)

Blenkinsop, A.

Fraser, Thomas (Hamilton)

Lever, Harold (Cheetham)

Blyton, W. R.

Freeman, John (Watford)

Lever, Leslie (Ardwick)

Boardman, H.

Freeman, Peter (Newport)

Lewis, Arthur (West Ham, N.)

Booth, A.

Gaitskell, Rt. Hon. H. T. N.

Lewis, John (Bolton, W.)

Bottomley, A. G.

Ganley, Mrs. C. S.

Lindgren, G. S.

Bowden, H. W.

Gibson, C. W.

Lipton, Lt.-Col. M.

Bowles, F. G. (Nuneaton)

Gilzean, A.

Logan, D. G.

Braddock, Mrs. Elizabeth

Glanville, James (Consett)

Longden, Fred (Small Heath)

Brook, Dryden (Halifax)

Gooch, E. G.

McAllister, G.

Brooks, T. J. (Normanton)

Gordon-Walker, Rt. Hon. P. C.

MacColl, J. E.

Broughton, Dr. A. D. D.

Granville, Edgar (Eye)

McGhee, H. G.

Brown, Rt. Hon. George (Belper)

Greenwood, Anthony (Rossendale)

McInnes, J.

Brown, Thomas (Ince)

Greenwood, Rt. Hon. Arthur (Wakefield)

Mack, J. D.

Burke, W. A.

Grenfell, D. R.

McKay, John (Wallsend)

Burton, Miss E.

Grey, C. F.

McLeavy, F.

Butler, Herbert (Hackney, S.)

Griffiths, David (Rother Valley)

MacMillan, Malcolm (Western Isles)

Callaghan, L. J.

Griffiths, Rt. Hon. James (Llanelly)

McNeil, Rt. Hon. H.

Carmichael, J.

Griffiths, William (Exchange)

MacPherson, Malcolm (Stirling)

Castle, Mrs. B. A.

Grimond, J.

Mainwaring, W. H.

Champion, A. J.

Gunter, R. J.

Mallalieu, J. P. W. (Huddersfield, E.)

Chetwynd, G. R.

Hale, Joseph (Rochdale)

Mann, Mrs. Jean

Clunie, J.

Hale, Leslie (Oldham, W.)

Manuel, A. C.

Cooks, F. S.

Hall, Rt. Hon. Glenvil (Colne Valley)

Marquand, Rt. Hon. H. A.

Coldrick, W.

Had, John (Gateshead, W.)

Mellish, R. J.

Collindridge, F.

Hamilton, W. W.

Messer, F.

Cook, T. F.

Hardman, D. R.

Middleton, Mrs. L.

Cooper, Geoffrey (Middlesbrough, W.)

Hargreaves, A.

Mikardo, Ian

Cooper, John (Deptford)

Hastings, S.

Mitchison, G. R

Corbet, Mrs. Freda (Peckham)

Hayman, F. H.

Moeran, E. W.

Cove, W. G.

Henderson, Rt. Hon. Arthur (Tipton)

Monslow, W

Craddock, George (Bradford, S.)

Herbison, Miss M.

Moody, A. S.

Crawley, A.

Hewitson, Capt. M.

Morgan, Dr. H. B.

Crosland, C. A. R.

Hobson, C. R.

Morley, R.

Crossman, R. H. S.

Holman, P.

Morris, Percy (Swansea, W.)

Cullen, Mrs. A.

Holmes, Horace (Hemsworth)

Mort, D. L.

Daines, P.

Houghton, D.

Moyle, A.

Dalton, Rt. Hon. H.

Hoy, J.

Mulley, F. W.

Darling, George (Hillsborough)

Hubbard, T.

Murray, J. D.

Davies, A. Edward (Stoke, N.)

Hudson, James (Ealing, N.)

Nally, W.

Davies, Rt. Hn. Clement (Montgomery)

Hughes, Emrys (S. Ayr)

Neal, Harold (Bolsover)

Davies, Harold (Leek)

Hughes, Hector (Aberdeen, N.)

Noel-Baker, Rt. Hon. P. J.

Davies, Stephen (Merthyr)

Hughes, Moelwyn (Islington, N.)

O'Brien, T.

de Freitas, Geoffrey

Hynd, H. (Accrington)

Oldfield, W. H.

Deer, G.

Hynd, J. B. (Attercliffe)

Oliver, G. H.

Delargy, H. J.

Irvine, A. J. (Edge Hill)

Orbach, M.

2066

2067

Padley, W. E.

Shurmer, P. L. E.

Viant, S. P.

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Silverman, Julius (Erdington)

Wallace, H. W.

Paling, Will T. (Dewsbury)

Silverman, Sydney (Nelson)

Watkins, T. E.

Pannell, T. C.

Simmons, C. J

Webb, Rt. Hon. M. (Bradford, C.)

Pargiter, G. A.

Slater, J.

Wells, Percy (Faversham)

Parker, J.

Smith, Ellis (Stoke, S.)

Wells, William (Walsall)

Paton, J.

Smith, Norman (Nottingham, S.)

West, D. G.

Pearson, A.

Snow, J. W.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Popplewell, E.

Sorensen, R. W.

White, Mrs. Eirene (E. Flint)

Porter, G.

Soskice, Rt. Hon. Sir Frank

White, Henry (Derbyshire, N. E.)

Price, Philips (Gloucestershire, W.)

Steele, T.

Whiteley, Rt. Hon. W.

Proctor, W. T.

Stewart, Michael (Fulham, E.)

Wilcock, Group Capt. C. A. B.

Pryde, D. J.

Stokes, Rt. Hon. R. R.

Wilkes, L.

Pursey, Cmdr. H.

Strachey, Rt. Hon. J.

Willey, Frederick (Sunderland)

Rankin, J.

Strauss, Rt. Hon. George (Vauxhall)

Willey, Octavius (Cleveland)

Rees, Mrs. D.

Stress, Dr. Barnett

Williams, David (Neath)

Reeves, J.

Summerskill, Rt. Hon. Edith

Williams, Rev. Llywelyn (Abertillery)

Reid, Thomas (Swindon)

Sylvester, G. O.

Williams, Ronald (Wigan)

Reid, William (Camlachie)

Taylor, Bernard (Mansfield)

Williams, Rt. Hon. Thomas (Don V'lly)

Rhodes, H.

Taylor, Robert (Morpeth)

Williams, W. T. (Hammersmith, S.)

Richards, R.

Thomas, David (Aberdare)

Wilson, Rt. Hon. Harold (Huyton)

Robens, Rt. Hon. A.

Thomas, George (Cardiff)

Winterbottom, Ian (Nottingham, C.)

Roberts, Emrys (Merioneth)

Thomas, Iorwerth (Rhondda, W.)

Winterbottom, Richard (Brightside)

Roberts, Goronwy (Caernarvonshire)

Thomas, Ivor Owen (Wrekin)

Wise, F. J.

Robertson, J. J. (Berwick)

Thorneycroft, Harry (Clayton)

Woodburn, Rt. Hon. A.

Robinson, Kenneth (St. Pancras, N.)

Thurtle, Ernest

Wyatt, W. L.

Rogers, George (Kensington, N.)

Timmons, J.

Yates, V. F.

Ross, William

Tomney, F.

Younger, Rt. Hon. K.

Royle, C.

Ungoed-Thomas, Sir Lynn

Shawcross, Rt. Hon. Sir Hartley

Usborne, H.

TELLERS FOR THE NOES:

Shinwell, Rt. Hon. E.

Vernon, W. F.

Mr. Wilkins and Mr. Hannan.

Mr. H. Strauss: I beg to move, in page 21, line 22, at the end to insert:
(4) Any person interested may submit to the Commissioners full particulars of any proposed transaction, together with a request that they shall intimate whether they are of the opinion that the main purpose (or one of the main purposes) of that transaction is the avoidance or reduction of liability to the profits tax and the Commissioners shall within twenty-one days of such request intimate their opinion in regard to the proposed transaction. Such an opinion shall thereafter be binding upon them for the purposes of subsection (1) of this section, provided that the transaction when executed conforms in all material respects to the particulars previously submitted to the Commissioners.
Hon. Members are familiar with the effect of this Clause as it is seen from this side of the Committee and its great dangers as we see them. It casts the greatest uncertainty on the effect of all sorts of normal legal transactions, because the effect of those transactions cannot be finally determined, sometimes, until years afterwards. As my hon. Friend the Member for Chippenham (Mr. Eccles) said at an earlier stage, we are not certain that we can by any Amendment make this Clause satisfactory, but this Amendment is an attempt to make it workable and to avoid the worst evils by enabling a company that is contemplating entering into some transaction to find out before it enters into that transaction what view the Commissioners take about it.
12 noon.
That has great advantages, because if they submit full particulars of the
2068
transaction to the Commissioners and the Commissioners say "That, in our opinion, does not come within the mischief of the Clause", the company can then go ahead and enter into the transaction without having the legal effect of that transaction, so far as taxation is concerned, reversed at a subsequent stage, provided of course that there is no failure of full disclosure, and that the transaction later carried out corresponds in all respects to the transaction of which particulars had been sent to the Commissioners. I think that hon. Members in all quarters of the Committee will see the great advantage of such a scheme if it is practicable.
Perhaps I might be allowed to call attention to two precedents which may offer us some guidance in this matter. One comes from a Finance Act and the other from a different Act which I shall mention later. First, let me mention the precedent in a Finance Act. At an earlier stage in our proceedings hon. Members on both sides mentioned the provisions of Section 21 of the Finance Act, 1922. That is the Section which dealt with Super-tax, as it was then called, on undistributed income of certain companies. Roughly speaking, those companies were companies that had not more than 50 shareholders. Section 21 of that Act provided that:
"Where it appears … that any company … has not … distributed … a reasonable part of its actual income"

2069
steps might be taken to make the shareholders liable for Super-tax on what might have been distributed by that company. Later on, in 1928, the Section was enacted which offers some precedent for the proposal contained in this Amendment, because Section 18 of the Finance Act, 1928, provided that if the company submitted accounts to the Special Commissioners they were bound to inform it whether or not they proposed to take any action with regard to the making of a direction for Super-tax purposes. That is, I think, the nearest precedent under a Finance Act.
There is, however, another precedent to which I wish to draw attention and which many hon. Members may remember. I do so with some pleasure, because I see the right hon. Member for Ebbw Vale (Mr. Bevan) in his place. He will well remember the provision which I thought was a useful addition which he made to his Bill to meet somewhat the same sort of problem as that for which my present Amendment is designed. I refer to the provision in Section 35 of the National Health Act, 1946.
The right hon. Gentleman will remember that that Section dealt with the prohibition of sale of medical practices. That was, in the right hon. Gentleman's submission, a necessary provision for the general scheme of his Statute, and it was necessary for him, in order to support that provision, to create a number of criminal offences—offences connected with selling directly or indirectly the goodwill of a medical practice. Debates in Committee on that Bill showed difficulties similar to those to which we have called the Attorney-General's attention in the course of our discussion on this Clause.
After a great deal of consideration, the right hon. Member for Ebbw Vale provided in subsection (9) of Section 35 of the 1946 Act that:
"Any medical practitioner or the personal representative of any medical practitioner may apply to the Medical Practices Committee for their opinion as to whether a proposed transaction or series of transactions involves the sale of the goodwill or any part of the goodwill of a medical practice which it is unlawful to sell by virtue of this section."
I will not bother with the remaining words. The right hon. Gentleman will well remember that provision. I also see in his place the hon. Member for
2070
Tottenham (Mr. Messer), with whom I served on that Committee, who I know will also remember it well.
The certificate which was provided in this way under subsection (9) was of use if criminal proceedings were brought, because subsection (10) provided:
"Where any person is charged with an offence under this section in respect of any transaction … it shall be a defence to the charge to prove that the transaction or series of transactions was certified by the Medical Practices Committee under the last foregoing subsection."
Then there was a proviso to prevent the certificate from being used if there had been any failure to disclose material circumstances.
Those are the two precedents. I do not for one moment claim that either of those is an exact precedent for what I now propose to the Committee, but they both give valuable guidance on what the Committee have been able to do when they have provided for novel questions of a transaction or series of transactions. It is desired to help those who may be affected, and who are quite innocent in intention, to find out in advance, before they enter into a transaction, whether it is one which, in the opinion of the authority concerned—in this case the Commissioners—falls within the mischief of the Clause. That is the object for which our Amendment is designed.
As the Attorney-General knows, the Opposition cannot call on that drafting skill which is available to the Government Front Bench. It may be that there are technical defects in the Amendment, but its intention is serious and, if it can be accepted and improved in wording, if that is the wish of the right hon. and learned Gentleman, one of the great difficulties under this Clause will be avoided—namely, the complete uncertainty which for a period of years throws a doubt over the effect of transactions—not invalidating them, but in transforming their legal consequences as far as taxation is concerned.
Whatever their view on the merits or demerits of the Clause, I am sure that all hon. Members want to make it as little onerous as possible to honest men anxious to do the right thing. I do not want to repeat any of the earlier discussions, but unless we insert some provision of this kind, it will be extraordinarily difficult

2071
for honest men to know where they are under this Clause and not to suffer from it. This is a genuine attempt to meet a serious difficulty.
Mr. Birch: I should like to support what my hon. and learned Friend has said. People nowadays really recur to first principles of taxation, but one of the canons of taxation laid down by Adam Smith was that they should be certain in their effect. We can hardly imagine a greater degree of uncertainty than is caused by this Clause. We have had many examples of what might happen under a strict interpretation of this un-amended Clause. For instance, it might upset the refinancing of a capital programme, something which would make a good deal of difference to a company, long contemplated and long thought out.
What will happen about taxation nowadays, when it is so immensely high, clearly is of vital importance to any company which is trying to arrange its affairs. If the company does not know where it is about this, and if, even years later, the Commissioners of Inland Revenue may come and claim taxation on the ground that what was done was intended as a device to avoid taxation, it is difficult to see how companies can arrange their affairs properly and sensibly.
As my hon. and learned Friend has pointed out, this Amendment is not without precedent. There has been a recent precedent as well as one in the past, and I cannot see why any great difficulty should be caused in the implementation of it. It may be that the time factor is rather too short in which my hon. and learned Friend has put down the Amendment. It may be that the Commissioners might be allowed a longer time in which to give their decision, although obviously the shorter time required the better. But I do not see how this Amendment could lead to abuse, and I do see how it could lead to a great deal of assistance to companies in carrying on their affairs. Also I see how it could lead to some mitigation of a Clause which any impartial person must agree in principle is a thoroughly bad one.
Mr. P. Roberts: I support this Amendment, so clearly and cogently argued, but I want to point out one difficulty. I was much impressed when my hon. and learned Friend pointed out that if there
2072
were proof of a lack of full disclosure or if fraud was proved, this Amendment would not apply. I do not see those actual words in the Amendment, but I have no doubt that the Economic Secretary would be able to produce words sufficient to cover that point if he were to accept the Amendment.
In putting forward this suggestion, it is necessary to point out that if there were any fraud in the details put to the Commissioners, or if there were not full disclosure, it would be wrong for this Amendment to apply. I hope it will be accepted even if it does not appear in the Clause itself.
12.15 p.m.
Mr. Pitman: I owe an apology to the hon. and learned Member for Norwich, South (Mr. H. Strauss), in that I anticipated this Amendment when we were dealing with a previous one in which we sought to limit the time to three years. During that debate the Attorney-General pointed out that there was an uncertainty in perpetuity in regard to the liability of a company under this Clause. I believe that the hon. and learned Member for Norwich, South, is in some way underestimating the strength of his case and that under the Super-tax provision it is the company which pays the tax and not the super-tax payer. It is exactly the same in relation to this Clause, it is the company which pays the Profits Tax and not the person to whom the income of that company has been paid.
Therefore, we have the identical situation of a company being able to go for years and years with a double uncertainty which this Amendment would put right. There is first the uncertainty as to whether or not, and how much, tax will be due. Then there is the second uncertainty of the time factor, as to whether or not this bogey from the past—if it is a bogey, and nobody has the means of finding that out—will come out of its lair and will at some future date shed its mischief for the current year on the company.
It is perfectly clear that both sides of the Committee are agreed in the desire to reopen the question if there is any fraud or misrepresentation of any kind. It would be quite contrary to the wishes of both sides of the Committee if anything were done by way of Amendment which gave any loophole to anybody who was doing anything deliberate or fraudulent

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in this way. We are seeking to deal with the many borderline cases in which there is no intention whatever to defraud. They may even be accidental cases. Certainly there will be cases in which there is no intent to defraud. It is important, if we are to pass this Clause, that we should so amend it that the honest and decent companies—here I would point out again that the Clause applies to every company that makes profits in perpetuity—will not have it applied to them without any limit of time. Therefore, I strongly support the Amendment so ably moved by my hon. and learned Friend.
Mr. Heald: If it is felt that any justification is required for another speech on this matter. I should like to explain why I think that one is required. For the last 10 hours we have been discussing a Clause which, I believe, it is widely recognised in the Committee involves a constitutional question of great importance and something which, at any rate, affects the rights of the subject, if it is put no higher than that. During that time we have had no word of any kind from the Liberals. For that reason alone, I think that a little more from this side of the Committee might be justified. The matter has been left, not for the first time in recent years, to the Conservatives and to the National Liberals, who have a view of their national responsibilities. For that reason, a few words might not be out of order.
The proposal, which I support, is put forward as an alternative to what we have already discussed. From the very beginning, we on these Benches were anxious to make it perfectly clear that we had no sympathy with tax dodging. That is why we put down the Amendment requiring a reference to bona fides, and I do not think it is fair for anyone on the opposite side of the Committee to suggest, in view of that fact, that we on this side are concerned with helping tax dodgers. We thought that a reference to bona fides was the best way of dealing with the matter and this was the purpose of the First Amendment, but that has not been accepted.
The present Amendment goes much further and requires the utmost bona fides, because it involves that a man should go openly to the Treasury and say, "This is what I propose to do. Will
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you examine it carefully and say whether you think it involves avoidance of tax such as is objectionable?" That requires the utmost bona fides, and I hope that when the Attorney-General deals with this proposal he will acknowledge that that is the attitude that we on this side adopt.
We were very surprised to hear the right hon. and learned Gentleman say that he could not see how the Clause without amendment could be described as interfering with the rights and liberties of the subject. One has only to appreciate what it does in order to see how strange is that view, a view that, one might think, it would only be possible for such a distinguished and eminent lawyer to take in the late hours of the morning after a long Sitting in the Committee.
The Clause involves the notional rearrangement of legal rights and obligations under transactions which have actually been completed at the time when they are inquired into. Surely it is not an exaggeration to say that that involves something of grave importance in relation to our constitutional and legal system. Therefore, we are entitled to ask that particular care should be directed to this matter.
I shall not repeat the arguments that have already been put forward for what is here suggested. There are precedents for it. There may be arguments as to the wording which should be used, but there is one argument which I hope the right hon. and learned Gentleman will not advance against the Amendment, although I shall not be surprised if he does so. I hope he will not tell us that this is not done, that the Treasury do not do it, do not like it and do not want it, and that it is not convenient.
As I have said before, in relation to the same subject, that is not the relevant question. The question is: What does Parliament want done? If Parliament says what it wants done, the Treasury will do as they are told and will find a way of doing it. That has happened many times before, it will happen many times again, and I ask the right hon. and learned Gentleman, in approaching the Clause, to approach it in that spirit.
The Attorney-General: The Amendment as drafted puts what, I think, is conceded would be a quite impossible

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burden upon the Treasury. It would put upon them a statutory obligation, within 21 days of being so requested by anybody concerned, to give a binding certificate which could preclude any further action by the Treasury as long as the transaction complied with what is described in the certificate.
If hon. Members consider the implications of that, they will realise that it is a proposition which is not really practicable. After all, a number of applications may flow in—one cannot possibly predict. I know that the Committee are impatient of arguments based on administrative inconvenience, and I do not base my argument on that, but I feel that hon. Members will realise the difficulty of a proposal which puts upon the Treasury a wholly insupportable burden which they could not possibly discharge.
I hope that hon. Members will picture the situation that would arise. Companies from all over the country would, I suppose, be tempted always, almost as a matter of course, to apply for these certificates. Not only that, but most of them would be perfectly reputable and honest. The great majority would be very cautious and conservative, and say "It is conceivable that a direction might be given here. Let us be on the safe side. Let us apply for a certificate." Then there might very well be a wholly unmanageable flood of applications which no Department could possibly take on except with a very large increase of staff and after developing a wholly new organisation for coping with the flow of work.
I hope hon. Members will agree with me that it is not simply an argument of administrative convenience, for administrative inconvenience must be overcome as far as it can be, but it is going much further to say that a Department must undertake and manage a volume of work which really involves a large expansion of its organisation and personnel.
Under the Excess Profits Tax procedure it was not the unusual practice for companies to approach the Treasury and receive informal opinions with regard to transactions which might fall within the Section of the Excess Profits Tax legislation which corresponds to the Clause we are discussing, and I am assured that that procedure will continue whenever it is possible and feasible. These informal
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opinions would not have binding or force upon the Treasury.
The hon. and learned Member for Norwich, South (Mr. H. Strauss), did not claim that the two precedents which he cited were wholly analogous to the problem we are considering. In the case of one of the companies—Section 21 companies is what they are called—all that has to be done is to look at the accounts, and under Section 19 of the 1928 Finance Act the company has to render its accounts, and then, for the certificate to be granted, a decision has to be made as to whether the company has distributed a reasonable amount of its income. That is a problem which is extremely easy in comparison with the problems which will constantly be created when applications are made for the kind of certificate we are considering. Similar observations apply to the procedure under Section 35 of the National Health Act, 1946.
12.30 p.m.
I will give an example of the kind of difficulty that might arise. Let us suppose that a whole-time service director replaces a controlling director. It might afterwards transpire that the controlling director who was replaced was a person who had five times as much knowledge and understanding of how to run the company as the service director, and it would then be perfectly apparent that the real motive in supplanting him by the whole-time service director was merely to gain a tax advantage.
All these matters and considerations would be wholly within the knowledge of the company and unless there was the fullest disclosure it could not be within the knowledge of the Treasury. It would be just in that kind of case in which companies were run by persons who are not above some shady practice that there would be a temptation to approach the Treasury and, to use a colloquialism, to "try it on" and get a certificate in advance to put a stamp on the transaction coming within Clause 28.
Mr. Dodds-Parker: What criterion would the Treasury use for deciding whether a controlling director really knew better than a service director how to run the business?
The Attorney-General: That is one of the difficulties. It is a question of fact. The Treasury would have to make up their

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mind on the information before them, and it demonstrates that, if the Treasury are required to give certificates, they must be wholly at the mercy of the persons asking for the certificates in nine cases out of 10. If they can make extensive inquiries they can see who ought to be the director to run the business in the interest of the business, but if they are confronted with a statutory obligation to furnish within 21 days—or any extended period substituted for the 21 days, unless it is a very extensive period, in which case it would probably not be much use to the company concerned—they will in almost all cases have to refuse to give a certificate because, from the very nature of things, they will not be able to inform themselves fully as to the circumstances lying behind the application.
On the one hand, the proposal may lead to difficulties. On the other hand, I have some sympathy with the proposal. It is desirable that everything should be done which can possibly introduce certainty into a sphere where there may be uncertainty. If it can be done we should very much like to do it. I should not be prepared to give any undertaking that I can introduce any change into the terms of the Clause even between now and the Report stage, but when the Amendment was put on the Order Paper we gave it a great deal of thought.
Those who advise me upon it feel very much impressed by the practical difficulties. They point out that if they were placed under a statutory duty the result would almost inevitably be that they would have perforce to lean in the direction of caution and there would constantly have to be a refusal to grant a certificate, and perhaps that would happen in so many cases that the whole procedure might be frustrated.
However, I undertake to give this matter further thought between now and the Report stage. It may be that we shall not be able to put anything into the statute, but we may be able to devise some extra-statutory procedure which might help in these cases. Maybe we can think out something of that sort. If we could do so we should like to do it, but we are very fearful of the burden it might place on the Department. The Department is, of course, ready to undertake any burden within its powers, but it is no good putting upon it a burden which would
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simply mean a constant refusal to give a certificate. That would not be attaining the object which we have in mind. We will give very careful thought to this and see if anything practical can be worked out.
Hon. Members have referred to a certificate before the transaction is carried out. It seems to me that the same problem arises after the transaction is carried out. The hon. Member for Chippenham (Mr. Eccles) was very concerned that companies might not know for a long time whether they would have a direction served upon them or not. In a sense the question arises both after and before the transaction is carried out, and we will also consider that problem in our survey of the general question and see if we can do something to meet the difficulty which arises.
I must make it perfectly clear that I cannot give any undertaking. As hon. Members may imagine, we have not only begun to think of this today but have given it a great deal of thought already and discussed it very fully. We will make a further effort and see if we can succeed where we have hitherto not succeeded, but it must be clear that I am not binding myself to produce anything, although I will do my best to do so.
Mr. Boyd-Carpenter: The speech of the Attorney-General exhibited an amount of split personality. In the first part he set out, with that great power of exposition which we all acknowledge he has, what was quite obviously the Treasury view, and, in the second part, he allowed his own understanding of the problem a freer range. I was very impressed, and I have no doubt some of my hon. Friends were, by the attitude of mind which he exhibited and his appreciation of the reality of the problems to those who have to conduct the industries of this country. I fully appreciate that his undertaking contains no binding assurance, but, speaking for myself—I do not know what attitude my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss) will adopt—I believe that the Attorney-General will sincerely try to find a solution.
I desire to add only two comments. The first relates to his argument on the possibility that the applicant might not disclose the full facts. Nobody wants to

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shelter an applicant who so conducts himself. In putting down the Amendment we intended to cover this by using in the first line the words "full particulars." As I understand the Amendment, an applicant who did not comply with that condition and did not supply full particulars would not be entitled to the protection given by the certificate. In any event, we agree with the right hon. and learned Gentleman in our desire to protect only the person who comes forward with the full facts.
The natural reaction of a Department is to resent an additional burden and the very natural reaction of Departmental Ministers is to protect their staffs from them. One appreciates how grossly overworked the central Civil Service is today, but I must point out that it is a decision of Government policy to bring forward the Clause. There was no obligation on the Government to bring forward these proposals, which add to the work of their advisers, but, having decided to do this, there is some obligation on the Government, even at the cost of additional strain on their staffs, to do whatever they can to mitigate the ill effects on industry of this proposal. I hope that in any subsequent discussions he may have with the Treasury or other Departments the Attorney-General will not fail to remind them, with his infinitely agreeable charm and delicacy, of that aspect of the matter.
Lieut.-Commander Braithwaite: I listened with close attention to the Attorney-General and I welcome his conciliatory tone, but I trust that he will not take it amiss if I indicate what I believe to be the flaw in the argument he used a few minutes ago. My hon. and learned Friend the Member for Chertsey (Mr. Heald) gave the Committee an almost uncanny prognosis of the workings of the mind of the Attorney-General when he forecast the form that his reply would take, and it is upon that that I wish to comment.
Is it really such a burden to set up machinery of this kind? Would it not be of much the same type and function as the Capital Issues Committee, the instrument through which applications are made for the flotation of new capital? The right hon. and learned Gentleman
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indicated that if something of that sort were to be done there would be a temptation—I think that was the word he used—for companies to make use of it, and that queries would come flowing in from all over the country. I think that is what he meant by saying that there would be a heavy burden and a great volume of work.
I say, with great respect, that that argument discloses in most naked fashion the weakness of this Clause. Surely the whole point in passing legislation is that Measures should not be indefinite but should be so drafted that there is clarity in the minds of those concerned about how they stand under the law. If that were done the Attorney-General's chief objection would surely disappear.
In other words, if the Clause were clear there would obviously not be the temptation of which he complains for companies all over the country to take advantage of the machine. I suggest that the first step he should take is to redraft the Clause—I have said this two or three times already in the watches of the night—in language which can be clearly understood by the laymen; and, having done that, he might well set up the machinery envisaged in the Amendment.
Mr. Erroll: The Attorney-General's reply was particularly interesting, because it showed that he was plainly out of sympathy with the whole of this Clause. He revealed that he saw the difficulties in which industry would be placed. One sentence which was extremely revealing in that connection was the one in which he pointed out that if our Amendment was accepted the Commissioners would, as he said, be at the mercy of companies asking for the certificate. That may be true, but the fact is that if our Amendment is not accepted the companies will be at the mercy of the Commissioners.
I do not see why companies should now be placed at the mercy of the Commissioners. It is plain that companies will now have to move in these matters without any real guidance or any real knowledge about what the Commissioners may do after the event. This Amendment is an attempt to save companies from that very difficulty. To say that administrative difficulties within the offices of the Commissioners make it impossible to operate our Amendment is merely to

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show that the Clause had not been properly thought out when it was placed in the Finance Bill.
It is admitted that this Clause will place a very real burden and difficulty on companies. It is true that this difficulty and burden could be removed by the administrative steps that would be made possible by the Amendment. The Government are not prepared to accept our Amendment and will only allow the Clause to go through in its present form. So the difficulties are to be put on the companies and they are to be left to make their own estimate of what the Commissioners are willing to do.
The right thing to have done would have been to defer the introduction of this Clause until a later Finance Bill, when proper and fair precautions and safeguards for genuine company transactions could have been devised, so that the Clause could have been introduced, say, in next year's Finance Bill, in a form which would make it perfectly clear what one's liability for tax is when one is undertaking any transaction. If it is not clear one should be able to go to the Commissioners and obtain a ruling. It is fantastic that one should have to move in the dark, knowing that the Commissioners have absolute powers to decide after the event whether what one has done will attract Profits Tax or not. The certificate proposal, which we suggest is the only way out of the difficulty, is a reasonable request to make.
There might be a small flood of applications. It might be that some companies would apply for safety's sake, but surely, with the foresight of the Commissioners and the reputation they have built up, it is worth while risking a small flood of applications for certificates. Some may perhaps be wrongly granted because the Commissioners might make mistakes in their endeavour to get on with the work, but that is a small price to pay for giving companies the opportunity of knowing in each class of transaction what they are liable for and what they are not liable for. I suggest that our Amendment should be accepted to save companies from being at the mercy of the Commissioners.
12.45 p.m.
Mr. Black: Encouraged by the rather mild sympathy which the Attorney-General
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has expressed with the object of this Amendment, I venture to add my appeal to those which have already been made to him to find some way of meeting the difficulty which this Amendment is intended to overcome. I have spent the 30 years of my working life in the world of business, and have gained any experience of business which I have been successful in acquiring in the rather hard school in which one pays by the loss of one's own money for any mistakes that one makes. That may be a hard school compared with the theoretical school in which a great many people claim to have graduated in the field of business but at all events it gives one a real understanding and experience of business problems.
One of the greatest difficulties from which the business community suffers today is the uncertainty that faces it in so many of the problems it meets and in so many of the decisions which it has to take. Drawing upon my own experience, I would say the 30 years of my business experience can be divided roughly into two periods. The earlier period was one in which one could go to professional advisers—solicitors and accountants—in regard to problems and one could obtain a fairly definite opinion as to what one's position would be as a result of entering into any particular transaction that was in contemplation.
In the early days of my business life it was fairly easy to obtain advice of a definite character and which turned out in the event to be sound and right. But during the latter part of that period the possibility of obtaining that kind of definite and authoritative advice from professional men has become less and less as a result of the accumulation of the kind of legislation represented by the Clause which we are now considering.
It is clear that any business firm contemplating any transaction that might come within the scope of this Clause would be very unlikely to obtain from its professional advisers, whether they be solicitors or accountants, any definite or authoritative advice on which they could act with any degree of confidence and certainty. The advice would almost certainly take the form of a statement that it was impossible to say in advance what the view of the Special Commissioners might be in any particular circumstances that might arise.

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I therefore beg of the Attorney-General to go a little further than he has done already. He has expressed a mild sympathy with the object which we have in view in this Amendment. This is not a minor matter; it is not a question of trifling importance. It vitally concerns business men in the day-to-day decisions that they have to take, and anything that the Attorney-General can devise, in the interval between the present stage of the Bill and the next stage, to go at least some way towards meeting the difficulty which this Amendment is intended to overcome will be a great help and relief to the sorely harassed business community.
Mr. Eccles: When—I think it was 10 hours ago—it was my duty to move the first Amendment to this Clause I predicted that, amend it as we might, we would not in the end be able to make anything respectable of it. I never thought that that forecast would receive the corroboration which it has from the Attorney-General.
I agree with what my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) and my hon. and gallant Friend the Member for Bristol, North-West (Lieut.-Commander Braithwaite) have said. The speech of the Attorney-General to this Amendment is perhaps the most interesting we have had from the Government bench, for he has said that to determine whether a transaction, either before it is made, or after it is made, is not unlawful within the four corners of the Clause, he would have to set up a huge new organisation with a great deal more staff because the burden of inquiries would be overwhelming.
That is exactly what we have been trying to say all through the early morning, namely, that it is a thoroughly bad Clause because no one knows whether any act which he has done results in an avoidance of tax—that is, whether a diminution of his liability to tax will, or will not, come within the review of the Commissioner.
I differ slightly from my hon. Friend the Member for Wimbledon (Mr. Black). I do not think the Amendment is good. I do not think it can be made to work. I am so impressed by the enormous range of the transactions which are to come under review as a result of this Clause
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that I do not see what kind of organisation within the administrative powers of the Inland Revenue can be set up to deal with it. Although it may, in my opinion, rule out the Amendment, it surely condemns the Clause root and branch.
I think that the Committee have been fortunate to get this view from the right hon. and learned Gentleman. From this moment, however long the debate is continued on this Clause, however many times the Government refuse our Amendments, we know it is an impossible Clause to work, and the right thing to do would be to take it away and bring it back later in a workable form, if that is possible.
Mr. Maudling: The right hon. and learned Gentleman received the principle of the Amendment with sympathy, but was frightened of the administrative difficulties. I cherish the hope that he will find the administration not quite so difficult as he imagined, although I agree that if the administrative difficulties of the Amendment are overwhelming then the difficulties of the Clause, ipso facto, are also overwhelming. Perhaps he was over-frightened by the 21 days' period mentioned in the Amendment. Was it the period of time or the fact the Treasury had to consider so many schemes that was in his mind? If it is the first consideration I imagine that my hon. Friends would consider a different period. I imagine their motive was based on experience of trying to dig answers out of Government departments. I am sure that on the matter of time agreement could be reached, but I suggest that the Attorney-General will find, on looking into the matter again, that the administrative difficulties are not necessarily overwhelming.
In addition to the precedents that have been quoted, there are other examples. When a company starts a pension fund nowadays one has to make sure it falls within the provisions of the Finance Act of 1947. It can get an opinion on whether the fund will be approved by the Inland Revenue. The other example surely is the consent the Treasury will have to give under Clause 32, because giving consent prior to a transaction is precisely the same thing as giving a certificate that the proposals will not be liable to tax.
Colonel J. R. H. Hutchison: I had no intention of taking part in this debate until I heard what had been said, and had studied the Amendment more closely. I am a business man. I am one of those

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who have been trying to carry out the injunctions which we have heard so often from almost every Minister. We have had a considerable measure of success, but let it be recognised that we have had it at a time when there has been, for the most part, a sellers' market in which it has been relatively easy to sell our goods. When that situation becomes less obvious I wonder how much hon. Gentlemen realise how heavily the dice are loaded against the adventurer, the man prepared to risk his capital.
Taxes climb all the time. If he is successful a large measure of his success is taken away. We find this presumption of guilt Clause creeping into one Act after another, and now we have a desperately deleterious new Clause in a new Bill casting doubt on every conception, action, and transaction which businessmen have to consider. If the Government wanted to deter any business from carrying out the policy they urge they could not have gone about it in a better way. I think the Clause is so dangerous, is so widely drawn, as to put almost Gestapo powers in the hands of the Commissioners who will infuse into commerce so many new doubts, dismays, and wonders, that it should not be allowed to exist in any form at all.
I am bound to say that in a very black situation I have never seen a more reasonable Amendment entitling we folk to have some sort of guidance on whether we are going to put our heads into another noose or not. If I shut down a branch of my works am I to be told that I am avoiding tax, and that I am to be penalised? On a problem of that kind there must be an avenue through which we can get guidance and advice.
Mr. P. Roberts: The suggestion in the Clause as it stands unamended is that there are transactions taking place all over the country that will have to be looked into. Enormous staffs will have to be recruited in the Treasury to carry out the provisions of the Clause as it now stands. Might it not save time, instead of this staff having to go out and find these difficult transactions, if companies—at least the honest ones—were to put their case before the Treasury in the first place?
1.0 p.m.
If this Clause is to work at all there must be an enormous increase of checking
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staff in the Treasury. Surely it is better that their work should be lightened by companies coming to them and putting their transactions fairly and clearly before them rather than that they should have to go and seek out the transactions. I suggest to the Government that if they really mean to make this work this Amendment will assist them, but it seems to me that they realise that the whole of this Clause is quite unworkable.
Mr. Houghton: May I offer to hon. Gentlemen opposite a few remarks on how this machinery will actually work. There seems to be an impression that the machinery needed to deal with this Clause and any Amendment to it will affect the Treasury. That will not be so. The Commissioners of Inland Revenue will be the body responsible and their headquarters, as hon. Members know, are not at the Treasury, but at Somerset House.
The Commissioners will work through their local inspectors of taxes, and it surprises me that hon. Gentlemen opposite have not referred to the fact that the computation of profits for Income Tax purposes under Schedule D is the work in the first place of local inspectors of taxes, who, at the same time, are responsible for the computation of assessments for Profits Tax. Therefore, this work will be dealt with in the field and not in any central headquarters.
That will give hon. Gentlemen opposite a different impression of how the thing will function. The hon. Member for Chippenham (Mr. Eccles) says that the Clause is unworkable. I must remind him that a similar Clause, with similar provisions applicable to Excess Profits Tax, in the Finance Acts of 1941 and 1944, worked in precisely the same way, and through precisely the same agencies as this Clause will work; that is to say, the local inspectors of taxes, who had to deal with almost as many problems under E.P.T. as they might now have to deal with for Profits Tax.
Mr. Eccles: The last words of the hon. Member are exactly the case against him. It is not true that the number of problems under E.P.T. are almost the same as the number of problems which may arise under this Clause. After all, E.P.T. is only the margin of profit over and above the basic standard. Here, we are dealing

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with the entire range of company profits. Surely the hon. Gentleman will agree that the potential number of avoidances of tax—that is a horrible phrase, but he know what I mean—will be far greater under this Clause than it was under E.P.T.
Mr. Houghton: I thank the hon. Member for that intervention, but the instructions by the Commissioners of Inland Revenue to the local inspectors of taxes on Excess Profits Tax were much more voluminous than the instructions given on the Profits Tax.
In any case, I am merely offering to the Committee a more correct impression of the machinery which will be used. There is all the difference in the world between local inspectors of taxes discovering in the course of their work ways and means which taxpayers may be adopting for the avoidance of the payment of taxes, and using the powers which this Clause will give them, and having to sit in their offices receiving proposals for changes in company structure, or in the control of a company, and being asked to give decisions on, possibly, hypothetical cases. I think the hon. Gentlemen opposite are exaggerating the problems of the administration of this Clause.
Mr. Eccles: We agree that, as the Clause stands, the volume of work is in the hands of the Income Tax inspectors. If the Clause were amended, as my hon. Friends desire, this volume of work would be in the hands of the public as well since they would be able to bring their cases. Does not that prove to the hon. Gentleman how unsatisfactory it would be, because the fact that there would be this flood of inquiries from the public just proves the extent of the uncertainty which must reign.
Mr. Houghton: I am sorry, but it does not prove that. However, I do not wish to detain the Committee any longer, and I shall content myself by saying that there is a vast difference between the volume of work which will arise in the ordinary administration of the Profits Tax with the power that this Clause proposes to give to local inspectors of taxes, and the volume of work which would arise if taxpayers were invited almost to submit their proposals to the Inland Revenue to see whether the proposed racket would pass muster.
Mr. Bell: I think the hon. Member for Sowerby (Mr. Houghton), is approaching this Amendment on the wrong lines. We have not to decide whether this Amendment should be accepted or not by some delicate balance of the staff of the Inland Revenue as between having the Amendment and not having it. I think the staff of the Inland Revenue, whose devotion to their duty is well known both inside and outside this Committee, would be the last people to want the law to be moulded round their sole convenience.
I would remind the hon. Gentleman of a matter which we were discussing on another Amendment to this Clause not very long ago, namely, the inconvenience which results to traders from not having this certainty. The matter was mentioned in relation to an Amendment which I moved introducing a limitation period for the re-adjustment of these liabilities.
The Attorney-General expressed great sympathy with the difficulty in which traders will find themselves under this Clause if it is unamended, because they will not know for an indeterminate number of years just what their liability to Profits Tax may be deemed to be by virtue of this Clause. The Attorney-General was very frank about it. He said there was no time limit, and they would never know with absolute certainty in their natural lives what their liabilities to Profits Tax might be re-adjusted to be.
As the Committee did not accept that Amendment here is an opportunity of remedying the same defect in a different way. In some ways it is a superior method, because the trader can come to the Inland Revenue and be given just that certainty which otherwise he may never get at all. He never knows when his accounts will be re-opened and his liability for tax be re-adjusted at the sole discretion of the Commissioners, from whose decision he can appeal only to the Special Commissioners, and after that stage he cannot appeal at all on a question of fact.
This is a very serious matter for the trading community of this country. I hope that the Attorney-General—who is now having an anxious discussion with the Chancellor of the Exchequer as to whether they should accept this Amendment or what undertaking in respect of it they should give—is having success in persuading his right hon. Friend that they

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ought to accept my hon. Friend's Amendment on this point; and make a small gesture to compensate the business community for the inconvenience and uncertainty into which they will otherwise be thrown. I hope the right hon. and learned Gentleman will say in a moment that he will make that gesture, and that from now on he proposes to accept quite a lot of Amendments moved from this side of the Committee in our generous attempts to help him to improve this Bill.
Sir A. Salter: I was not very surprised and not entirely sorry that the right hon. and learned Gentleman was unable to accept the Amendment in the precise form in which it was moved. I fully realise that the question of the length of time and in some respects the effect of any certificate would raise some difficulties. What I think is important about the right hon. and learned Gentleman's speech—a point which I greatly welcome—is that he recognised quite clearly and quite frankly that the honest individual citizen who has the responsibility of arranging his business affairs in conformity with the law of the land will be in an intolerable state of uncertainty.
One thing which struck me very much was that in a long, very valuable and very necessary debate on the Clause, almost every Amendment and almost every speech made on this side of the Committee, and indeed practically every answer given from the other side of the Committee, have combined to show how essential it is that the individual taxpayer governing a business should be in a position in which it is less difficult for him to find out what is the law. Ignorance of the law is not an excuse. That is a harsh maxim nowadays, when the law has become so complex and so far-reaching.
But here we have a case not of where the citizen does not take the trouble to discover the meaning of the law, but where he cannot find the meaning. In answer to many cases cited on this side of the Committee, trying to define more exactly the nature of the citizen's obligations and trying to limit the width of discretion left with the Commissioners, the right hon. and learned Gentleman merely emphasised the point we made by saying how many they were, how difficult
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they were to define and how unforeseeable are the circumstances which might arise.
I do not wish to prolong the discussion, for I think it must be apparent to everyone how many genuine cases of doubt will exist under the Clause. The right hon. and learned Gentleman said that in relation to Excess Profits Duty it was customary for informal advice to be given and that somehow or other we seemed to get along in that way. But there is one very important distinction, apart from that already mentioned by my hon. Friend the Member for Chippenham (Mr. Eccles), between Excess Profits Duty and Profits Tax. Excess Profits Duty was never considered as anything but a temporary tax. I do not think we can rely upon the Profits Tax being similarly made a purely temporary part of the machinery of our taxes.
One consequence is that it is necessary, in relation to all sorts of arrangements that those organising a business may need to make—and some of my hon. Friends have referred to superannuation schemes and all sorts of schemes which may have to be adjusted in one way or the other—that these people should take into account the effect of Profits Tax upon those schemes when they take their decision. One of my hon. Friends after another has shown how uncertain is the way in which the Clause would then operate.
I recall this matter in order to suggest to the right hon. Gentleman that, when he is considering how far he will go to meet us and how best he should meet us in what is admitted to be an intolerable inconvenience and even hardship on the individual citizen, if he wants to devise some alternative to machinery along the lines proposed by my hon. and learned Friend he should think again of the different Amendments which he has rejected and the different arguments which have been put forward from this side of the Committee to show how, in existing circumstances, the citizen is placed in a position which is quite intolerable.
Mr. H. Strauss: The right hon. and learned Gentleman made a careful speech in reply to this Amendment and he rightly said that I did not claim that my precedents were exact precedents. I fully agree with some of the things he said and I was very glad that he recognised the object which we had in mind—which was

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to give greater security to innumerable traders who were in doubt as to their position. He gave an undertaking, not that he would put an Amendment down on Report, but that he would give the matter careful consideration to see whether he could meet the desire we had in mind, with which he sympathised. In view of that undertaking, in a moment I shall beg leave to withdraw the Amendment.
I should like, first, to deal with a minor matter on which I differed from him. The right hon. and learned Gentleman said that the Commissioners would be driven to play for safety by refusing their certificates. I do not think they would have been entitled to do that under such an Amendment as this, had it been accepted. It would have been their duty to give an honest and bona fide opinion and not merely to play for safety by turning the application down. Nevertheless, I welcome the undertaking that the right hon. and learned Gentleman has given and, in view of that undertaking, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
1.15 p.m.
Mr. Boyd-Carpenter: I beg to move, in page 21, line 34, at the end, to insert:
Provided that section one hundred and forty-nine of the Income Tax Act, 1918 (which relates to the statement of a case on a point of law), shall apply with the necessary modifications to every such appeal as it applies in the case of appeals to the General and Special Commissioners under the said Act.
This Amendment raises a point of considerable importance in principle but its intentions and, I think, its effects are satisfyingly simple. What we aim to do is to give to the person aggrieved originally by the direction but subsequently by the decision of the Special Commissioners the right of appeal, on a point of law only, to the courts. Certainly the right hon. Gentleman is familiar with the provisions of Section 149 of the Income Tax Act of 1918, and I do not think I need trouble the Committee with a lengthy explanation of those provisions except to say that when a person is aggrieved by the decision of the Special Commissioners and believes them to be wrong in law, he serves notice upon them and they then state a case for the decision of the High Court. That is a familiar, practical and,
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I think the right hon. Gentleman will agree, efficient procedure.
We desire to apply that procedure, with its appeal on law only—not on fact—to the High Court, to the provisions of this Clause. In the first place, in any matter of substantial importance to the citizen it is surely desirable that if he is dissatisfied with the decision of bodies which, however admirable, are not the King's Court's, he should have the right to go to the King's Courts for interpretation of the law.
The Attorney-General: Perhaps I might be of assistance by saying that the form of the Clause as drawn does incorporate Section 149 to which the hon. Gentleman is referring.
Mr. Boyd-Carpenter: I am much obliged. That will very much shorten, certainly my speech and, I have no doubt, the proceedings on this Amendment. I should like to get it clear. I understand that the provisions of Section 149 of the Income Tax Act, 1918—that is the appeal on law—are already covered by the Clause as it stands. I am bound to say that that was not clear to me on a reading of the Clause.
Of course I accept the Attorney-General's statement, and, as the object we sought to achieve has been achieved, I see no purpose in detaining the Committee further. This Amendment was not put down without certain consideration of the matter, and it would be of assistance, if only for clarification of our minds, if the right hon. Gentleman would be good enough to indicate where that occurs. I do not doubt it for a moment.
The Attorney-General: It is done in this way. Subsection (4) says:
"all the provisions of the enactments relating to appeals against assessments to the profits tax … shall have effect with respect to any appeal to the Special Commissioners under this subsection."
That brings in paragraph 2 of Part IV of the Fifth Schedule of the Finance Act, 1937, which dealt with the old National Defence Contribution, and which has now been made applicable to the Profits Tax, and so brings in Section 149 to which the hon. Gentleman has referred.
Mr. Boyd-Carpenter: The effect is what we desire. I think the right hon. and learned Gentleman will agree that the way

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in which it is arrived at is far from obvious, and our putting down of this Amendment has had some value in eliciting from him that statement. In the circumstances, I do not propose to proceed with the Amendment.
Mr. Maudling: I beg to move, in page 21, line 34, at the end, to insert:
(5) Where the Commissioners have made adjustments under this section increasing the income of a person assessable to profits tax then appropriate reductions shall be made to any other income of that person assessable to Profits Tax to counteract the effect of the first-mentioned adjustments with the object of avoiding double taxation as a result of the transactions to which this section is applied.
The purpose of this Amendment, which I think is an important Amendment, should be fairly clear to the Committee from its wording. The idea underlying it is simply that if the Commissioners choose for the purposes of Profits Tax to regard any transaction which has taken place as if it had not taken place, they must do that completely and thoroughly. In other words, they shall not be allowed to say: "We shall regard part of the transaction as if it had taken place because that suits us, but we shall disregard another part because to do so also suits us." Under our Amendment they must, in effect, if they wish to disallow a transaction, do no more than to put the taxpayer back where he would have been if he had never embarked on the transaction.
Perhaps for the benefit of the Committee I could give an example which might be suitable. Suppose a taxpayer could derive certain income from two companies, one of which has a higher Profits Tax liability than the other, and he arranges to transfer part of his income from the company liable to the higher rate to the company liable at the lower rate.
That might well be held by the Commissioners to be a transaction to which this Clause applies—a transaction designed to avoid liability for Profits Tax—and they would therefore have the power to reverse that transaction, to treat it as null and void, in which case they would treat source A from which he transferred the income as if it still had its original profit; but they should therefore per contra be forced to treat source B as if the income had not been transferred to it. In other words, if they refuse
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to accept a transfer of income they must treat the taxpayer's tax liability as if the transfer had never taken place at all.
It would be possible for a taxpayer to arrange for one company in a group of companies to enter into a transaction with another company in that group which would increase the income of the second company at the expense of the income of the first company. The Commissioners might hold that that transaction was one which should be held invalid, and might wish to restore the income of the first company to what it had been. If they want to restore the income of the first company to what it would have been they must readjust the income of the second company in the same regard.
There should not be a double assessment of tax in any circumstances as a result of the operations of this Clause. I believe that is the intention of the Clause, because the Commissioners are authorised, if they think fit, to
"direct that such adjustments shall be made as respects liability to the profits tax as they consider appropriate so as to counteract the avoidance or reduction of liability to the profits tax which would otherwise be affected by the transaction or transactions."
In other words, as I read it, it is not the intention that the Commissioners should be able to go further than counteracting the avoidance which is taking place. They should not be permitted to go further and put the taxpayer in a worse position as regards Profits Tax than he would have been if he had never done this transaction or series of transactions in the first place.
The argument is rather similar to the argument we had last year on the Lord-Black case. I think it most important, in dealing here with avoidance rather than evasion, that no question of a penalty should be allowed to creep into our discussions. I hope it will not be argued by the Revenue authorities or by the Attorney-General that if the taxpayer is worse off as a result of starting this scheme and having it stopped it is his own fault for trying it, because that would imply that the Commissioners have the right to impose a penalty. I do not see how there can be a right to impose a penalty when what the taxpayer is doing is lawful at the time he does it. I hope I have been able, at this stage of our proceedings, to make clear the purpose of the Amendment. It is simply designed to avoid double liability for taxation.
Mr. Leslie Hale: This is the sort of thing that arises under the Excess Profits situation. What I do not understand is that under the example the hon. Gentleman has postulated his company A transfers assets to company B because company A's Profits Tax position is likely to be heavier than company B's.
Mr. Maudling: It is not a transfer of assets. It is business in the normal course of trading, selling goods to company B at an artificial price, which would increase the profits of B at the expense of A.
Mr. Hale: That is a transfer of assets, although I quite agree that I envisage a different form of a transfer of assets. Company A sells goods to company B at an artificial price so as to transfer the profits to a company with a more favourable tax position. That affects the tax liability of that company. But that is a transfer which has taken effect, and the Commissioners are being asked under this Clause to say that it was done falsely, in a sense fraudulently, so far as their tax position is concerned.
It is rather on the lines of the old whisky transactions which once attracted some attention. I think that we have a right to disregard that transaction for the purpose of taxation, and to put the thing back in the old position, with all the contractual obligations, and with all the rights of one company to sue another. They must get the two companies together again and reverse the process.
1.30 p.m.
Mr. Maudling: I am afraid I have not made my argument clear to the hon. Gentleman. My point was that in a case like that, where the taxpayer has arranged that the income of company B shall go up at the expense of company A, the Commissioners are entitled to come along and say, "We will nullify the transaction."
Mr. Hale: No, they do not nullify the transaction; they regard it for taxation purposes.
Mr. Maudling: They will disregard or nullify it for taxation purposes. This Clause is dealing with taxation. They will disregard this transaction for taxation purposes, therefore they will be able to treat the income of company A as it
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would have been if the transaction had never taken place. They can also at the same time treat the income of company B as it would have been if the transaction had never taken place. Otherwise we might reach the position where company A and company B are both treated at the higher level of income. I hope I have made my point clear to the hon. Gentleman.
Colonel J. R. H. Hutchison: My hon. Friend has stated so succinctly and clearly the purpose of this Amendment that there is not a great deal left for me to say, and I would not have risen except for one point to which my attention was drawn by the hon. Member for Oldham, West (Mr. Hale). He used the word "fraudulent" and another analogous word. As I see this Clause, it is so wide, so full of possibilities and doubts, that a great many of these things may happen perfectly innocently.
Mr. Hale: I was replying to the hon. Member for Barnet (Mr. Maudling) who postulated this case, that goods had been sold at a purely artificial price, not at a representative price, in order that another company should make a profit to which the first company and its shareholders were entitled.
Colonel Hutchison: I appreciate that the words of my hon. Friend drew those words from the hon. Member, but the matter does not end there. All kinds of complications can arise under this Clause perfectly innocently. The thesis of my hon. Friend was that in cases of that kind the taxpayer should not be put in a worse position than he would have been if the transaction had taken place properly according to the views of the Commissioners. In short, we say that although a lot of people try to do so, the Inland Revenue must not try to have their cake at the same time as they eat it. I hope that the Chancellor will give his views on the present position of this Clause.
Mr. Erroll: I should like to continue the discussion on this subject and to start with an example of what is deemed to be a perfectly honourable transaction at the time it is made. It is a quite well known and generally acceptable practice that a company may sell to one of its subsidiaries at a price below the normal sales prices, very often at cost price. That

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is a perfectly genuine and legitimate transaction. Nevertheless, the Commissioners may decide afterwards, if they have this Clause as one of their powers, that it was a transaction to evade Profits Tax although it was perfectly openly and honourably transacted at the time it was done.
As I understand it, the Commissioners will be able to ignore the transaction and accordingly assess for Profits Tax. What we are seeking to bring about by this Amendment is that the Commissioners shall be compelled to ignore the corresponding transaction by the receiving subsidiary company who thereby would be gaining a profit. If the reduction of profit is to be disallowed in the case of the vendor company, so the accretion of profit should be correspondingly disallowed in the case of the receiving subsidiary company. If that is not granted, then the Commissioners are imposing a penalty on the company and its subsidiary by charging Profits Tax twice over on a transaction which it has decided to ignore in the case of the vendor company only.
I should like an explanation from the Attorney-General as to whether it is intended that the Commissioners should be entitled so to levy this type of penalty. If that is the intention, obviously the Amendment should be refused. However, as it is quite clear that it is not intended to equip the Commissioners with penal powers in the exercise of their duties under this Clause, our Amendment should be accepted in order to remove all doubt from the minds of those companies who will in the future, as they have done in the past, conduct a number of honourable transactions which might nevertheless, be deemed by the Commissioners—and nobody knows what they will decide in this matter—to be carried out with a view to evading Profits Tax.
Notice taken that 40 Members were not present; Committee counted, and 40 Members being present—
The Attorney-General: If I may, I will begin first with the example given by the hon. Member for Barnet (Mr. Maudling). In that case the Amendment which he has moved would have no operation at all. The Amendment deals with the case where the Commissioners have made adjustments under the Section
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which had the result of increasing the income of a person, and it provides that appropriate reductions shall be made to any other income of that person.
The example given by the hon. Member was a case of two companies, A and B—
Mr. Maudling: In common ownership.
The Attorney-General: —and stock is transferred from company A to company B at half its value. Let us suppose that company B realises the stock, and makes a profit accordingly, equivalent to half the value of that stock. Supposing no direction is made, the tax will fall upon company B, and it will be on an amount which is the equivalent of half the value of the stock. That is perfectly clear. Equally, supposing the direction is made, the transaction for the purpose of the assessment of Profits Tax will be disregarded and the equivalent of the value of half the stock will be taxed on company A.
This Amendment, however, simply provides for a corresponding reduction of the income of a person who, by virtue of a direction, is treated as having an increased income. The example given by the hon. Gentleman was one of two separate persons, and the Amendment accordingly has no application to that case. It deals only with the case where the income of the same person is increased by virtue of the direction, and it provides that the income of that person, and nobody else, should be correspondingly reduced.
When we saw the Amendment on the Order Paper, we very carefully considered in what sort of cases it could have any application. It has no equivalent provision as, for example, finds a place in the Excess Profits Tax legislation in relation to what is Section 35 of the 1941 Act or Section 33 of the 1944 Act. The only kind of case in which it seemed to us that there could be any scope for the operation of the proposed subsection in the form in which it is put upon the Order Paper is the kind of case which, I think, the hon. Member for Altrincham and Sale (Mr. Erroll) had in mind. I am sorry that I was not present for a short portion of his speech, but I think I heard him aright and that he was dealing with this kind of case—which is at any rate a good example.

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There may be a parent company which transfers its stock to a subsidiary at an undervalue—say, at half its value—and the subsidiary then proceeds to trade in that stock and to realise it and, accordingly, to make a profit equivalent to half the value of that stock. It then, being a wholly-owned subsidiary, let us suppose, of the parent company, pays to the parent company all the dividends which it is enabled to pay by virtue of having made a profit equivalent to the undervalue of the stock.
In that case, it could be said at first sight, at any rate, that we have the situation in which the parent company has a direction made upon it which has the effect of treating it for Profits Tax purposes as if it still owned its stock and was still the owner of the full value of the stock, and at the same time the wholly owned subsidiary pays dividends, which are swelled by the proportion of the undervalue of the stock which it has realised.
In such a case it could be said on the face of it that the parent company would be taxed upon the notional increase which follows from the making of the direction and, equally, that it would be taxed upon the dividends which it receives from its subsidiary. But even in that case, I do not think the Amendment could have any operation, for this reason: that the income of the subsidiary which goes to the parent company would be franked investment income and would not, therefore, enter into the profits of the parent company. It would be an income which would have borne tax in the hands of the subsidiary. Therefore when it reached the parent company, it would be franked investment income and would not go to swell the profits of the parent company.
Alternatively, the parent company might have opted for group treatment, it being optional in the case of Profits Tax, and the opting for group treatment would have the same effect. In other words, it aggregates the tax liability of the group into one global whole. Therefore, so far as we can discover—and we have listened to see whether there is a case in which there is scope for a provision of the kind that is proposed—it is very difficult to find a case in which there is any room for the operation of a subsection like this.
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The only possible case which occurred to us—it seemed a very unlikely one—was this. Supposing the subsidiary was not a British company, but an overseas company. Supposing the subsidiary was registered overseas and, accordingly, the income which flowed from the subsidiary in the form of dividends to the parent company was not franked investment income because it had not borne United Kingdom tax. There, it occurred to us, it might be said, if one could find the right case, that there was a case in which there might be virtually a double tax on the same source of income because the parent company would have a direction made upon it and it might be said, as I have mentioned, that the income from the subsidiary was really the same income.
The difficulty we see in that connection, and I await to hear an argument in answer to this conception of the position, is the defence that for practical purposes identification is never really possible. The subsidiary company might carry out a number of transactions, and one cannot point to any 1d. or £1 of the dividend which is paid by the subsidiary and say that that 1d. or £1 is referable to the portion of the undervalue of the transferred stock. In point of fact, the subsidiary carries out a whole number of transactions, and at the end of the year, as the result of the year's trading, strikes a balance and the net result of the aggregate value of all the trading it has carried out during the year is to yield a trading profit.
1.45 p.m.
As I have said, when we consider that trading profit and the subsidiary company pays out a dividend, we cannot then stamp or frank any part of that dividend which is paid out of that trading profit and say, "This portion of it is attributable to the stock that was transferred from the principal to the subsidiary and to that proportion of it which represents the undervalue of that stock at the price at which it was transferred by the principal to the subsidiary." Therefore, having carefully considered the Amendment, we feel that it is very difficult to find any scope for its operation. If there is a need for it, then there is one, but so far as we see, having examined the various possible transactions that might come within

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its scope, we cannot see that it could really have any operation in any transaction that we can think of as a practical transaction.
Mr. Pitman: To begin with, as the Attorney-General will know, the Amendment is closely linked with Clause 33—or perhaps I should say that the particular hypothetical cases about which we and the Attorney-General have been talking are dealt with under the provisions of that Clause. I am grateful, as will be the whole Committee, for the long way which the right hon. and learned Gentleman has gone to clear up our difficulty in this respect, but I do not think he has cleared it up finally and completely.
It was perfectly clear to me that the hon. Member for Oldham, West (Mr. L. Hale), had similarly been misled by the wording of the Clause and that it is therefore not sufficiently clear for the taxpayer. In the Clause the duty and ability are given to the Special Commissioners, if they think fit, to
"direct that such adjustments shall be made as respects liability to the profits tax …"
Then it goes on:
"so as to counteract the avoidance or reduction of liability to the profits tax …"
That is wholly one way only. That adjustment is one which the Commissioners are permitted to make only in the direction adverse to the taxpayer.
It is said that every action has an equal and opposite reaction, and one needs to be very careful about such generalisations, but I think, from what the Attorney-General has already said, that he is envisaging that in this particular field a gain of company A is the loss of company B, and vice-versa, and that we may therefore work on that generalisation that every action has an equal and opposite reaction.
What worries us in the Clause is either of two things: either that there is not really power in the Clause for the Commissioners to make the corresponding adjustment in the other way to the benefit of the taxpayer in the other unit; or if, as the Attorney-General gave us to understand, the compensation adjustment in the case of home operating companies will come by the system of franked income, which has already borne Profits Tax, I suggest to the right hon. and learned Gentleman that the Clause is
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palpably unclear in that respect and needs amendment.
I do not see that the Amendment of my hon. Friend is all that bad in this respect. There needs to be amendment of some kind to make it clear that the franked income will act as an adjustment in the other way. It may be that the Attorney-General is saying that every person in charge of a company is able to make, in the appropriate company of his own, that adjustment in his own books and to agree it in the computations for Profits Tax with the Inland Revenue with whom he is dealing. The right hon. and learned Gentleman may be claiming that this particular adjustment need not be done by the Commissioners because, in fact, it may suitably be done by the taxpayer himself in his other capacity where he is otherwise suffering. But it seems to me to be perfectly clear that there is a corresponding side to avoidance or reduction. Wherever there is "avoidance or reduction" of liability in one company, there must, per contra, be an "incidence or increase" on the other. We ought not to leave the Amendment without getting it absolutely clear how the corresponding incidence or increase is adjusted to the benefit of the corresponding taxpayer.
Mr. Erroll: I want to reinforce what has been said by my hon. Friend the Member for Bath (Mr. Pitman). His example was clear. He said that the loss of company A is the gain of company B, and that is just the point. The Clause would disregard the loss to company A, but would still regard it as a gain or profit for company "B" and tax it although there was no profit.
The Attorney-General: The profit for Profits Tax purposes goes back to the former company but the latter company is not taxed upon it. It is shifted back.
Mr. Erroll: But no profit at all has been earned. If we look at the position as between two departments of the same company, they could switch their figures as they liked. It is only when one company is the parent and the other is the subsidiary that it becomes possible to assess the notional profit made by the subsidiary so that it can be offset against the loss made by the parent. The whole of the transaction is disregarded as it affects the parent company, but tax must still be paid as regards the profit of the subsidiary.

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The Attorney-General referred to franked investment income. The same point applies here. The franked investment income is improperly swollen by a transaction which is being disregarded by the Commissioners when reviewing the parent company, and therefore more money has been paid out in the franking of a greater amount of investment income than has truly been earned by the company and its subsidiary.
The matter is a very real one and I am sorry that the Attorney-General imagines such cases to be non-existent, because genuine transactions of this type are constantly occurring, not for tax avoidance but in the ordinary course of business. Companies will be placed in considerable difficulty if they are not to know what is to happen about these transactions until after the event, when the Commissioners may decide that it was, quite fortuitously, an action for the avoidance of Profits Tax.
Captain Crookshank: It seems that my hon. Friends have found a point here. I listened very carefully to what the Attorney-General was saying and I was under the impression that he thought so too; that he had reviewed the problem very extensively and that it had been seen that there might be a certain possibility of something happening on the lines suggested by my hon. Friends. In fact, the Attorney-General as much as invited everyone still further to detail the case.
It may be that this is not the right moment to pursue it any further. It is very hard on the Attorney-General that he has been left to carry on the battle alone for so long. He must be completely exhausted physically and he must be in want of a meal, and I should be very sorry to keep him here any longer at this point in view of his obvious needs. I congratulate him on his feat of endurance in struggling, in so far as he has had to struggle, with the enemy, in so far as we are the enemy, alone and unaided. However, I believe that in his speech he more or less thought there was a point here, and I think so, too. Perhaps this is one of the problems which might be more suitably left over until the Attorney-General, for all his activity, has a fresher mind to bear on the subject.
Mr. Maudling: It may be that the Amendment leaves something to be desired.
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The point of substance is that in the operation of the Clause by the Commissioners nothing in the nature of a penalty should arise. I thought that the Attorney-General agreed with that but I should like to study his answer at greater length. Without prejudice to the possibility of putting down further Amendments on the Report stage, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Maudling: I beg to move, in page 21, line 34, at the end, to insert:
(5) If the taxation liability of a person is increased as a result of action taken under this section, credit shall be granted thereagainst in respect of any tax payable under the law of any territory outside the United Kingdom on the portion of income which, although treated as the income of such person for the purposes of this section, is also liable to tax in that other territory. Such credit shall be calculated as provided in Part V of the Finance (No. 2) Act, 1945, as amended, and section thirty-six of the Finance Act, 1950, subject to suitable adaptation.
The Amendment is of a similar character to the last one, but I hope the drafting will make its purpose clearer to the Attorney-General. Let us imagine a company which produces articles and has a subsidiary company operating overseas selling those articles. It is a common practice for the company producing the goods in this country to sell them at an artificially low price to the subsidiary merchanting overseas. The effect of that is to reduce the profit of the home company and increase the profit of the overseas subsidiary.
My fear is that in certain circumstances a transaction of this kind might be regarded as a transaction designed to reduce liability to Profits Tax and the Commissioners might seek to set it aside for taxation purposes. In that case they would be entitled to treat the profits of the home company as if the goods had been sold at the true market price and they would then be able to tax the home company on a higher income than it had, in practice, earned under these arrangements. On the other hand, the subsidiary company overseas would still continue to be taxed on its higher income because it received the goods from the home company at a lower price and it would continue to pay foreign tax on the full income it had earned overseas.
The Amendment seeks to ensure that in working out the tax liability of the home

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company in those circumstances credit is given for the fact that while the income of the home company has been artificially increased for the purposes of British Income Tax the income of the subsidiary overseas has not, per contra, been artificially decreased for the purposes of the overseas revenue authorities. This is another case of balancing one against the other and I hope that the Attorney-General will accept the Amendment.
Sir P. Bennett: I hope the Attorney-General will bear in mind that in many of these transactions the prices are arranged in view of the tariffs of the countries to which the goods are sent. We should not like it to be thought that any re-arranging of prices was done with a view to tax dodging. It is very often done because of the necessity to keep the prices to the absolute minimum in view of tariffs overseas. An example is the need to keep prices at the very lowest in order to get into the American market. This is a legitimate arrangement necessitated by foreign tariffs.
2.0 p.m.
The Attorney-General: I make no comment about that. I am sure that the hon. Member is correct in what he says—that the goods are priced at a low rate to the foreign subsidiary because of overseas tariffs. That may well be the case in perhaps nine cases out of 10, but it may mean that in the tenth case there is a tax avoidance motive. However, I do not think that is material in connection with this Amendment.
If I understood the argument of the hon. Member for Barnet (Mr. Maudling) correctly, the Amendment does not really deal with what he had in mind. He had in mind the type of case of which I spoke when I was dealing with the previous Amendment, that is to say, the case in which the parent company here invoices its stock at an artificially low price to its foreign subsidiary. As I understood the hon. Member's argument, it was that the direction served on the parent company might result in an increase in the parent company's income so as to take account of the true price of that stock which it had invoiced and, at the same time, the foreign subsidiary overseas would have its income increased to the extent of the amount by which that stock had been underpriced to it.
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That is a case which seemed to me to be material on a previous Amendment—that there might be a foreign subsidiary paying dividends to the parent company here, and those dividends coming from a source overseas would not rank as investment income because they would not have borne United Kindom tax. I gave my answer, but it is extremely difficult in practice to identify as income that portion of the price which is undercharged on the transfer of the stock.
As I read the Amendment, it deals with a completely different point. It asks that credit should be given in respect of tax payable under the law of any territory outside the United Kingdom on the portion of the income which althouh treated as the income of such persons is liable to tax in the foreign territory. That is not the kind of point to which the hon. Member addressed himself.
In this Amendment he is asking that the following should be done: supposing the parent company invoices its stock at an under-value to the foreign subsidiary and the parent company has served upon it a direction which increases its income for Profits Tax purposes the Amendment asks that credit should be given in respect of the extra tax which might become payable on the foreign subsidiary's income, I suppose in respect of that portion of its income which is represented by the extent of the under-value at which the stock is invoiced to it.
In other words, this Amendment does not deal with duplication of income. It simply asks that credit should be given in respect of the higher rate of overseas tax which it is assumed may be charged as a result of the foreign subsidiary's income being increased to the extent of the under-charge to it of the stock. Here again, I very much doubt whether there is room for this Amendment and whether it really achieves any purpose.
As the Committee knows we now have double taxation agreements which have been entered into between us and, at a rough estimate, 50 other countries, including the United States. It is a common feature of those agreements that when income is diverted away from a particular company to a subsidiary company in another territory the income is charged to tax on the company from which the diverted income derives.

2107
The effect, in the circumstances so envisaged, where the parent company here invoices its stock at an under-value to a foreign subsidiary, is that the Profits Tax would fall upon the parent company to the whole extent of the increased income which it should and would have been able to show if it had not invoiced its stock at an under-value. It is a correlative understanding—
Colonel J. R. H. Hutchison: Does not the right hon. and learned Gentleman, therefore, at that stage in his argument, get the figure which he said Would be very difficult to allocate in respect of undervalued stock when it came back from the subsidiary, because it has already been done for tax purposes over here?
The Attorney-General: This Amendment deals simply with the tax position. It does not deal with duplication of income. It simply asks what these double taxation agreements provide for, namely, credit against double tax. It is a common feature of these double taxation agreements which we have entered into under the provisions of Section 51 of the Finance Act, 1945, that the income is charged to tax in respect of the parent company from which it has been diverted.
It is a correlative understanding of an agreement of that sort that the foreign country or the Commonwealth country does not charge the subsidiary the increased tax which would be appropriate to its augmented income; it charges it at the old rate. Therefore, there is no room, when a tax is in operation on these lines, for giving credit against increased tax because if the agreement operates according to its intention the foreign subsidiary is not charged at a higher rate of tax but continues to pay the low rate of tax which would be assessable upon it if its income had not been increased by reference to the under-valued stock invoiced to it. That is the case in respect of countries with which we have double taxation agreements.
Even in the case of countries with which we have no such agreements, Section 36 of the Finance Act, 1950, provides unilateral relief, both in the case of the Commonwealth countries, to the extent of three-quarters, and in the case of non-Commonwealth countries to the extent of one-half the foreign tax. So there is very
2108
little scope for giving credit in respect of increased tax when most of the countries are linked together by double taxation agreements, and in the case of those countries with which we have no such agreements credit is already given for half in some cases and three-quarters in others of any extra tax.
Lieut.-Commander Braithwaite: The Attorney-General battles bravely on while the Leader of the House is sunk in slothful slumber—[Interruption.]—my hon. Friends are not responsible for refusing to report Progress, keeping everybody up and then setting the Committee a lamentable example. I regard the last reply of the Attorney-General as somewhat unconvincing. I feel that the Solicitor-General, whom I should like to congratulate on his appointment, and on his first appearance in the Committee during our long deliberations, and who seats himself most inconspicuously, might take a turn in the front line, relieving his sorely stricken comrade.
Was not the Attorney-General—I put this in the friendliest manner—on somewhat delicate ground in the speech he has just delivered? It seemed to me that the case he put to the Committee fitted almost exactly like a glove the case of the Anglo-Iranian Oil Company, which has subsidiaries in various parts of the world, I believe in Kuwait, the Bahamas and another locality. Might not the Attorney-General's words, uttered at the end of this long Sitting, be flashed to Teheran?
Mr. J. Hudson: On the other hand, no one would have thought of that until the hon. and gallant Gentleman mentioned it.
Lieut.-Commander Braithwaite: That just shows how careful we should be in the exercise of our duties here. Here is a Parliamentary private secretary, in his second re-incarnation in that office, telling us that none of his Ministers on the Treasury bench would think of the situation in Teheran, or the consequences of rash speeches.
Mr. Brendan Bracken: The hon. Member for Ealing, North (Mr. J. Hudson), has had too much lemonade.
Lieut.-Commander Braithwaite: No, I would not say that. My right hon. Friend suggests that this is a result of over consumption

2109
of lemonade. That is a gross exaggeration. I am sure the hon. Gentleman does not drink sparkling waters, alcoholic or otherwise.
Was not the right hon. and learned Gentleman giving us an abstract example which might lead us into difficulties? I thought so. It does seem to me that this is the sort of thing which happens when the Committee sits unduly for long periods. Domestic consequences do not matter very much perhaps when we all know one and other, as we do here, but in countries abroad rash speeches can have unhappy repercussions. It has now gone 10 minutes past two o'clock, and the case is reinforced for an adjournment so that we may sit again at half past two o'clock, and put Private Notice Questions to the Prime Minister on these subjects.
Mr. Selwyn Lloyd: I did not understand a great deal of the Attorney-General's reply. That, no doubt, is my fault and not his. But the point I want to make is whether it is possible that there should be a double taxation liability as a result of action taken under this subsection? That is the fundamental point upon which I am not clear.
The Attorney-General: It depends what is meant by double taxation liability. Taxation liability on the parent company can be increased, and if it is not decreased abroad, one may say that there is higher taxation, if there had not been direction at all. But one cannot identify the tax on all transactions. They are imposed separately in different countries.
Mr. Lloyd: If the right hon. and learned Gentleman admits that there is double taxation liability, does he contend that that is equitable? If not, there is a great deal of sense in this Amendment.
Mr. Maudling: I cannot help agreeing with the Attorney-General's strictures on the Amendment, but I think the purpose of it is quite clear. He confirmed my point to a considerable extent. He agreed that there is a problem here, but it does depend on whether there is a double taxation agreement. It may be put right in, this case, but on his own argument it is not put right in other cases, and I think that this Amendment goes some way towards redressing the problem he admitted.
Question put, "That those words be there inserted."
The Committee divided: Ayes, 265; Noes, 286.

Division No. 125.]

AYES

[2.15 p.m.

Aitken, W. T.

Bullus, Wing Commander E. E.

Duncan, Capt. J. A. L.

Alport, C. J. M.

Burden, F. A.

Dunglass, Lord

Amery, Julian (Preston, N.)

Butcher, H. W.

Duthie, W. S.

Amory, Heathcoat (Tiverton)

Carr, Robert (Mitcham)

Eccles, D. M.

Arbuthnot, John

Carton, Hon. E.

Eden, Rt. Hon. A.

Ashton, H. (Chelmsford)

Channon, H.

Elliot, Rt. Hon. W. E.

Assheton, Rt. Hon. R. (Blackburn, W.)

Churchill, Rt. Hon. W. S.

Erroll, F. J.

Astor, Hon. M. L.

Clarke, Col. Ralph (East Grinstead)

Fisher, Nigel

Baker, P. A. D.

Clarke, Brig. Terence (Portsmouth, W.)

Fort, R.

Baldock, Lt.-Cmdr. J. M.

Clyde, J. L.

Fraser, Hon. Hugh (Stone)

Baldwin, A. E.

Colegate, A.

Fraser, Sir I. (Morecambe & Lonsdale)

Banks, Col. C.

Conant, Maj. R. J. E.

Fyfe, Rt. Hon. Sir David Maxwell

Baxter, A. B.

Cooper-Key, E. M.

Gage, C. H.

Beamish, Maj. Tufton

Corbett, Lt.-Col. Uvedale (Ludlow)

Galbraith, Cmdr. T. D. (Pollok)

Bell, R. M.

Craddock, Beresford (Spelthorne)

Galbraith, T. G. D. (Hillhead)

Bennett, Sir Peter (Edgbaston)

Cranborne, Viscount

Gammans, L. D.

Bennett, Dr. Reginald (Gosport)

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

Garner-Evans, E. H. (Denbigh)

Bennett, W. G. (Woodside)

Crosthwaite-Eyre, Col. O. E.

Gates, Maj. E. E.

Bovine, J. R. (Liverpool, Toxteth)

Crouch, R. F.

Gomme-Duncan, Col. A.

Birch, Nigel

Crowder, Capt. John (Finchley)

Grimston, Hon. John (St. Albans)

Black, C. W.

Crowder, Petre (Ruislip—Northwood)

Grimston, Robert (Westbury)

Boles, Lt.-Col. D. C. (Wells)

Cundiff, F. W.

Harden, J. R. E.

Boothby, R.

Cuthbert, W. N.

Hare, Hon. J. H. (Woodbridge)

Bossom, A. C.

Darling, Sir William (Edinburgh, S.)

Harris, Frederic (Croydon, N.)

Boyd-Carpenter, J. A.

Davies, Nigel (Epping)

Harris, Reader (Heston)

Boyle, Sir Edward

de Chair, Somerset

Harvey, Air Codre. A. V. (Macclesfield)

Bracken, Rt. Hon. B.

De la Bère, R.

Harvey, Ian (Harrow, E.)

Braine, B. R.

Deedes, W. F.

Harvie-Watt, Sir George

Braithwaite, Sir Albert (Harrow, W.)

Digby, S. Wingfield

Hay, John

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Dodds-Parker, A. D.

Head, Brig. A. H.

Bromley-Davenport, Lt.-Col. W.

Donner, P. W.

Heald, Lionel

Brooke, Henry (Hampstead)

Douglas-Hamilton, Lord Malcolm

Henderson, John (Cathcart)

Browne, Jack (Govan)

Drayson, G. B.

Hicks-Beach, Maj. W. W.

Buchan-Hepburn, P. G. T.

Drewe, C.

Higgs, J. M. C.

Bullock, Capt. M.

Dugdale, Maj. Sir Thomas (Richmond)

Hill, Dr. Charles (Luton)

Hill, Mrs. E. (Wythenshawe)

Maitland, Comdr. J. W.

Scott, Donald

Hinchingbrooke, Viscount

Marlowe, A. A. H.

Shepherd, William

Hirst, Geoffrey

Marples, A. E.

Smithers, Peter (Winchester)

Holmes, Sir Stanley (Harwich)

Marshall, Douglas (Bodmin)

Smithers, Sir Waldron (Orpington)

Hope, Lord John

Marshall, Sidney (Sutton)

Smyth, Brig. J. G. (Norwood)

Hopkinson, Henry

Maude, Angus (Ealing, S.)

Snadden, W. McN.

Hornsby-Smith, Miss P.

Maude, John (Exeter)

Soames, Capt. C.

Horsbrugh, Rt. Hon. Florence

Maudling, R.

Spearman, A. C. M.

Howard, Greville (St. Ives)

Medlicott, Brigadier F.

Spence, H. R. (Aberdeenshire, W.)

Hudson, Sir Austin (Lewisham, N.)

Mellor, Sir John

Spens, Sir Patrick (Kensington, S.)

Hudson, Rt. Hon. Robert (Southport)

Molson, A. H. E.

Stanley, Capt. Hon. Richard (N. Fylde)

Hudson, W. R. A. (Hull, N.)

Monckton, Sir Walter

Stevens, G. P.

Hurd, A. R.

Moore, Lt.-Col. Sir Thomas

Steward, W. A. (Woolwich, W.)

Hutchinson, Geoffrey (Ilford, N.)

Morrison, John (Salisbury)

Stewart, Henderson (Fife, E.)

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

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

Stoddart-Scott, Col. M.

Hutchison, Colonel James (Glasgow)

Mott-Radclyffe, C. E.

Storey, S.

Hyde, Lt.-Col, H. M.

Nabarro, G.

Strauss, Henry (Norwich, S.)

Hylton-Foster, H. B.

Nicholls, Harmar

Summers, G. S.

Jennings, R.

Nicholson, G.

Sutcliffe, H.

Johnson, Howard (Kemptown)

Nield, Basil (Chester)

Taylor, Charles (Eastbourne)

Jones, A. (Hall Green)

Noble, Cmdr. A. H. P.

Taylor, William (Bradford, N.)

Joynson-Hicks, Hon. L. W.

Nugent, G. R. H.

Teeling, W.

Kaberry, D.

Nutting, Anthony

Teevan, T. L.

Kerr, H. W. (Cambridge)

Oakshott, H. D.

Thomas, J. P. L. (Hereford)

Lambert, Hon. G.

Odey, G. W.

Thompson, Kenneth Pugh (Walton)

Lancaster, Col. C. G.

Ormsby-Gore, Hon. W. D.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Langford-Holt, J.

Orr, Capt. L. P. S.

Thorneycroft, Peter (Monmouth)

Leather, E. H. C.

Orr-Ewing, Charles Ian (Hendon, N.)

Thornton-Kemsley, Col. C. N.

Legge-Bourke, Maj. E. A. H.

Orr-Ewing, Ian L. (Weston-super-Mare)

Thorp, Brig. R. A. F.

Lennox-Boyd, A. T.

Osborne, C.

Tilney, John

Lindsay, Martin

Peake, Rt. Hon. O.

Turner, H. F. L.

Linstead, H. N.

Perkins, W. R. D.

Turton, R. H.

Llewellyn, D.

Peto, Brig. C. H. M.

Vane, W. M. F.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Pickthorn, K.

Vaughan-Morgan, J. K.

Lloyd, Maj. Guy (Renfrew, E.)

Pitman, I. J.

Vosper, D. F.

Lloyd, Selwyn (Wirral)

Powell, J. Enoch

Wakefield, Edward (Derbyshire, W.)

Lockwood, Lt.-Col. J. C.

Price, Henry (Lewisham, W.)

Wakefield, Sir Wavell (Marylebone)

Longden, Gilbert (Herts, S. W.)

Prior-Palmer, Brig. O.

Ward, Hon. George (Worcester)

Low, A. R. W.

Profumo, J. D.

Ward, Miss I. (Tynemouth)

Lucas, Sir Jocelyn (Portsmouth, S.)

Raikes, H. V.

Waterhouse, Capt. Rt. Hon. C.

Lucas, P. B. (Brentford)

Rayner, Brig. R.

Watkinson, H.

Lucas-Tooth, Sir Hugh

Redmayne, M.

Webbe, Sir H. (London & Westminster)

Lyttelton, Rt. Hon. O.

Remnant, Hon. P.

Wheatley, Maj. M. J. (Poole)

McCorquodale, Rt. Hon. M. S.

Renton, D. L. M.

White, Baker (Canterbury)

Macdonald, Sir Peter (I. of Wight)

Roberts, Maj. Peter (Heeley)

Williams, Charles (Torquay)

Mackeson, Brig. H. R.

Robinson, Roland (Blackpool, S.)

Williams, Gerald (Tonbridge)

McKibbin, A.

Robson-Brown, W.

Williams, Sir Herbert (Croydon, E.)

McKie, J. H. (Galloway)

Rodgers, John (Sevenoaks)

Wills, G.

Maclay, Hon. John

Roper, Sir Harold

Wilson, Geoffrey (Truro)

Maclean, Fitzroy

Russell, R. S.

Winterton, Rt. Hon. Earl

MacLeod, Iain (Enfield, W.)

Ryder, Capt. R. E. D.

Wood, Hon. R.

MacLeod, John (Ross and Cromarty)

Salter, Rt. Hon. Sir Arthur

York, C.

Macmillan, Rt. Hon. Harold (Bromley)

Sandys, Rt. Hon. D.

Macpherson, Major Niall (Dumfries)

Savory, Prof. D. L.

TELLERS FOR THE AYES:

Mr. Studholme and Mr. Heath

NOES

Acland, Sir Richard

Bowen, E. R. (Cardigan)

Crosland, C. A. R.

Adams, Richard

Bowles, F. G. (Nuneaton)

Crossman, R. H. S.

Albu, A. H.

Braddock, Mrs. Elizabeth

Cullen, Mrs. A.

Allen, Arthur (Bosworth)

Brook, Dryden (Halifax)

Daines, P.

Aden, Scholefield (Crewe)

Brooks, T. J. (Normanton)

Dalton, Rt. Hon. H.

Anderson, Alexander (Motherwell)

Broughton, Dr. A. D. D.

Darling, George (Hillsborough)

Anderson, Frank (Whitehaven)

Brown, Rt. Hon. George (Belper)

Davies, A. Edward (Stoke, N.)

Awbery, S. S.

Brown, Thomas (Ince)

Davies, Harold (Leek)

Ayles, W. H.

Burke, W. A.

Davies, Stephen (Merthyr)

Bacon, Miss Alice

Burton, Miss E.

de Freitas, Geoffrey

Baird, J.

Butler, Herbert (Hackney, S.)

Deer, G.

Balfour, A.

Callaghan, L. J.

Delargy, H. J.

Barnes, Rt. Hon. A. J.

Carmichael, J.

Dodds, N. N.

Bartley, P.

Castle, Mrs. B. A.

Donnelly, D.

Ballenger, Rt. Hon. F. J.

Champion, A. J.

Driberg, T. E. N.

Bonn, Wedgwood

Chetwynd, G. R

Dugdale, Rt. Hon. John (W. Bromwich)

Benson, G.

Cocks, F. S.

Dye, S.

Beswick, F.

Coldrick, W.

Ede, Rt. Hon. J. C.

Bevan, Rt. Hon. A. (Ebbw Vale)

Collindridge, F.

Edelman, M.

Bing, G. H. C.

Cook, T. F.

Edwards, John (Brighouse)

Blenkinsop, A.

Cooper, Geoffrey (Middlesbrough, W.)

Edwards, Rt. Hon. Ness (Caerphilly)

Blyton, W. R.

Cooper, John (Deptford)

Edwards, W. J. (Stepney)

Boardman, H.

Corbet, Mrs. Freda (Peckham)

Evans, Albert (Islington, S. W.)

Booth, A.

Cove, W. G.

Evans, Edward (Lowestoft)

Bottomley, A. G.

Craddock, George (Bradford. S.)

Evans, Stanley (Wednesbury)

Bowden, H. W.

Crawley, A.

Ewart, R.

2112

2113

Field, Capt. W. J.

Lang, Gordon

Robinson, Kenneth (St. Pancras, N.)

Finch, H. J.

Lee, Frederick (Newton)

Rogers, George (Kensington, N.)

Fletcher, Eric (Islington, E.)

Lever, Harold (Cheetham)

Ross, William

Follick, M.

Lever, Leslie (Ardwick)

Royle, C.

Foot, M. M.

Lewis, Arthur (West Ham, N.)

Shawcross, Rt. Hon. Sir Hartley

Forman, J. C.

Lewis, John (Bolton, W.)

Shinwell, Rt. Hon. E.

Fraser, Thomas (Hamilton)

Lindgren, G. S.

Shurmer, P. L. E.

Freeman, John (Watford)

Lipton, Lt.-Col. M.

Silverman, Julius (Erdington)

Freeman, Peter (Newport)

Logan, D. G.

Silverman, Sydney (Nelson)

Gaitskell, Rt. Hon. H. T. N.

Longden, Fred (Small Heath)

Simmons, C. J.

Ganley, Mrs. C. S.

McAllister, G.

Slater, J.

Gibson, C. W.

MacColl, J. E.

Smith, Ellis (Stoke, S.)

Glanville, James (Consett)

McGhee, H. G.

Smith, Norman (Nottingham, S.)

Gooch, E. G.

McInnes, J.

Snow, J. W.

Gordon-Walker, Rt. Hon. P. C.

Mack, J. D.

Sorensen, R. W.

Granville, Edgar (Eye)

McKay, John (Wallsend)

Soskice, Rt. Hon. Sir Frank

Greenwood, Anthony (Rossendale)

Mackay, R. W. G. (Reading, N.)

Sparks, J. A.

Greenwood, Rt. Hn. Arthur (Wakefield)

McLeavy, F.

Steele, T.

Grenfell, D. R.

MacMillan, Malcolm (Western Isles)

Stewart, Michael (Fulham, E.)

Grey, C. F.

McNeil, Rt. Hon. H.

Strachey, Rt. Hon. J.

Griffiths, David (Rother Valley)

MacPherson, Malcolm (Stirling)

Strauss, Ht. Hon. George (Vauxhall)

Griffiths, Ht. Hon. James (Llanelly)

Mainwaring, W. H.

Stross, Dr. Barnett

Griffiths, William (Exchange)

Mallalieu, J. P. W. (Huddersfield, E.)

Sylvester, G. O.

Grimond, J.

Mann, Mrs. Jean

Taylor, Bernard (Mansfield)

Gunter, R. J.

Manuel, A. C.

Taylor, Robert (Morpeth)

Hale, Joseph (Rochdale)

Marquand, Rt. Hon. H. A.

Thomas, David (Aberdare)

Hale, Leslie (Oldham, W.)

Mallish, R. J.

Thomas, George (Cardiff)

Hall, Rt. Hon. Glenvil (Colne Valley)

Messer, F.

Thomas, Iorwerth (Rhondda, W.)

Hall, John (Gateshead, W.)

Middleton, Mrs. L.

Thomas, Ivor Owen (Wrekin)

Hamilton, W. W.

Mikardo, Ian

Thorneycroft, Harry (Clayton)

Hannan, W.

Mitchison, G. R

Thurtle, Ernest

Hardman, D. R.

Moeran, E. W.

Timmons, J.

Hardy, E. A.

Monslow, W.

Tomney, F.

Hargreaves, A.

Moody, A. S.

Ungoed-Thomas, Sir Lynn

Hastings, S.

Morgan, Dr. H. B.

Usborne, H.

Hayman, F. H.

Morley, R.

Vernon, W. F.

Henderson, Rt. Hon. Arthur (Tipton)

Morris, Percy (Swansea, W.)

Viant, S. P.

Herbison, Miss M.

Mort, D. L.

Wallace, H. W.

Hewitson, Capt. M.

Moyle, A.

Watkins, T. E.

Hobson, C. R.

Mulley, F. W.

Webb, Rt. Hon. M. (Bradford, C.)

Holman, P.

Murray, J. D.

Weitzman, D.

Holmes, Horace (Hemsworth)

Nally, W.

Wells, Percy (Faversham)

Houghton, D.

Neal, Harold (Bolsover)

Wells, William (Walsall)

Hoy, J.

O'Brien, T.

West, D. G.

Hubbard, T.

Oldfield, W. H

Wheatley, Rt. Hon. John (Edinb'gh E.)

Hudson, James (Ealing, N.)

Oliver, G. H.

White, Mrs. Eirene (E. Flint)

Hughes, Emrys (S. Ayrshire)

Orbach, M.

White, Henry (Derbyshire, N. E.)

Hughes, Hector (Aberdeen, N.)

Padley, W. E.

Whiteley, Rt. Hon. W.

Hughes, Moelwyn (Islington, N.)

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Wilcock, Group Cant. C. A. B.

Hynd, H. (Accrington)

Paling, Will T. (Dewsbury)

Wilkes, L.

Hynd, J. B. (Attercliffe)

Pannell, T. C.

Willey, Frederick (Sunderland)

Irvine, A. J. (Edge Hill)

Pargiter, G. A.

Willey, Octavius (Cleveland)

Irving, W. J. (Wood Green)

Parker J.

Williams, David (Neath)

Isaacs, Rt. Hon. G. A.

Paton, J.

Williams, Rev. Llywelyn (Abertillery)

Janner, B.

Pearson, A.

Williams, Ronald (Wigan)

Jay, D. P. T.

Porter, G.

Williams, Rt. Hon. Thomas (Don V'lly)

Jeger, Dr. Santo (St. Pancras, S.)

Price, Philips (Gloucestershire, W.)

Williams, W. T. (Hammersmith, S.)

Jenkins, R. H.

Proctor, W. T.

Wilson, Rt. Hon. Harold (Huyton)

Johnson, James (Rugby)

Pryde, D. J.

Winterbottom, Ian (Nottingham, C.)

Johnston, Douglas (Paisley)

Pursey, Cmdr. H.

Winterbottom, Richard (Brightside)

Jones, David (Hartlepool)

Rankin, J.

Wise, F. J.

Jones, Frederick Elwyn (West Ham, S.)

Rees, Mrs. D.

Woodburn, Rt. Hon. A.

Jones, Jack (Rotherham)

Reeves, J.

Woods, Rev. G. S.

Jones, William Elwyn (Conway)

Reid, Thomas (Swindon)

Wyatt, W. L.

Keenan, W.

Reid, William (Camlachie)

Yates, V. F.

Kenyon, C.

Rhodes, H.

Younger, Rt. Hon. K.

Key, Rt. Hon. C. W.

Richards, R.

King, Dr. H. M.

Robens, Rt. Hon. A.

TELLERS FOR THE NOES:

Kinghorn, Sqn. Ldr. E.

Roberts, Emrys (Merioneth)

Mr. Popplewell and Mr. Wilkins.

Kinley, J.

Roberts, Goronwy (Caernarvonshire)

Kirkwood, Rt. Hon. D.

Robertson, J. J. (Berwick)

Mr. Black: I beg to move, in page 21, line 39, at the end, to add:
(6) If a body corporate refrains from declaring a dividend or making any distribution to proprietors in respect of any chargeable accounting period or from increasing or decreasing the rate or amount of a dividend or distribution to proprietors above or below the rate or amount declared or distributed in
2114
respect of any preceding chargeable accounting period it shall not be regarded as having effected a transaction for the purposes of this section.
(7) The issue of shares or debentures or any transaction whereby the capital employed in the business of a body corporate is increased shall not be regarded as a transaction for the purposes of this section.

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The purpose of this Amendment is to endeavour to exclude from the operation of the Clause two classes of case which, but for the Amendment, might be caught by it. I cannot think that it is the wish or intention of the Government that they should be so caught. I will deal with the Amendment in the two parts into which it falls. First, there is the part which deals with the payment of dividends. I will take the case of a company which has perhaps a 20-year record behind it. During that period it has been the practice of the company to distribute, for the sake of example, three-quarters of its annual profit by way of dividends.
Let us assume that, owing to national and other conditions, the profit of that company increased very greatly. At the end of the year the directors are faced with the problem of deciding what dividends they will recommend should be paid. But for the incidence of the highly increased Profits Tax on distributed profits, it is reasonable to assume, based on their previous practice and experience, that they would considerably increase the dividends, but in view of the fact that the dividend will attract the very heavy rate of Profits Tax it is proposed to be charged on distributed profits the directors decide on that and on other grounds, that it will be better for them to meet the often expressed wish of the Chancellor of the Exchequer that there should be no increase in the rate of dividend. They decide therefore to maintain their dividend at the rate of the previous year, notwithstanding the fact that the profits of the company are perhaps double what they were in the previous year.
It is clear that one of the main reasons why the directors of the company reached that position was the fact that they desired to avoid the heavy rate of Profits Tax charged on distributed profits. They would not seek to conceal that fact, or to deny it. It would therefore seem to me to be quite fair that, but for this Amendment which I am asking the Government to accept, it would be perfectly possible for the company to be charged a high rate of Profits Tax on the dividend which the Special Commissioners might decide the directors would have declared, but for the fact that they decided to maintain the existing dividend, and thereby limit or reduce their liability for Profits Tax.
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In the example which I have taken it would be quite fantastic for any such result to occur, but it could occur under the Clause. It would be quite fantastic that it should occur because the directors of the company would only be carrying out the wishes so often expressed by the Chancellor of the Exchequer and his predecessor in office not to increase the dividend. If, as I feel quite certain must be the case, it is not the intention that the payment of a dividend should come within the category of transactions against which the Clause is aimed, then I presume the Government will be willing to say so and to accept the Amendment.
2.30 p.m.
The second part of the Amendment relates to the raising of new capital for the purpose of the expansion or the increase in size and operations of the company. Everyone who has experience of these matters knows that directors who need to raise additional capital in order to expand their business can do so in one of at least two ways. They can raise new capital by the issue of additional shares, or they can raise new capital by the issue of debentures or by the creation of mortgages or other forms of loan capital. Those are the two generally accepted methods available to company directors when they desire to bring in new capital and expand the size and operations of their business.
It is a fact that it is more advantageous from the standpoint of the incidence of Profits Tax for the new capital to be raised in the form of loan capital rather than by the issue of new shares, because the interest on the loan capital ranks as a charge on the profits before the net amount is reached on which Profits Tax is charged, whereas the profits earned by the additional capital, if the new capital takes the form of the issue of new shares, goes to swell the profit on which Profits Tax is levied.
But it would be a quite absurd position, I submit to the Committee, if a situation were to arise in which, directors who, in the interests of their company, chose one method as being most appropriate for raising further capital in the circumstances of their case, should have a demand made upon them for additional Profits Tax simply because they had selected one method of increasing the finances available to them instead of choosing the other

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method. That is a position which I submit could very well arise and which would arise on the interpretation of the Clause as it stands, unless we add the Amendment which is now before the Committee.
I cannot believe it is the intention of the Government that either of the classes of transaction to which I have referred should come within the scope of the Clause. I cannot believe that is the intention, although in the way in which the Clause is framed it seems to be quite clear that it could have that result. In order to avoid the fantastic position which otherwise might arise and to put the position beyond the possibility of doubt or misunderstanding, my hon. Friends and I have put down this Amendment, which I feel quite certain the right hon. and learned Gentleman will be willing to accept.
The Attorney-General: I can assure the hon. Gentleman that we have no intention of using the powers in Clause 28 in the kind of case which he instances. He began by describing the case of a company which began to make an increased profit but refrained from declaring dividends on the increased profit, admittedly because they were anxious not to incur the higher tax on distributed profits. I can assure the hon. Gentleman that in those circumstances a direction will never be issued. That would not be regarded as a transaction within the scope of the Clause, and I unhesitatingly give him that assurance.
He went on to deal with the second part of the Amendment, and he asked whether it was possible that a company might find a direction placed upon it if it issued loan capital instead of preference share capital or other share capital with the result that it could treat the interest on the loan as a deduction in computing its profits. There again, I can say that in any ordinary case, certainly no direction would result from an issue of loan capital instead of share capital, even though it was desired that the interest on the loan capital should be taken into account for the purpose of computing the profits of the company.
Hon. Members may say, if we definitely do not intend to do that, would it not be a good thing to include it in the terms of the Clause? There are so many things
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which we certainly would not do, but, if we sought to include within the Clause every transaction upon which we should not embark, the Bill would begin to reach unwieldy dimensions. I suggest that it is quite unnecessary to include this in the Bill. The first part of the Amendment is one on which we can go to the length of saying that our intention conforms with the wording of the whole of the first part.
As to the second part of the Amendment, I should issue this caveat. If we said that in no circumstances could the issue of debentures give rise to a charge, we should be going too far because, as hon. Members know, redeemable bonus debentures can be used for the purpose of concealing what is really a distribution of income. In a case of that sort we would not be able to say that we would refrain from making a direction if it was clear that the purpose of the issue of the redeemable debentures was simply to mask a distribution of what was really income.
But I think the assurance I have given covers all the cases which the hon. Member has in mind, and it certainly covers all those which he mentioned. I therefore hope that he will be content with that assurance. I hope he will agree with me that, as no such direction would be made, there is not very much point in putting it into the Clause.
Mr. Watkinson: On a point of order. As the normal time for the sitting of the House has now passed, Major Milner, may I ask for your guidance with regard to the Adjournment which is down in my name for tonight?
The Chairman: I do not think that is a point of order for me, or a point with which I can deal.
Mr. Watkinson: If I may say so with great respect—and I am not challenging your Ruling in any way—I should have thought that some guidance could be given to me as to whether the present Sitting of the House now supersedes the Business for Tuesday.
The Chairman: The hon. Gentleman will appreciate that the Adjournment is a matter for Mr. Speaker—not for me.
Lieut.-Commander Braithwaite: Would not my hon. Friend be in order to move to report Progress and ask leave to sit

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again in order to find out the intentions of the Leader of the House concerning the Adjournment which would normally have taken place?
The Chairman: The question of the Adjournment would be a matter for Mr. Speaker, and I should not be disposed to accept a Motion to report Progress in order that such an inquiry might be made.
Mr. Molson: I am inclined to think that the speech that we have just heard from the Attorney-General goes further than any speech that we have heard from this Government in the direction of establishing administrative rule in this country. One of the reasons the Committee has sat for such a long time is because the Government have asked for powers such as have never been asked for by any Government in peace-time before, in order, not to apply a law of taxation to the person who is subject to taxation, but in order that the Government and the Executive shall have an almost arbitrary power to issue a direction that, in their opinion, some financial transaction that has taken place has been with the intention of evading tax.
My hon. Friends have drawn attention to the fact that the Chancellor of the Exchequer and his predecessor both made a general appeal—[Interruption.] There is such a great deal of talk going on that I can hardly hear myself speak. I am trying to address some serious remarks to the Attorney-General. My hon. Friends have drawn the attention of the Attorney-General to the fact that there do exist upon the Statute Book powers by which it is possible for the Commissioners of Inland Revenue to levy tax upon the dividends which companies could have distributed but in fact did not distribute.
The purpose of this Amendment is to ensure that the Government do not use the wide and almost unlimited powers that they are attempting to obtain under this Clause in order to levy a tax upon companies on the ground that the higher dividends could and should have been distributed. All that the Attorney-General has to say is that, because the Chancellor of the Exchequer and his predecessor have issued general appeals to directors of companies not to increase their dividends, in point of fact the Executive will not avail themselves of the
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powers which they are seeking to obtain under this Clause.
The Attorney-General, apart from being a politician, has been brought up in the common law of England, and he will know that before the Government came into power it was generally the case that a taxpayer could refer to the Statutes to find out what his liabilities were. Steadily, in Finance Act after Finance Act, increased discretion has been given to the Inland Revenue to use their discretion in levying taxation. We have now been discussing for a number of hours a Clause which goes further than any Clause has gone in peace-time before, and all that my hon. Friends are asking is that it shall contain a proviso that if companies—
Mr. Paton: On a point of order. May I ask you, Major Milner, what this speech has to do with the Amendment before the Committee? It seems to me to be a speech on the Clause.
The Chairman: The hon. Gentleman was referring to the Amendment, and relevance is a matter for the Chair.
Mr. Molson: I am very much grieved that in what I have said so far I have not made my point plain to the hon. Gentleman. I know that he would not have raised that point of order in any spirit of frivolity, or in order to embarrass me, and I therefore realise—
2.45 p.m.
The Attorney-General: Perhaps it might be of assistance if I attempted to clarify what I perhaps did not state sufficiently clearly. If hon. Members feel anxiety about the point whether the direction will be exercised or not, I am perfectly prepared on the Report stage to put down an Amendment which will provide that the mere failure to declare dividends, and so on, will not rank as a transaction. In effect it is what is said in the first part of the Amendment.
I cannot accept the drafting of the first part of the Amendment, but I am prepared to put down an Amendment giving effect to what it says. As I intimated, or I hope I intimated, in the course of my speech, I cannot go to the length of giving an undertaking to put down an Amendment in the terms of the second part of this Amendment, because the

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second part covers various methods of tax evasion, and I could not agree to that. If hon. Members feel anxiety about it and would sooner see a provision in the Bill that failure to pay dividends because the company does not want to incur higher taxes is not to rank as a transaction within Clause 28. I am perfectly prepared to do so.
Mr. Molson: So far as I am concerned, I did not understand that that was the drift of the Attorney-General's first speech. I should not have risen if I had thought that. I can only excuse myself by saying that quite obviously the hon. Member for Norwich, North (Mr. Paton) did not understand it either. Personally, that seems a most satisfactory assurance which the Attorney-General has given.
Mr. Bell: I must confess that when the Attorney-General first replied to my hon. Friend I was profoundly disturbed by the nature of his reply.
The Attorney-General: I accept full responsibility. I frankly confess that I did mislead the hon. Gentleman. I expressed the hope that the Committee would not think it necessary for these words to be put in the Clause, but if the wish of hon. Gentlemen is otherwise, and if they wish this put into the Clause, I am perfectly prepared to do so. I express the opinion that it would not be necessary, but if that is not an opinion which commends itself to hon. Members, I am perfectly prepared to put it in.
Mr. Bell: I am obliged to the right hon. and learned Gentleman. I was only saying by way of preamble that I was originally disturbed by his account, because it appeared to be that extremely dangerous thing, the administrative assurance that the law would not be applied in particular circumstances. I know that from his training in common law the right hon. and learned Gentleman has the same abhorence of that kind of administrative assurance as I have from a similar training. Of course, we all know that what a Member of Parliament says is not law.
In view of what the Attorney-General has now said, and the very generous undertaking which he now offers, for which we are much indebted, I am sure I should have the approval of my hon. Friend, who is not now here, in asking leave to withdraw the Amendment.
The Chairman: The appropriate course to take is to have the Amendment negatived, as the hon. Gentleman who moved it is not at the moment present, if that is agreeable.
Mr. Bell: May I just say a few more words to the Attorney-General before leaving the matter? Although I appreciate that the second part of the Amendment is more difficult than the first, I hope the right hon. and learned Gentleman will not give up hope too quickly. I think that with a little ingenuity it would be possible to devise words to cover the point which my hon. Friend has in mind in the second part of this Amendment, I also appreciate what the Attorney-General said about the difficulty of the bonus issue which is not a bona fide issue. That is a real point of difficulty which I thoroughly appreciate.
I think, however, that the ingenuity of the draftsmen should not find it impossible to distinguish between the straightforward issue of debenture shares as distinct from the increase in ordinary capital, decided upon as a mere matter of business efficiency, and the sort of issue to which the right hon. and learned Gentleman referred which is not a bona fide issue at all. I hope that when framing his Amendment for the Report stage, the right hon. and learned Gentleman will try to embody, not only the first but also, if possible, the second leg of our Amendment.
Mr. Birch: The Attorney-General slightly misled the Committee. In fact, his second speech was exactly the opposite of his first speech. In his first speech he said he could not put everything in—
The Attorney-General: I agree.
Mr. Birch: It showed up the ultimate, absurdity of his Clause under which nobody knows where he is about anything. I am not a lawyer, but Coke the great lawyer, talked of "the golden met-wand of the law" and of the "crooked cord of discretion." We have had too-much of the crooked cord or discretion under this Government. I am glad to hear that the right hon. and learned Gentleman will accept some form of words meaning the same as the first subsection. However, the second subsection is important because the effect of Profits Tax at this rate is to force people continually

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to issue more debentures and less preference shares. Ultimately it will be very damaging to our capital structure.
I can see a day coming when the power of the crooked cord of discretion is there. The Treasury will say, "We are sick of this. We will take a twist out of this Clause and we will have the money." I agree with my hon. Friends behind me that it should be possible to draft the subsection more clearly so that abuses can be excluded but so that the substance of what, the mover had in mind could be obtained. If the right hon. and learned Gentleman will not do it himself, we might try it ourselves on the Report stage.
Mr. Pitman: This is a most important principle and all hon. Members are grateful to the Attorney-General for conceding it. I want to draw his attention to another matter which he might deal with in the intervening time, a matter dear to the hearts of hon. Members on all sides of the Committee. I refer to the question of superannuation funds.
The Chairman: Order. Does that question arise on this Amendment? If not, it is not in order.
Mr. Pitman: It is an extension of the principle with which the Minister dealt.
The Chairman: I think it is really too remote.
Mr. C. Williams: The hon. Gentleman who moved the Amendment has come back, Major Milner, and he may wish to respond to the generous offer of the Government if I explain to him that the Government are prepared to go into this matter in a thorough way. As you know, it is always better to withdraw an Amendment than to have it negatived, and possibly my hon. Friend may like to be in a position to ask leave to withdraw his Amendment.
Mr. Black: In view of the sympathetic way in which the Government have been good enough to receive this Amendment, and the undertaking given, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Viscount Hinchingbrooke: We are coming to the end of a marathon race—
Hon. Members: No.
Mr. Lyttelton: My noble Friend means on this Clause.
Viscount Hinchingbrooke: This Clause has occupied us for some 12 hours and the time has not been wasted. I was about to say that the Attorney-General has run a little faster than anybody else, certainly with great skill and endurance. I think we should all like to congratulate him on his remarkable performance. [HON. MEMBERS: "Hear, hear."] But although it has been a remarkable performance, the right hon. and learned Gentleman has not conceded many points until just now. In spite of one or two concessions and promises for the Report stage, and the gracious promise just given, this Clause remains one of the worst in the Bill.
On the first Amendment the Attorney-General started by saying that the Clause was justified because it would round up and deal effectively with many illegal and doubtful transactions. He then proceeded to enumerate a number of them. I was not able to take down a list but I remember one. It seemed to me that all were perfectly legitimate and normal operations with no immoral content in them; transactions which any business house in olden times could have made perfectly readily, without the slightest moral qualms, in order to suit their business engagements and opportunities. There was the one he mentioned of a retail group of companies which, to make use of the abatement provisions for companies with small incomes, had indulged in a separatist activity, it had hived off its companies and become a loose group of rather small concerns.
I understood that was entirely in conformity with the most up-to-date doctrine of the Labour Party. Only two days ago we read in "The Times" of the hon. Member for Edge Hill (Mr. Irvine), repeating what was said earlier about the virtues of decentralisation and the importance of returning to competition within small units of production, distribution and exchange. That is a perfectly moral and highly political transaction suited to the present tendencies of the Labour Party. Yet the right hon. and learned Gentleman thinks there is something immoral in it and that he must tax it up to the hilt.

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We consider that the mischief in this Clause is that it seeks to surpass events. For years past, in perfectly legitimate ways, Parliament has been legislating annually to keep up with certain transactions which it thought were of the character of gross evasion of taxation. The House of Commons was able year after year to spend a good deal of time in debating the principles and applications of new enactments relating to these schemes.
My hon. and learned Friend the Member for Kensington, South (Sir P. Spens), recalled for the Committee that before the war Conservative Governments year by year had gone in for that kind of thing. This process was repeated during the war, and right up to the present day by the Labour Party. Now, for the first time, we have a comprehensive piece of legislation which will make it possible in future to supersede all commercial Clauses of future Finance Bills. By commercial Clauses I mean Clauses to recover lost taxation.
It is generalised legislation that the right hon. and learned Gentleman has brought forward this afternoon. It is generalised legislation of a desperate character. What right has the State to by-pass the considered proceedings of Parliament and to give to a secret group of men in Somerset House the power to say off-hand whether certain transactions are licit or illicit? That is what is done by this Clause, and I regard it as monstrous and wrong and extremely ill-conceived.
I am surprised indeed that the right hon. and learned Gentleman, who has proved himself in this Committee over a number of years, has lent his counsel to it. I hope that even at this stage it is not too late to ask the learned Attorney-General—indeed, the Chancellor of the Exchequer, who we are glad, for once in the last 12 hours, to see sitting on the Front Bench opposite—to reconsider this from the point of view of the highest possible good, and to see whether he cannot remove it from the Bill before the Report stage.
3.0 p.m.
Captain Duncan: I have sat throughout the earlier parts of the Sitting in silence because it was, to my mind, a lawyers' day out. There have been
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experts on company law, stockbrokers, and lawyers of all kinds, and I did not feel competent to intervene in these technical debates, but as a layman I must say something on the Motion that the Clause stand part of the Bill because I feel that it is a most dangerous Clause.
I have listened to a great deal of the debates, but there was one thing which my hon. Friend the Member for Chippenham (Mr. Eccles), said which awoke me to the possibilities of the Clause. That was that while the impression had grown in me that this was mainly a matter of big business and the City, the Clause applies to every company, public or private, in the land. I thought of the sort of company which might be found in my own constituency—the farming company, the milling company, the wool merchant, the auctioneer, the jute factory, the carpet factory—all these small and medium sized companies which were formed for their own good reasons and are being carried on by people for the sake of that sort of industry. Something should be said to explain to the smaller industries in the country districts what the Clause means.
What does the Clause say? It says:
"Where the Commissoners are of opinion that the main purpose or one of the main purposes for which any transaction or transactions was or were effected … was the avoidance or reduction of liability to the profits tax. …"
the Commissioners may alter their liability to the Profits Tax. Note the words:
"Where the Commissioners are of opinion."
They do not have to prove anything unless there is an appeal to the Special Commissioners, which is a complicated thing for a small country firm to enter into. People are frightened of going to law, because they know the majesty of the law against them, particularly the majesty of the Commissioners of Inland Revenue. This omnibus kind of phrase is a very loose phrase to put in a Bill of this nature. By it, all that is necessary is that the Commissioners have to be "of opinion" that something has to be done.
Then, in brackets, there appear the words:
"whether before or after the passing of this Act."
That piece of retrospective legislation seems to me again to be most unfortunate and unfair for the many people who, quite legally and for their own business purposes—and, it may be, for the interests

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of their own shareholders in a small way—have taken action in the past to protect the interests of their business and now are to be caught. This applies not only to action which is taken after the Bill is passed, but for something which has been done before its passing. I say, therefore, that this is a most unfortunate Clause.
In a speech about 3 o'clock this morning the Attorney-General gave the case away, because he said that the Clause was admittedly drastic and was of an omnibus character, and that the only alternative to this sort of Clause would be a series of Clauses year by year in Finance Bills to catch up with leaks in the avoidance of tax by clever people. If those are the two alternatives, then I say that the latter, with all its complications, is better in principle and fairer in justice to the smaller taxpayers than the present sweeping, large omnibus Clause which catches everybody, whether innocent or guilty.
The Clause is based on E.P.T., but E.P.T., we hope, is dead—at any rate, it was a war-time, and not a peace-time, Measure, and the Government tell us that we are still at peace. I pray that we shall be at peace in the future, and I say that the Clause should not be related to wartime conditions. We should get back to proper peace-time legislation and do away with copies and imitations of wartime regulations and legislation, and revert to the proper principle and detail of legislation rather than to this type of omnibus Clause.
Mr. Hylton-Foster: I should be loth to add anything to the fatigue which the Attorney-General has had to endure, but there is one point about which the Committee should have the advantage of his advice. We talked some hours ago about subsection (3), and for my part I listened with the greatest attention to everything that the Attorney-General said about it—its origin and purpose, and why it was in the Clause. I was left with the gloomy conclusion that it is a Clause which can only be of use in cases in which it ought not to be used. It cannot be of any use in any case where the Commissioners are able to be of opinion that one of the main purposes of a transaction is of the vicious kind, because if they can be of that opinion there is no need to do any deeming about it.
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The Clause can only be of use where the Revenue's case is so bad that despite the fact that the obvious main benefit which would result from the transaction is the avoidance or reduction of taxation, the Revenue are unable to make the Commissioners be of opinion that the main purposes or one of the main purposes involved was the vicious purpose which is prescribed.
For that reason one is, or should be, very interested to see what is the effect of the provision in subsection (4) of appeal to the Special Commissioners. The very last thing I want to do is to misquote the right hon. and learned Gentleman, but after a long night of listening and strife I have a clear recollection of what he said. I do not want to misquote him; it occurred in his speech on the first Amendment, when the debate was allowed to run rather wide for the general convenience of the Committee. He said, in effect, "If the Committee will look at the right of appeal to the Special Commissioners, they will see that it is all open to the taxpayer, who can"—the Attorney-General drew attention to these words—
"appeal
'on the ground that the avoidance or reduction of liability to tax was not the main purpose or one of the main purposes …'"
The point about which I desire to have the Attorney-General's advice before the Committee is whether that is really right. What happens in the case of the taxpayer who is caught under subsection (3), who has his purpose deemed to be
"a main purpose or one of the main purposes"?
What happens to him when he gets before the Special Commissioners? Can he reopen the issue before them as to where there is an automatic deeming? The Committee should be satisfied about this before we make the Clause law.
Mr. Jennings: I want to raise a point on the Clause. [HON. MEMBERS: "Oh."] Is the Government Deputy Chief Whip about to propose, "That the Question be put"? If he would listen, he would hear something which is worth hearing. I rise to speak against the Clause for a very important reason. I have had a good deal of experience of the Commissioners deeming that liability is one thing or the other, and I wish to put to the Attorney-General the case of the taxpayer. In this

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case the Commissioners deem that the liability of a taxpayer should be something greater by reason of some action which he has taken, and that taxpayer has to appeal to these Special Commissioners. He is not really expert in putting his case and, therefore, he has some accountant's special knowledge, or some legal advice to pay for. In some of these cases the taxpayer is involved in a fair sum of money; perhaps 100, 200 or 300 guineas, in order to get his case put before the Special Commissioners.
One aspect of this matter which appears to me to be unfair to the taxpayer is that if a rather flippant Commissioner says, "This transaction is having the effect of lessening the Profits Tax," and he says that the taxpayer can go to the Special Commissioners, all the expense is paid by the taxpayer. I would like to know whether, when taxpayers win before the Special Commissioners, they will get their costs against the Inland Revenue?
It seems to me that in a great number of cases taken in the Revenue courts and before the Special Commissioners the taxpayer is facing the possibility of spending substantial sums of money and when he wins he will still pay his expenses. Taxpayers should not be held up by the Special Commissioners, and if the Commissioners deem that something will affect the liability for Profits Tax, and give an assessment, and say that it is up to the taxpayer to appeal to the Special Commissioners, that is grossly unfair to the taxpayer.
There are many cases to which I heard the Attorney-General refer, like a director parting with his interest to a nominee shareholder. That may be a perfectly legitimate thing to do, but because he has done it the Commissioners have the right, at their whim, to say that that has lessened his Surtax liability and, therefore, that that transaction will have to be set aside, and that if the man cares to appeal he can. That is grossly unfair and for that main reason I shall vote against this Clause. [HON. MEMBERS: "Hear, hear."] I am glad to hear that and I hope that some hon. Members from the opposite side of the Committee will come into the Lobby with me.
There is a great deal of what I might call professional opinion in many of these matters. An item might be an issue of
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debentures. It might be in the interest of a taxpayer to have a debenture issue. But the Commissioners may take a different view and he is held up, and may have a liability assessed on him for what is a perfectly legitimate business reason. The variety of transactions on which these Commissioners can assess the taxpayer, at their will or whim, are far too great, and will interfere with hundreds of taxpayers in this country.
The Clause is far too wide. I can agree with the war-time Clause for Excess Profits Tax, because that was wartime legislation and it was rushed legislation. I know that we have had legislation rushed through the House this last two or three days, but surely we do not want Clauses like this to protect ourselves against bad legislation. If it is bad legislation and we have to put in a protective Clause to protect the Inland Revenue, then I say we should take more time over our legislation. Instead of getting speeches from hon. Members on this side of the Committee let us get something from the other side. I suggest that the reason we have had nothing from hon. Members opposite is because they do not understand a thing about it.
Mr. J. Jones: We leave it to the hon. Member to tell us.
3.15 p.m.
Mr. Jennings: I have told the hon. Member a few things, and I shall probably tell him a few more as time goes on.
This Clause is un-English, in my opinion. It is treating the taxpayer as though he is a criminal. The Commissioners have the right to upset his transactions and make him pay additional sums in Profits Tax. The only way to get out of it is for him to spend his personal money in fees and expenses and if he wins he still has to spend his money, because the whim of the Commissioners was wrong in the first place. That is un-English. It is not right to British taxpayers as a whole. I hope that hon. Gentlemen opposite will realise that what is in this Bill is something foreign to the British nation, and it is up to all of us when we go in the Lobby to see we are not adding to the burdens of the British taxpayer or blaming him for something of which he is not guilty.
Mr. Ian L. Orr-Ewing: Like my hon. and gallant Friend the Member for Angus, South (Captain Duncan), I have not opened my mouth during the long debate on this Clause, and I would not have done so had I had any reassurance during those hours when I was listening to the statements from the Government Front Bench. I had hoped that when this debate started at least some of what we might call the stigma attached to this Clause could have been removed.
I, like others, would like to say how very fairly we have been treated in this matter by the right hon. and learned Gentleman. He has treated us very fairly indeed, and yet something was lacking in nearly all his remarks. Even in the sub-title of this very Clause there is something in the nature of pre-judgment of the issue, and that is what offends me more than anything else.
It is quite true that it is easy to exaggerate the meaning of the Clause, and it is true that no one will be made a criminal. The worst that can happen is that somebody found avoiding or attempting to avoid Profits Tax, and proved to have avoided the payment of this tax, will have to pay it. That is right, and I am all in favour of it, because it would mean that I should have to pay less if more people paid what they should pay. I think that is a general principle upon which we can all agree.
On the other hand, I suggest that this type of legislation carries so much within it by implication that it is hardly suitable for inclusion in a Finance Bill at all. We have set out within this Clause something which can possibly provide a certain code for certain methods of behaviour on the part of those responsible for the direction and management of companies. But when that type of Clause is insinuated into the Finance Bill, and coupled with all sorts of veiled, indirect and ill-defined threats which can be easily raised, the position becomes almost intolerable for those who may come within its effect when the Bill becomes an Act.
My hon. and gallant Friend was absolutely justified in what he said, that the smaller private companies, taking it by and large, whatever hon. Gentlemen may say in public—and I do not believe that they think it—are honestly, decently and efficiently run. The way some of this
2132
debate has gone would really imply that this country is occupied by an army of spivs. The whole standard of decency in this country seems to have been whittled down to such a low level, and this would certainly be the case if the sort of suggestions which we have heard from the other side of the Committee were true; but that is not true. When we are dealing, in the majority of cases, with obviously honest men they deserve to be treated as honest men and to be treated fairly. There should not be these subtle and vague threats, these sneers and jibes from the other side of the Committee which do no good to the reputation of this country.
I do not believe that much that has been said today can be overlooked by the small traders and small business men of this country. I believe that they would be deeply hurt when they understand what has been insinuated from the other side of the Committee by some hon. Members. Not too many of them spoke, but if hon. Members study HANSARD—it will take them quite a long time—they will find that certain remarks were made which would seem to assume that this Committee had to deal with a gang of dishonest men who are running the small businesses of this country.
That is not the case, and I think it will be the duty of every hon. Member on this side of the Committee to draw attention to certain things that have been said in the course of this debate, because it is our duty to stand up for the good name of business people of this country just as much as that of anybody else. So long as we sit in this House we prefer to underline that which is good rather than that which is bad. It is because of the insinuation of evil which lies within this Clause that I shall have great pleasure in going into the Lobby against it.
Mr. S. Silverman: The hon. Member has been accusing Members on this side of the Committee of doing unfair things and making unfair accusations. One must, therefore, presume that he has no desire to make unfair accusations himself. Will he please tell the Committee who it was who made the accusations to which he referred?
Mr. Orr-Ewing: If the hon. Member had been in the Chamber at rather greater length than he was in the early hours of

2133
the morning, he might well have found many examples of the sort of thing I mean. I feel quite sure that when the hon. Member studies HANSARD tomorrow he will be able to find the sort of thing I mean. I certainly did not mean to be unfair.
Mr. Silverman: The hon. Member has made an accusation. I asked him to say whom he accuses and of what he accuses him. That question has nothing whatever to do with the number of hours that I have been in the Chamber, but since the hon. Member raises the point, may I tell him that I have been inside the Chamber about four and a half times as long as he has? I will give the hon. Member the exact hours if he wants them. Having disposed of that point—
Mr. Molson: Is this a speech or an interruption?
Mr. Silverman: I am as entitled to address the Committee as any other Member.
The Chairman: I called the hon. Member.
Mr. Silverman: Having established first that the hon. Member was wrong in what he said about me, and secondly that it was in any case irrelevant, I now repeat the question which I asked him. He has accused Members on this side of the Committee of making certain accusations. There is no Member on this side of the Committee—and some of them have been here the whole of the time, including the Attorney-General—who knows to whom the hon. Member was referring or to what he was referring. Nobody on this side of the Committee made any such accusations as the hon. Member alleges. If, therefore, he still wishes to assert, in face of all the evidence, that the charges were made he ought to tell us who made them and what charges were made. Otherwise he is doing something which I think every Member of the Committee will regard as a gross abuse of his privilege as a Member.
Mr. Orr-Ewing: I must leave it to the judgment of the hon. Member when he studies HANSARD. [Interruption.] It would really be advisable for the hon. Member to read HANSARD tomorrow. He can then judge whether my remarks as regards the tone of certain parts of the debate, into
2134
which I most certainly read insinuations to which I referred in my speech, were fair or not.
Mr. Silverman Mr. Silverman rose—
The Chairman: The hon. Member for Nelson and Colne (Mr. S. Silverman) has made his point. I gave him an opportunity of speaking, and he has had a reply. Whether it is satisfactory or not, he must be content.
Mr. Silverman: I am much obliged, and I am grateful to you, Major Milner. I would, however, like to raise with you the point as to whether it is proper for a Member of the Committee to accuse other Members of the Committee of certain things and neither justify the accusation nor withdraw it.
The Parliamentary and Financial Secretary to the Admiralty (Mr. James Callaghan): It is not out of order; it is just bad taste.
The Chairman: I do not think I can assert that that is un-Parliamentary so to do.
Mr. J. C. Maude: I do not want to be discourteous to the hon. Member for Nelson and Colne (Mr. S. Silverman) but merely to state the reason—I can do so in three minutes—why I propose to vote against this Clause. I have listened, without being able to sleep at all, to hours and hours of debate on this Clause, and it has been excellent and fascinating. The reason why I propose to vote against it, and it is a fundamental one, is that my mind has been crystallised by going every now and then into the Library and looking in the Encyclopaedia Britannica to try to refresh my mind.
Am I not right in saying that the object behind the Bill, and the Clause in particular, is probably the well-intentioned one—I say this without offence; I do not mean to be beastly or cynical about it—by means of taxation and the methods which are inevitable when taxation is extremely heavy, to produce either a levelling up of the people, or even, if necessary, as is so often said in political speeches, a levelling down? That is all very well, and I am all in favour of people having an experiment of that sort provided it has not been tried before. But it has been tried before, and I should like to quote from the Encyclopaedia Britannica: I will give the

2135
exact chapter and verse to show that it is really lamentable that we do not take lessons from the East.
Here it is; it is quite brief:
"In the year 790 A.D. …"
This is quite jolly, but it is to the point—
"in Tibet there was a very, very learned king, called Mu-ni Tsen-po who, being determined to raise all his subjects to the same level, enacted that there should be no distinction between poor and rich, humble and great. He compelled the wealthy to share their riches with the indigent and helpless and to make them their equals in respect of the comforts and conditions of life. He repeated this experiment three times, but each time he found that they all returned to their former condition, the rich becoming still richer and the poor still poorer, and after his third experiment he was poisoned by his mother."
This is really an appalling Clause, but it has all been tried before. This is a Clause conceived in error. It is a symptom of lack of realism. That is a very dangerous symptom indeed, and I shall enormously enjoy voting against it.
3.30 p.m.
Mr. Lyttelton: I trust that the Committee will forgive me if I come back to the 20th century. One of my hon. Friends earlier advised hon. Members that if they listened they might hear something worth while. I should not go as far as that. I hope that the Committee will hear something worth while from me, but I rather doubt it. There was an accusation levelled against the Labour Party in the speech of one of my hon. Friends which I should like to rebut at once. He suggested that the virginal silence which we have experienced from the benches opposite during the 12 hours' debate on this Clause has been due to the fact that Labour Members know nothing about this subject. In my opinion, that is entirely wrong. The real reason is that they know so much about it that their Whips do not dare to let them speak. That is a much more kindly explanation why hardly a single word has fallen from their otherwise eloquent lips today.
The first point about this Clause was the analogy with E.P.T. I would remind the Committee that the Excess Profits Tax was a tax above the datum line on two or three years' profit and, therefore, it only dealt with one section of the profits. That was a war-time Measure. This Clause deals with the whole structure
2136
of profits in peace-time and the analogy cannot be carried very far. Our great criticism is that it gives far too great administrative latitude. What has happened, in popular terms, is that the Inland Revenue have moved in and the Treasury have not had the guts to repel their advances.
To put it in a more pictorial way, Sowerby has been found to be invading Whitehall, and that is very bad. Welcome as Sowerby is at Westminster, he should not be allowed to enter into Whitehall. The Clause gives the Inland Revenue power to alter at will the Revenue laws passed by this Committee. In matters of taxation it must be Parliament that is supreme and not the judgment of officials. Once these wide administrative powers are given to officials, then we shall fall far short of our duty towards the public and the taxpayer. We are all against tax evaders. Certainly, all taxpayers are gainst them, because their burden will become heavier if others evade their taxes. But I would rather have seen some evasion slip through than throw this net over every type of transaction and merely hope that the innocent may escape through the meshes.
The more particular point which I wish to put before the Committee concerns the raising of additional capital. It is undeniable that, as the law stands, the dividends paid on proprietary capital, like preference shares or ordinary shares, are subject to Profits Tax, whereas interest on loaned capital, like debentures, does not attract Profits Tax. Under this Clause, if for a perfectly bona fide reason, a company was in such a credit position that it decided that it should protect the equity and raise additional capital by means of a debenture, it would be open to the Commissioners to say that one of the main objects of such an issue was to escape Profits Tax and that, therefore, they had theoretically the right to say to the company that they must rearrange their capital structure.
They may say, "It is true that the rate of interest which you have to pay on debentures, preserves the equity of the company. Nevertheless, it results in less taxation for the Treasury. Therefore, we exact from you that you must raise your capital by ordinary shares or preference shares." That may be a farfetched or even fanciful incident, but it

2137
is possible for the Commissioners to take that point of view. The same thing applies to the expenses which a company may have debited against profits. I do not know when, under this Clause, one will be sure that the expense accounts are not going to be reopened. It is a serious matter to leave uncertainty alive for such a long time.
Generally speaking, I suggest that legislation would be much too easy and our lives here much too easy and very unlike what they are, if the only object of legislation was to throw the net so wide that everybody was caught in it, and then the Commissioners and the Ministers started taking the innocent out of the net and throwing them back into the water. That is not the art at all. It is absolutely indefensible to draw the net so wide that
no transaction is closed finally, or can be ascertained as innocent, until long after the event.
It is for these reasons that I think the Clause, by and large, is unamendable and that it should be taken out of the statute altogether. We should proceed by special weapons against special types of evasion. I admit that there are some evaders who will escape, but not for long. We have a long record in the past of catching particular types of evaders. I speak with the utmost sincerity and earnestness when I say that this overcoat Clause is utterly repugnant.
Question put, "That the Clause stand part of the Bill."
The Committee divided: Ayes, 300; Noes, 276.

Division No. 126.]

AYES

[3.40 p.m.

Acland, Sir Richard

Crosland, C. A. R.

Hale, Leslie (Oldham, W.)

Adams, Richard

Crossman, R. H. S.

Hall, Rt. Hon. Glenvil (Colne Valley)

Albu, A. H.

Cullen, Mrs. A.

Hall, John (Gateshead, W.)

Allen, Arthur (Bosworth)

Daines, P.

Hamilton, W. W.

Allen, Scholefield (Crewe)

Gallon, Rt. Hon. H.

Hannan, W.

Anderson, Alexander (Motherwell)

Darling, George (Hillsborough)

Hardman, D. R.

Anderson, Frank (Whitehaven)

Davies, A. Edward (Stoke, N.)

Hardy, E. A.

Awbery, S. S.

Davies, Rt. Hn. Clement (Montgomery)

Hargreaves, A.

Ayles, W. H.

Davies, Harold (Leek)

Hastings, S.

Bacon, Miss Alice

Davies, Stephen (Merthyr)

Hayman, F. H.

Baird, J.

de Freitas, Geoffrey

Henderson, Rt. Hon. Arthur (Tipton)

Balfour, A.

Deer, G.

Herbison, Miss M.

Barnes, Rt. Hon. A. J.

Delargy, H. J.

Hewitson, Capt. M.

Bartley, P.

Dodds, N. N.

Hobson, C. R.

Bellenger, Rt. Hon. F. J.

Donnelly, D.

Holman, P.

Benn, Wedgwood

Driberg, T. E. N.

Holmes, Horace (Hemsworth)

Benson, G.

Dugdale, Rt. Hon. John (W. Bromwich)

Houghton, D.

Beswick, F.

Dye, S.

Hoy, J.

Bevan, Rt. Hon. A. (Ebbw Vale)

Ede, Rt. Hon. J. C.

Hubbard, T.

Bing, G. H. C.

Edelman, M.

Hudson, James (Ealing, N.)

Blenkinsop, A.

Edwards, John (Brighouse)

Hughes, Emrys (S. Ayr)

Blyton, W. R.

Edwards, Rt. Hon. Nest (Caerphilly)

Hughes, Hector (Aberdeen, N.)

Boardman, H.

Edwards, W. J. (Stepney)

Hughes, Moelwyn (Islington, N.)

Booth, A.

Evans, Albert (Islington, S. W.)

Hynd, H. (Accrington)

Bottomley, A. G

Evans, Stanley (Wednesbury)

Hynd, J. B. (Attercliffe)

Bowden, H. W.

Ewart, R.

Irvine, A. J. (Edge Hill)

Bowen, E. R. (Cardigan)

Field, Capt. W. J.

Irving, W. J. (Wood Green)

Bowles, F. G. (Nuneaton)

Finch, H. J.

Isaacs, Rt. Hon. G. A.

Braddock, Mrs. Elizabeth

Fletcher, Eric (Islington, E.)

Janner, B.

Brook, Dryden (Halifax)

Follick, M.

Jay, D. P. T.

Brooks, T. J. (Normanton)

Foot, M. M.

Jeger, George (Goole)

Broughton, Dr. A. D. D.

Forman, J. C.

Jeger, Dr. Santo (St. Pancras, S.)

Brown, Rt. Hon. George (Belper)

Fraser, Thomas (Hamilton)

Jenkins, R. H.

Brown, Thomas (Ince)

Freeman, John (Watford)

Johnson, James (Rugby)

Burke, W. A.

Freeman, Peter (Newport)

Johnston, Douglas (Paisley)

Burton, Miss E.

Gaitskell, Rt. Hon. H. T. N

Jones, David (Hartlepool)

Butler, Herbert (Hackney, S.)

Ganley, Mrs. C. S.

Jones, Frederick Elwyn (West Ham, S.)

Callaghan, L. J.

Gibson, C. W.

Jones, Jack (Rotherham)

Carmichael, J.

Glanville, James (Consett)

Jones, William Elwyn (Conway)

Castle, Mrs. B. A.

Gooch, E. G.

Keenan, W.

Champion, A. J.

Gordon-Walker, Rt. Hon. P. C.

Kenyon, C.

Chetwynd, G. R.

Granville, Edgar (Eye)

Key, Rt. Hon. C. W.

Clunie, J.

Greenwood, Anthony (Rossendale)

King, Dr. H. M.

Cocks, F. S.

Greenwood, Rt. Hon. Arthur (Wakefield)

Kinghorn, Sqn. Ldr. E.

Coldrick, W.

Grenfell, D. R.

Kinley, J.

Cook, T. F.

Grey, C. F.

Kirkwood, Rt. Hon. D.

Cooper, Geoffrey (Middlesbrough, W.)

Griffiths, David (Rother Valley)

Lang, Gordon

Cooper, John (Deptford)

Griffiths, Rt. Hon. James (Llanelly)

Lee, Frederick (Newton)

Corbet, Mrs. Freda (Peckham)

Griffiths, William (Exchange)

Lee, Miss Jennie (Cannock)

Cove, W. G.

Grimond, J.

Lever, Harold (Cheetham)

Craddock, George (Bradford, S.)

Gunter, R. J.

Lever, Leslie (Ardwick)

Crawley, A.

Hale, Joseph (Rochdale)

Lewis, Arthur (West Ham, N.)

Lewis, John (Bolton, W.)

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Sylvester, G. O.

Lindgren, G. S.

Paling, Will T. (Dewsbury)

Taylor, Bernard (Mansfield)

Lipton, Lt.-Col. M.

Pannell, T. C.

Taylor, Robert (Morpeth)

Logan, D. G.

Pargiter, G. A.

Thomas, David (Aberdare)

Longden, Fred (Small Heath)

Parker J.

Thomas, George (Cardiff)

McAllister, G.

Paton, J.

Thomas, Iorwerth (Rhondda, W.)

MacColl, J. E.

Pearson, A.

Thomas, Ivor Owen (Wrekin)

Macdonald, A. J. F. (Roxburgh)

Poole, C.

Thorneycroft, Harry (Clayton)

McGhee, H. G.

Porter, G.

Thurtle, Ernest

McGovern, J.

Price, Philips (Gloucestershire, W.)

Timmons, J.

McInnes, J.

Proctor, W. T.

Tomney, F.

Mack, J. D.

Pryde, D. J.

Ungoed-Thomas, Sir Lynn

McKay, John (Wallsend)

Pursey, Cmdr. H.

Usborne, H.

Mackay, R. W. G. (Reading, N.)

Rankin, J.

Vernon, W. F.

McLeavy, F.

Rees, Mrs. D.

Viant, S. P.

MacMillan, Malcolm (Western Isles)

Reeves, J.

Wallace, H. W.

McNeil, Rt. Hon. H.

Reid, Thomas (Swindon)

Watkins, T. E.

MacPherson, Malcolm (Stirling)

Reid, William (Camlachie)

Webb, Rt. Hon. M. (Bradford, C.)

Mainwaring, W. H.

Rhodes, H.

Weitzman, D.

Mallalieu, E. L. (Brigg)

Richards, R.

Wells, Percy (Faversham)

Mallalieu, J. P. W. (Huddersfield, E.)

Robens, Rt. Hon. A.

Wells, William (Walsall)

Mann, Mrs. Jean

Roberts, Emrys (Merioneth)

West, D. G.

Manuel, A. C.

Roberts, Goronwy (Caernarvonshire)

Wheatley, Rt. Hon. John (Edinb'gh E.)

Marquand, Rt. Hon. H. A.

Robertson, J. J. (Berwick)

White, Mrs. Eirene (E. Flint)

Mathers, Rt. Hon. G.

Robinson, Kenneth (St. Pancras, N.)

White, Henry (Derbyshire, N. E.)

Mellish, R. J.

Rogers, George (Kensington, N.)

Whiteley, Rt. Hon. W.

Messer, F.

Ross, William

Wigg, G.

Middleton, Mrs. L.

Royle, C.

Wilcock, Group Capt. C. A. B.

Mikardo, Ian

Shackleton, E. A. A.

Wilkes, L.

Mitchison, G. R.

Shawcross, Rt. Hon. Sir Hartley

Wilkins, W. A.

Moeran, E. W.

Shinwell, Rt. Hon. E.

Willey, Frederick (Sunderland)

Monslow, W.

Shurmer, P. L. E.

Willey, Octavius (Cleveland)

Moody, A. S.

Silverman, Julius (Erdington)

Williams, David (Neath)

Morgan, Dr. H. B.

Silverman, Sydney (Nelson)

Williams, Rev. Llywelyn (Abertillery)

Morley, R.

Simmons, C. J.

Williams, Ronald (Wigan)

Morris, Percy (Swansea, W.)

Slater, J.

Williams, Rt. Hon. Thomas (Don V'lly)

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

Smith, Ellis (Stoke, S.)

Williams, W. T. (Hammersmith, S.)

Mort, D. L.

Smith, Norman (Nottingham, S.)

Wilson, Rt. Hon. Harold (Huyton)

Moyle, A.

Snow, J. W.

Winterbottom, Ian (Nottingham, C.)

Mulley, F. W.

Sorensen, R. W.

Winterbottom, Richard (Brightside)

Murray, J. D.

Soskice, Rt. Hon. Sir Frank

Wise, F. J.

Nally, W.

Sparks, J. A.

Woodburn, Rt. Hon. A.

Neal, Harold (Bolsover)

Steele, T.

Woods, Rev. G. S.

Noel-Baker, Rt. Hon. P. J.

Stewart, Michael (Fulham, E.)

Wyatt, W. L.

O'Brien, T.

Stokes, Rt. Hon. R. R

Yates, V. F.

Oldfield, W. H.

Strachey, Rt. Hon. J.

Younger, Rt. Hon. K.

Oliver, G. H.

Strauss, Rt. Hon. George (Vauxhall)

Orbach, M.

Stross, Dr. Barnett

TELLERS FOR THE AYES:

Padley, W. E.

Summerskill, Rt. Hon. Edith

Mr. Collindridge and

Mr. Popplewell.

NOES

Aitken, W. T.

Bromley-Davenport, Lt.-Col. W.

De la Bère, R.

Alport, C. J. M.

Brooke, Henry (Hampstead)

Deedes, W. F.

Amery, Julian (Preston, N.)

Browne, Jack (Govan)

Digby, S. Wingfield

Amory, Heathcoat (Tiverton)

Buchan-Hepburn, P. G. T.

Dodds-Parker, A. D.

Arbuthnot, John

Bullock, Capt. M.

Donner, P. W.

Ashton, H. (Chelmsford)

Bullus, Wing Commander E. E.

Douglas-Hamilton, Lord Malcolm

Assheton, Rt. Hon. R. (Blackburn, W.)

Butcher, H. W.

Drayson, G. B.

Astor, Hon. M. L.

Carr, Robert (Mitcham)

Drewe, C.

Baker, P. A. D.

Carson, Hon. E.

Dugdale, Maj. Sir Thomas (Richmond)

Baldock, Lt.-Cmdr. J. M.

Channon, H.

Duncan, Capt. J. A. L.

Baldwin, A. E.

Clarke, Col. Ralph (East Grinstead)

Dunglass, Lord

Banks, Col. C.

Clarke, Brig. Terence (Portsmouth, W.)

Duthie, W. S.

Baxter, A. B.

Clyde, J. L.

Eden, Rt. Hon. A.

Beamish, Maj. Tufton

Colegate, A.

Elliot, Rt. Hon. W. E.

Bell, R. M.

Conant, Maj. R. J. E.

Erroll, F. J.

Bennett, Sir Peter (Edgbaston)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Fisher, Nigel

Bennett, Dr. Reginald (Gosport)

Cooper-Key, E. M.

Fort, R.

Bennett, W. G. (Woodside)

Corbett, Lt.-Col. Uvedale (Ludlow)

Fraser, Hon. Hugh (Stone)

Bevins, J. R. (Liverpool, Toxteth)

Craddock, Beresford (Spelthorne)

Fraser, Sir I. (Morecambe & Lonsdale)

Birch, Nigel

Cranborne, Viscount

Fyfe, Rt. Hon. Sir David Maxwell

Bishop, F. P.

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

Gage, C. H.

Black, C. W.

Crosthwaite-Eyre, Col. O. E.

Galbraith, Cmdr. T. D. (Pollok)

Boles, Lt.-Col. D. C. (Wells)

Crouch, R. F.

Galbraith, T. G. D. (Hillhead)

Boothby, R.

Crowder, Capt. John (Finchley)

Gammans, L. D.

Bossom, A. C.

Crowder, Petre (Ruislip—Northwood)

Garner-Evans, E. H. (Denbigh)

Boyd-Carpenter, J. A

Cundiff, F. W.

Gales, Maj. E. E.

Boyle, Sir Edward

Cuthbert, W. N.

Glyn, Sir Ralph

Bracken, Rt. Hon. B.

Darling, Sir William (Edinburgh, S.)

Gomme-Duncan, Col. A.

Braine, B. R.

Davidson, Viscountess

Gridley, Sir Arnold

Braithwaite, Sir Albert (Harrow, W.)

Davies, Nigel (Epping)

Grimston, Hon. John (St. Albans)

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

de Chair, Somerset

Grimston, Robert (Westbury)

2140

2141

Harden, J. R. E.

Macdonald, Sir Peter (I. of Wight)

Russell, R. S.

Hare, Hon. J. H. (Woodbridge)

McKibbin, A.

Ryder, Capt. R. E. D.

Harris, Frederic (Croydon, N.)

McKie, J. H. (Galloway)

Salter, Rt. Hon. Sir Arthur

Harris, Reader (Heston)

Maclay, Hon. John

Sandys, Rt. Hon. D.

Harvey, Air Cadre. A. V. (Macclesfield)

Maclean, Fitzroy

Savory, Prof. D. L.

Harvey, Ian (Harrow, E.)

MacLeod, Iain (Enfield, W.)

Scott, Donald

Harvie-Watt, Sir George

MacLeod, John (Ross and Cromarty)

Shepherd, William

Hay, John

Macmillan, Rt. Hon. Harold (Bromley)

Smithers, Peter (Winchester)

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

Macpherson, Major Niall (Dumfries)

Smithers, Sir Waldron (Orpington)

Heald, Lionel

Maitland, Cmdr. J. W.

Smyth, Brig. J. G. (Norwood)

Heath, Edward

Manningham-Buller, R. E.

Snadden, W. McN.

Henderson, John (Cathcart)

Marlowe, A. A. H.

Soames, Capt. C.

Hicks-Beach, Maj. W. W.

Marples, A. E.

Spearman, A. C. M.

Higgs, J. M. C.

Marshall, Douglas (Bodmin)

Spence, H. R. (Aberdeenshire, W.)

Hill, Dr. Charles (Luton)

Marshall, Sidney (Sutton)

Spens, Sir Patrick (Kensington, S.)

Hill, Mrs. E. (Wythenshawe)

Maude, Angus (Ealling, S.)

Stanley, Capt. Hon. Richard (N. Fylde)

Hinchingbrooke, Viscount

Maude, John (Exeter)

Stevens, G. P.

Hirst Geoffrey

Maudling, R.

Steward, W. A. (Woolwich, W.)

Hollis, M. C.

Medlicott, Brigadier F.

Stewart, Henderson (Fife, E.)

Holmes, Sir Stanley (Harwich)

Mellor, Sir John

Stoddart-Scott, Col. M.

Hope, Lord John

Molson, A. H. E.

Storey, S.

Hopkinson, Henry

Monckton, Sir Walter

Strauss, Henry (Norwich, S.)

Hornsby-Smith, Miss P.

Moore, Lt.-Col. Sir Thomas

Stuart, Rt. Hon. James (Moray)

Horsbrugh, Rt. Hon. Florence

Morris, Hopkin (Carmarthen)

Summers, G. S.

Howard, Greville (St. Ives)

Morrison, John (Salisbury)

Sutcliffe, H.

Hudson, Sir Austin (Lewisham, N.)

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

Taylor, Charles (Eastbourne)

Hudson, Rt. Hon. Robert (Southport)

Mott-Radclyffe, C. E.

Taylor, William (Bradford, N.)

Hudson, W. R. A. (Hull, N.)

Nabarro, G.

Teeling, W.

Hurd, A. R.

Nicholls, Harmar

Teevan, T. L.

Hutchinson, Geoffrey (Ilford, N.)

Nicholson, G.

Thomas, J. P. L. (Hereford)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Nield, Basil (Chester)

Thompson, Kenneth Pugh (Walton)

Hutchison, Colonel James (Glasgow)

Noble, Comdr. A. H. P.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Hyde, Lt.-Col. H. M.

Nugent, G. R. H

Thorneycroft, Peter (Monmouth)

Hylton-Foster, H. B.

Nutting, Anthony

Thornton-Kemsley, Col. C. N.

Jeffreys, General Sir George

Oakshott, H. D.

Thorp, Brig. R. A. F.

Jennings, R.

Odey, G. W.

Tilney, John

Johnson, Howard (Kemptown)

Ormsby-Gore, Hon. W. D

Turner, H. F. L

Jones, A. (Hall Green)

Orr, Capt. L. P. S.

Turton, R. H.

Joynson-Hicks, Hon. L. W.

Orr-Ewing, Charles Ian (Hendon, N.)

Tweedsmuir, Lady

Kaberry, D.

Orr-Ewing, Ian L. (Weston-super-Mare)

Vane, W. M. F.

Kerr, H. W. (Cambridge)

Osborne, C.

Vaughan-Morgan, J. K.

Kingsmill, Lt.-Col. W. H.

Peake, Rt. Hon. O.

Vosper, D. F.

Lambert, Hon. G.

Perkins, W. R. D.

Wakefield, Edward (Derbyshire, W.)

Langford-Holt, J.

Peto, Brig. C. H. M.

Wakefield, Sir Wavell (Marylebone)

Law, Rt. Hon. R. K.

Pickthorn, K.

Walker-Smith, D. C.

Leather, E. H. C.

Pitman, I. J.

Ward, Hon. George (Worcester)

Legge-Bourke, Maj. E. A. H.

Powell, J. Enoch

Ward, Miss I. (Tynemouth)

Lennox-Boyd, A. T.

Price, Henry (Lewisham, W.)

Waterhouse, Capt. Rt. Hon. C.

Lindsay, Martin

Prior-Palmer, Brig. O.

Watkinson, H.

Linstead, H. N.

Profumo, J. D.

Webbe, Sir H. (London & Westminster)

Llewellyn, D.

Raikes, H. V.

Wheatley, Major M. J. (Poole)

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Rayner, Brig. R.

White, Baker (Canterbury)

Lloyd, Maj. Guy (Renfrew, E.)

Redmayne, M.

Williams, Charles (Torquay)

Lloyd, Selwyn (Wirral)

Remnant, Hon. P.

Williams, Gerald (Tonbridge)

Lockwood, Lt.-Col. J. C.

Renton, D. L. M.

Williams, Sir Herbert (Croydon, E.)

Longden, Gilbert (Herts, S. W.)

Roberts, Maj. Peter (Heeley)

Wills, G.

Low, A. R. W.

Robertson, Sir David (Caithness)

Wilson, Geoffrey (Truro)

Lucas, Sir Jocelyn (Portsmouth, S.)

Robinson, Roland (Blackpool, S.)

Winterton, Rt. Hon. Earl

Lucas, P. B. (Brentford)

Robson-Brown, W.

Wood, Hon. R.

Lucas-Tooth, Sir Hugh

Rodgers, John (Sevenoaks)

Lyttelton, Rt. Hon. O.

Roper, Sir Harold

TELLERS FOR THE NOES:

McCorquodale, Rt. Hon. M. S.

Ropner, Col. L.

Brigadier Mackeson and

Mr. Studholme.

Question put, and agreed to.

Clause ordered to stand part of the Bill.
Mr. Baker White: On a point of order. May I ask your guidance, Major Milner, on a matter affecting the work of the Committee? Earlier in the day, when Sir Charles was in the Chair, I ventured to point out that, as there is no Question Time today, it is not possible to put a Private Notice Question to the Foreign Secretary or the Prime Minister on two matters of great importance, namely, the situation in Berlin and the situation in the Persian oilfields.
The Chairman: The hon. Gentleman must appreciate that that is not a point of order affecting the Committee, nor, indeed, is it one with which I can deal. The House is in Committee at the moment.
Earl Winterton: Further to that point of order. It would surely be in order to move, "That the Chairman do report Progress, and ask leave to sit again," so that Mr. Speaker may be in the Chair and a statement made. I should like to raise a very important question

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indeed. Supposing a most serious position arose when we were having another Sitting like this, it might be held, as the result of your Ruling, Major Milner, that even if the Prime Minister himself wished to address the House it would not be possible to accept a Motion to report Progress. I understood my hon. Friend to do that in order that he could discuss a very constitutional point.
The Chairman: Do I understand the noble Lord to move that Motion?
Earl Winterton: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
I am moving this Motion because I think it raises a question of some importance. This is an entirely novel procedure which I never recollect before, except on one occasion, in the whole of my experience, and I should like to have a Ruling from you, Major Milner, or from the Leader of the House, as to what is going to happen in future. We in this House, as everybody knows, are very subject, quite properly, to the decisions of the Chair. Supposing there were a political assassination somewhere in the Dominions or Empire—
Mr. Emrys Hughes: Or here.
Earl Winterton: As the hon. Gentleman interrupts me, I must say that some political assassinations here would not cause me as much grief as they would him.
As I was saying, supposing some incident of that kind occurred—I think this is a serious point, and I make no apology for putting it—what is the procedure by which we can vote Mr. Speaker into the Chair in order that a statement might be made? It is not a matter which is likely to concern me very much because I intend to retire at the end of this Parliament, and all I want to do is to safeguard future Parliaments from being told that nothing can be done in the matter because the Chairman of Committees is in the Chair. I think the Leader of the House should give us some guidance on this matter, and I have moved this Motion in order that he may do so.
Mr. Ede: To deal first with one of the remarks of the noble Lord, I do not think
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he is right in saying—although I pit my Paliamentary knowledge against his with some trepidation, in view of his long membership in this House—that the position in which we find ourselves at the moment is unprecedented. I can recollect two or three such occasions. In fact, I can recollect one such occasion in the Parliament which commenced in 1935 when we sat for two nights discussing unemployment regulations, and certainly in Erskine May there are several instances quoted of Sittings that lasted beyond the period of the next Sitting day after that in which they commenced.
If there were any matter which the Committee thought was of sufficient importance to warrant reporting Progress in order that a Minister could be questioned, and the Chairman of the Committee accepted the Motion and it was carried, then, as has happened more than once in my recollection of the House, I have no doubt that when the House resumed a Motion for the Adjournment could be moved. [Interruption.] I am glad to have even whispered confirmation of what I am saying from so high a quarter. The Patronage Secretary would move the Adjournment of the House so that, if desired, either a statement could be made or a question could be asked and an answer given. That, I think, is the position, but I am bound to say I do not think that either of the matters mentioned by the hon. Member for Canterbury (Mr. Baker White) would warrant the Committee deciding at this stage to report Progress.
Mr. Emrys Hughes: There is a much more important matter than that, which is, what has happened to the 46 Questions about Scotland on the Order Paper?
Mr. Ede: Those 46 Questions can be put down for another day either by the Members who originally put them down or by someone else who thinks they are worth putting down.
Earl Winterton: As the matter has been made clear by the Leader of the House, and as, presumably, if on a similar occasion a demand were made for such a statement it would be accepted, I beg to ask leave to withdraw the Motion.
Motion, by leave, withdrawn.

Clause 29.—(PROPERTY GIVEN TO PUBLIC BODIES.)
Mr. H. Strauss: I beg to move, in page 22, line 6, to leave out "or university," and to insert:
"university or college in the Universities of Oxford and Cambridge."
I think it would be for the convenience of the Committee if I were to take this Amendment and the next two Amendments standing in the names of my hon. Friends and myself—page 22, line 14 and page 22, line 40—together, if that is agreeable to the Chancellor of the Exchequer. The Clause which we have now reached is the one which—
Earl Winterton: On a point of order. I understand, Major Milner, that you intend to call my Amendment, which deals with a slightly different but analogous point from that which my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss) has moved. Indeed, I understood that the two Amendments were to be called together. Perhaps my understanding was wrong.
The Chairman: I am much obliged to the noble Lord. I am very much in the hands of the Committee. I do not know the precise details of the Amendments. They appear to me to fall into two groups, but if the movers are agreeable, I am perfectly content, and it would possibly result in a saving of time if they were discussed together. Is the hon. and learned Member for Norwich, South (Mr. H. Strauss) agreeable?
Mr. Strauss: I am ignorant of my right hon. Friend's Amendments. I shall only speak about the three Amendments in the names of my hon. Friends and myself, but if the Chancellor thinks it convenient to make this combination of all the Amendments, I will, of course, bow to the wishes of the Committee.
Mr. Gaitskell: I think it would probably be to the convenience of the Committee if we could take those Amendments together. I certainly wish to cover them all in the statement I make.
Mr. Strauss: This Clause, as explained by the Financial Secretary to the Treasury in his speech on Second Reading, goes some of the way to carrying out certain proposals of the Gowers Report. It is
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designed to further the interest of preserving some very valuable properties, and I think that it is generally agreed that the provisions of this Clause are beneficial, and they have, I think, been very generally welcomed.
I am proposing a slight extension because I believe that extension to be necessary if the proposal of the right hon. Gentleman is to achieve its purpose. Both the right hon. Gentleman the Chancellor of the Exchequer and his colleague the Financial Secretary to the Treasury are members of Oxford colleges, as I am myself, and I think we all three know, as do many other hon. Members in various quarters of the Committee, that Oxford and Cambridge Universities consist largely of their colleges.
4.0 p.m.
A loyal son of Oxford or Cambridge, if he were thinking of leaving a historic house to be looked after by Oxford or Cambridge as the case might be, would not leave it to the university but to his college. I see another former Fellow of an Oxford College in the hon. Member for Gloucestershire, South (Mr. Crosland), and I might perhaps mention his College of Trinity which still preserves the beautiful home, Wroxton Abbey, of the founder, Sir Thomas Pope.
I think it would be generally agreed that a loyal son of Oxford or Cambridge wishing to leave his historic property to be looked after, as he hopes, in perpetuity, would be more likely to leave it to his college than to the university.
Mr. Messer: What about Borstal?
Mr. H. Strauss: I think this is a serious subject and I hope hon. Members will try to be serious about this matter.
The first reason for moving this Amendment is that, without an Amendment such as this, the admirable intentions of the Chancellor will miss their mark so far as Oxford and Cambridge are concerned. If I turn from that to the proposed recipients of these bequests, the Oxford and Cambridge colleges, of course, perform many of the functions performed in more modern universities by the universities themselves. They provide the whole of the housing for the students which, in modern universities, is provided in hostels established by the universities. If it is relevant I could satisfy

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the Chancellor, though I am certain his own investigations confirm it, that the contribution of the colleges to the finance of the universities is enormous.
Another point the Committee may wish to bear in mind is that the sales of real property or disposals by Oxford and Cambridge colleges are completely under the Government eye and the jurisdiction of the Minister of Agriculture, under the Universities and College Estates Act, 1925. I could give the figures of the contribution the colleges make to the universities if that were considered relevant, but I do not wish to do so now because I do not think the Committee would consider it material.
A further point is the great experience of Oxford and Cambridge colleges in looking after and adequately upholding great and beautiful buildings. If the main idea the Government had in mind in this Clause was, as I gathered from the speech of the Financial Secretary to the Treasury on the Second Reading of the Bill, to help to preserve those buildings with which the Gowers Report dealt—though the Government do not propose to carry out all the recommendations of the Gowers Committee—I think that this Clause is an admirable one so far as it goes; but that it needs this extension to carry out and make really effective the Government's excellent intentions.
Earl Winterton: I certainly agree, of course, with my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss) about the case of colleges and I am in thorough support of his Amendment. But if there is a case made out—and I think he has made it—for applying this principle to colleges, then I think the extension of the principle which I suggest in the first two Amendments on the Order Paper in my name to insert "local trust" after "authority" is equally made out. Without saying anything derogatory to his Amendment, I think my case is more important, for the reasons I shall show.
I shall not bother the Committee with the history of the case, but there has been in recent years, in successive Finance Bills, an extension of exemption from Death Duties on property given to the National Trust. According to my information, it began with the Finance Act, 1931, by Section 40, where any estate in
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land was given or devised by any person to the National Trust and was held by that Trust inalienably for the public benefit, the Treasury might remit any duties leviable on the death of that person and in case of remission such property was not to be aggregated with any other property. Then in the Finance Act of 1937 by Section 31 (6),
"Where the requirements … of section forty of the Finance Act, 1931 are fulfilled … the estate or interest shall be exempt from any duties which might … have been remitted by the Treasury."
By Section 31 (1) of the same Act exemption from Death Duties was granted notwithstanding that the devise to the Trust was subject to life interests.
Again, in the Finance Act, 1949, by Section 31 (1) the exemption granted to an estate or interest in land given or devised to the National Trust was extended to any other property, for example, an endowment fund, given as a source of income for the upkeep of the land. Everyone knows what is in Clause 29, which we are now discussing.
I suggest to the Committee that there is a principle of some importance here involved—that what is permitted to the National Trust in the way of exemption should also be granted to societies which are designated in the third Amendment I have down on the Order Paper which says the expression "local trust" means
"an incorporated trust established for objects which include promoting encouraging and fostering the study science and knowledge of archaeology in any specified county or counties, acquiring or securing the preservation of buildings and places of historical or archaeological interest value natural beauty or public resort therein and forming and maintaining a depository for papers and records connected therewith."
Briefly, the societies which would come within the ambit of my three Amendments would be the archaeological societies or preservation societies not being part of the National Trust and which exist in many parts of the country. I should hate to refer to a matter with which I am personally concerned, though I have no financial interests in it, but I must tell the Committee that we have an archaeological society in Sussex of great merit with which a great number of well-known archaeologists are connected. We have quite a number of properties. We own Lewes Castle, Anne of Cleves' House in another part of the country, and

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three or four other properties. They are no doubt of benefit to the public who visit them for a small fee and in some cases have to pay no fee. The purpose of my Amendments is to ensure that we are put in the same position as the National Trust.
I might quote—because this is symptomatic or rather typical of what is being done by these societies—from what is being done by the particular society to which I have just referred to, the Sussex Archaeological Society—in the case of Lewes Castle Keep. The Society are the owners of Lewes Castle Keep, which is a most prominent landmark in an ancient town of great historic interest. This is an extract from the report of the Pilgrim Trust for 1950—not from our report:
"The Sussex Archaeological Society has more than a century of widely varied activity to its credit. During the past 25 years, by means of a trust formed specifically for the purpose of holding properties, it has been doing for much of Sussex what the National Trust does for the country as a whole, and so by voluntary effort is caring for some important monuments of the kind maintained in many areas at the taxpayers' expense by the Ancient Monuments Inspectorate of the Ministry of Works …"
In other words, we are performing as a voluntary duty work which in other parts is being done at the expense of the taxpayer.
It is a most pleasing experience for me, after 46 years in the House, to be able to make a speech of this kind in a lengthy Sitting without being interrupted or being called to order by the Chair. I seem to recollect through the mists of time about 42 years ago the Chairman saying, "I have already warned the noble Lord twice that he is completely divorced from the subject, and I must now ask him to resume his seat." It is a pleasing experience for me to find no apparent dissent from the Committee, not even from those who are in a very somnolent condition, as they are bound to be at this hour of the day. I hope that in view of the agreeable nature of the subject and in view of the genial manner in which I have discussed this Amendment, it will be accepted.
Mr. Profumo: While agreeing with everything that has been said by my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss), I rise to support the eloquent and crisp
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speech made by my noble Friend the Member for Horsham (Earl Winterton), for it is that side of the Amendment to which I should like to refer. In all quarters of the Committee we appreciate the stress under which the Chancellor of the Exchequer and the Attorney-General have been during these long weary hours at this stage of the Finance Bill. I see that one of them nods his head and the other shakes it.
Mr. Boyd-Carpenter: That symbolises the Government.
Mr. Profumo: I do not wish to be controversial. I only want to make this point. I hope that their fatigue and strain will not anaesthetise them from appreciating what may at first sight appear to be a somewhat small point. In fact, this is not in any way a small point. This point rests on a very fundamental principle indeed, and it is one which is not unknown to hon. Members opposite. It is a principle which is evoked on many occasions on their platforms—the principle of fair shares. We feel that this concession which is being offered by the Government in this Clause should be fairly shared between all the organisations which fall into the category which the Government are seeking to aid.
May I use a piece of military jargon and say that the objects of the exercise in this case appear to me to be twofold: first of all, to induce people to bequeath property to organisations by allowing a rebate of Death Duties, these organisations making us of that property in the national interest and in the interests of the community. The second purpose would appear to me to be to see that the legatees shall in fact secure such property without financial embarrassment. In these respects my noble Friend and I believe that this Clause does not go far enough. It may have been an oversight in the drafting of this Clause, but we believe that if the Clause remains as it is, then the omission will operate in a highly detrimental manner to the particular organisations which we would have included in this Clause, namely local trusts.
If these local trusts are left out of this Clause, they will continue to be in a position whereby they are not attracting all the legacies which they might otherwise attract, for two reasons. First, there is

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no inducement to members of the public to leave property or land to those local trusts because there is no alleviation of Death Duties; secondly, anybody considering leaving a piece of land or property will be frightened that the organisation concerned, the local trust, might be financially embarrassed after their death. This provision could undermine the whole of the finances of certain incorporated trusts.
4.15 p.m.
When the Exchequer are considering at any time any form of concession, the first point on which they have to order an inquiry is what the total cost may be to the Treasury, what financial burden will rest on the Treasury if they bring in the concession. When in the past my hon. Friends have sought concessions from the Government, the first thing they are always told is that it would be much too expensive. It is with a sigh of relief on this beautiful afternoon that I am able to say that the financial side of this matter is not germane.
The Government are seeking to alleviate from Death Duties properties which are bequeathed to universities, local authorities and Government Departments. Let us take them one by one. There are a score or more of universities. The cost involved to the Exchequer thus far cannot be inconsiderable. In the case of local authorities there are hundreds of them and, therefore, the financial loss to the Exchequer may be very considerable indeed, and if we go on to the category of Government Departments no one can tell how they may spread. If Socialism goes on, one cannot tell how many Government Departments there may be and what may be the loss to the Treasury.
There are, however, only five of these incorporated trusts concerned which we seek to have included in this Clause. There are the Shakespeare Birthday Trust, the Oxford Preservation Trust, the Cambridge Preservation Trust, the Sussex Archaeological Trust to which my noble Friend referred, and the Norfolk Archaeological Trust. Those are only five trusts and, therefore, it seems to be a pity to spoil a good ship for a ha'p'orth of tar.
My particular interest in this case concerns the Shakespeare Birthday Trust. This Trust was incorporated in 1890 and has
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been doing work of a very similar nature to the National Trust ever since. Its purposes are to own and administer properties in connection with William Shakespeare and his family, and to receive gifts of properties with a view to preserving the amenities in the vicinity of the Shakespeare buildings.
I think the Committee will appreciate that my constituent—for although he may be disenfranchised, he is still living—William Shakespeare, is one of the greatest dollar earners which this country has today. Therefore, it is of considerable importance that the Shakespeare Birthday Trust, which is the centre of the whole shrine of Stratford-upon-Avon, should have the possibility of maintaining the glamour and aura which surrounds this great centre of culture in which our own people can enjoy themselves and to which they can make pilgrimages, and to which overseas visitors may go and be certain of being in the surroundings in which the great bard himself lived.
I want strongly to support the Amendment and to ask the right hon. Gentleman whether at the end of what we might call "midsummer night's dream" we could expect that he would rise and say "As far as this Clause is concerned it shall be 'as you like it.'"
Mr. Gaitskell: The hon. Member for Stratford (Mr. Profumo), who was kind enough to be solicitous for our health, might like to know that I shook my head because I did not feel that I deserved the solicitude. It was my right hon. and learned Friend the Attorney-General who, with his usual courtesy, patience and lucidity hour after hour, conducted the proceedings on the last Clause, and who nodded his head.
I think it is rather pleasant to have this little interlude between the battles and to be discussing something on which I do not think there is much disagreement. As far as I can see, there is general support in the Committee for the main idea behind this Clause, which is, of course, to enable the Treasury to waive payment of Death Duty where land—that includes houses—or endowments have been left to a Government Department, a local authority or a university, as it is enabled to do in the case of the National Trust; and also to provide that it may also waive Death Duty where the contents

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of a house are bequeathed to any of those bodies, including the National Trust. The Amendments have put forward the proposal that the list of public bodies in whose respect Death Duty may be waived should be extended. There are two things I should like to say on this.
First of all, I should like to remind the Committee, in case there is any misunderstanding, that the purpose of the Clause is, of course, not to confer benefits on any public authority, college, university—or even trusts, however admirable they may be: it is to enable historic houses, and perhaps the grounds with them, to be preserved, and their contents, too. Therefore, again in case there should be any misunderstanding, I must say that I think that we can take it that there will be no question of any of the beneficiaries of these gifts benefiting financially from them. On the contrary, it is extremely probable that, before the Treasury would give its consent, it would have to insist, unless there were a substantial endowment, that the body concerned should, perhaps, itself pay some money to ensure the preservation of the house.
The second point is this. I feel myself that it would be quite impossible to limit the list to the colleges situated in Oxford and Cambridge to start with. As the hon. and learned Member for Norwich, South (Mr. H. Strauss) said, in, moving the Amendmeint, I was at an Oxford college myself, but I should certainly wish to include London, where I taught for many years; and I think that there is quite a number of other universities as well that would take it very ill indeed if they were excluded. I do not think one can very well stop just there. I have indeed had some correspondence with the Archbishop of Canterbury, who has pointed to the claims of the Churches in this matter, and the noble Lord the Member for Horsham (Earl Winterton) and the hon. Member for Stratford (Mr. Profumo) have, I think very rightly, drawn attention to certain trusts which have, I think, rather special claims in this field.
I have come to this conclusion, which I should like to put to the Committee. It seems to me that it is probable that it will not be possible to draw up a precise and definite list of the particular bodies that might be affected by this Clause. We drew up the present list, as a matter of
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fact, largely on the basis of the Act of 1894, under which duty could be waived when works of art were given to various bodies—local authorities, museums, an galleries, and the universities. However, as I have said, I do not think we can stop there.
I am inclined to this solution. I think it would be, perhaps, a better plan if we were to alter the Clause in this way. We should not have any specific list, but we should lay down that the Treasury might give exemptions simply where it was satisfied that that was a suitable way in which the property in question could be preserved for the benefit of the nation. It would have, of course, to lay down conditions to make that clear, but the whole purpose of it would really be to ensure that the treatment of the property was right, rather than that these provisions should be limited to any particular list of public bodies.
I do not imagine myself that, in practice, we shall find such a very long queue waiting to take on what is generally a very onerous, financially expensive affair; but that is all the more reason for not drawing the Clause too narrowly. Therefore, if the Committee would agree, I should propose to introduce at the Report stage a suitable Amendment in wider terms on the lines that I have indicated. I hope that that will be agreeable. I think that is pretty well in line with what hon. Members have in mind, and I hope that, on that understanding, these Amendments will not be pressed.
Mr. Grimond: I do not want to keep the Committee more than a minute or two, but I feel we should welcome the extension that the Chancellor of the Exchequer has suggested, though I do not know what those associated with the Amendments may feel about it. I should like to support what was said by the noble Lord the Member for Horsham (Earl Winterton) about the importance of encouraging local societies, and I should like to add just this consideration to what he said. I have had some connection with a National Trust, and I am quite sure that both the National Trusts—though I cannot speak for them—would welcome an Amendment on those lines.
There are some local properties which have local importance, although possibly

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not national importance, and which should be preserved, and it is extremely difficult for the Trusts to supervise all those. There are buildings such as old mills, which are fast disappearing, which local bodies could look after very well. We have had some experience of this sort of thing in Scotland. I am thinking particularly of a building in the Hebrides. Unfortunately, most of it was blown away before Edinburgh learned what was happening to it. The people in the localities of these buildings can do much better in looking after them than can people far away in Edinburgh or London. Therefore, I do not think that there is any danger that the National Trusts will object to an extension of this.
I draw the Chancellor's attention to the diversity of such organisation; for instance, there is the Severn Wildfowl Trust and the Highland Folk Museum. I do not know whether it would be possible to include such a body within this proposal. However, he rightly says that it is very difficult to draw up a precise list. There is the Highland Folk Museum, which does valuable work in collecting and looking after old implements, which would otherwise vanish for all time.
I would also draw attention to something in the noble Lord's Amendment which the noble Lord did not mention—the most important question of local papers and records.
Earl Winterton: I am sorry I did not mention them. It was my fault.
Mr. Grimond: I think it is a pity that local records and papers should be totally dispersed or put into the Central Records Office. There are a great many small collections of less important records which are best kept in the places to which they relate, and in some suitable local building. Again, in Scotland, we suffer in that respect, because most of our records have been moved to England, and we are still trying to get them back. I think that over-centralisation of records means that such records and papers either disappear in the vast Central Records Office, where they are not available to people in the localities to which they relate, and who have a real interest in them, and who want to be able to see them; or else, if the Record Office does not take them, they disappear for all time, and are lost to the nation.
Mr. Logan: I think that this concession ought to be granted, but there ought to be a proviso for protection's sake. I am wondering whether the Chancellor would have power to reject an application for the benefit of the proposal if he felt that the property in question ought not to have the benefit. That, I think, would be a suitable arrangement.
Mr. Alport: I shall take only one or two moments just to clarify my own mind, and perhaps the minds of one or two other hon. Members, with regard to what the Chancellor said in one particular. He said that the exemption would not be for the benefit of those who were the beneficiaries in so far as they would have to provide money for the upkeep. I can quite easily see that that would be so in almost all cases unless the money were provided as part of the bequest.
But does that mean that the beneficiaries, for instance, a university college—and I am thinking in particular of the University College of North Staffordshire which has recently come into being, and which, at the present moment, I believe, has only, comparatively speaking, poor accommodation—would not be able to use a house or an estate left to them for the purposes of a faculty or for a college? They would carry on the upkeep, but, it is perfectly true, change the use of the building to some degree and get an immense benefit—a benefit which would compensate for their newness, so to speak, in relation to older universities which for centuries have received this type of bequest, sometimes incorporating bequeathed buildings in other buildings for their own use.
4.30 p.m.
Mr. Ellis Smith: There is a point I want to get clear. This proposal has been very sympathetically considered, and I would say that I have sympathy with it. I should like to ask, as we have not had the advantage of seeing the list, whether, if other suggestions are made to the Chancellor, he will give the same sympathetic consideration to them as he has given on this occasion.
Mr. Pickthorn: I am very grateful to the Chancellor for the sympathetic way in which he has treated this matter, as I am sure are other hon. Members who are concerned with these two proposals. I

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think that I might offer comfort to one or two hon. Gentlemen who have been rather questioning about this, by saying that I have been more than once the honest broker in connection with gifts or bequests of this sort, and I do not think that there is likely to be any grasping on the part of universities and colleges. They are far more likely to be afraid of being landed with white elephants than to go legacy hunting in this matter.
And then, the Chancellor has said, there is the safeguard here of the requirement of Treasury consent. May I, for half a minute, say that I think, with respect to the hon. Member for Orkney and Shetland (Mr. Grimond), that he is mistaken in thinking that this has anything to do with local records, and I feel sure, as a member of the Royal Historical Manuscripts Commission, he is quite mistaken in thinking that no one is looking after them. Great trouble is being taken about them by the Master of the Rolls and others, and particular pains are being taken to see that there is no over-interpretation in that regard.
Mr. Gaitskell: I would point out that the waving of the Death Duty is entirely subject to Treasury control and that we would lay down conditions to make sure that it was only granted where it was going to result in a satisfactory arrangement for the preservation of these properties. In answer to my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith), I would point out that there is no list at all. I was saying that I did not think that one could deal with it on that basis of a list. I would far rather make an Amendment to the Clause so as to give the Treasury power to do this when it is satisfied that it should be done.
On the point raised by the hon. Member for Colchester (Mr. Alport), I would prefer not to say at this stage—indeed, I cannot possibly say at this stage—the exact conditions which would be laid down. What I meant when I said that it was not intended for the benefit of the bodies concerned was simply this: I thought that if I did not state that, there might have been an idea that the various colleges were anxious to acquire properties free of Death Duties and draw a larger income from them. That is not the idea at all. They would not get the
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waiver on Death Duties if that was going to happen. I did not mean that the property had to be preserved completely empty in every case. I think that we should normally expect, as we do in the case of National Trust, that it should be acceptable to the public.
Mr. P. Roberts: With regard to the Local Government Act, 1932, can the right hon. Gentleman tell me if that includes rural districts and urban districts for the acceptance of small local buildings?
Mr. Gaitskell: I should have to have notice of that one.
Major Tufton Beamish: As I am interested in the work of the Sussex Archaeological Trust, may I say how much I welcome the attitude of the Chancellor on this particular question? This Trust looks after a number of properties and places of great historical interest, some of which are in my constituency, including Lewes Castle and The Keep and other famous landmarks like the Long Man of Wilmington. I welcome the broader approach which the Chancellor of the Exchequer has proposed, and I hope that it may be acceptable to my noble Friend the Member for Horsham (Earl Winterton). I wonder if I am expressing a pious hope when I say that I hope the Chancellor will apply the same spirit of co-operation to all our other Amendments during the course of the Bill.
Viscount Hinchingbrooke: There is a conflict in my mind about what is said in the Clause. According to the Clause, anyone who gives or bequeaths land to a Government Department is exempted from Death Duties. It is not going to be enough, as I understand it from the Chancellor, simply to make a will and then die having bequeathed one's property. One has to go through a process of negotiation with the Treasury, the Treasury giving their sanction, and the recipient of the property has to be in a position to say that he will receive it and look after it, the Treasury sanctioning that process before the exemption of this Clause is called into play.
I think that is a very important point People must not suppose from the wording of the Clause that all they have to do is to make a will and then sit back and

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wait to die in the knowledge that their property will pass on and their heirs will be exempt from Death Duties. They have to go through a formal contract with the recipient of the property and obtain the sanction of the Treasury.
Mr. H. Strauss: Before I ask leave to withdraw my Amendment, may I thank the Chancellor of the Exchequer for his proposal, which I think is an improvement on the Clause as originally drafted? I should like to say why I did not include anything beyond the Oxford and Cambridge Colleges. It was not because I was not most willing that other institutions should be included, but because I had the actual authority of those colleges for including them.
I remember that many years ago, when I was serving, as I still serve, on the Executive Committee of the National Trust, I moved an Amendment, which was accepted, giving a benefit to the National Trust, and out of great goodwill I included the National Trust of Scotland, and was then told that they did not want it. After that experience I decided that I should never include any charity in an Amendment unless asked to do so. I thank the Chancellor for his sympathetic approach to this matter, and I think that what he has undertaken to do on the Report stage will greatly improve this Clause. Therefore, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Earl Winterton: As the Chancellor has met us extremely fairly, I do not propose to proceed with my Amendments. I am glad that this matter has been brought to his notice and that he is going to amend the Clause accordingly, which will make it far more symmetrical. There has been a pleasant interlude in which the troops have fraternised in the absence of the commanding officers and I hope that this spirit of generosity will not much longer prevail.
Clause ordered to stand part of the Bill.

Clause 30.—(GOVERNMENT SECURITIES EXEMPT FROM TAXATION WHILE IN FOREIGN OWNERSHIP.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Lieut.-Commander Braithwaite: If we could have a brief explanation of this Clause, which is somewhat difficult to follow, it would help the Committee. I realise that the learned Attorney-General is at the moment resting, but perhaps the Chancellor of the Exchequer or the Financial Secretary could explain its purport. I understand that certain securities escape Death Duty if the person who owns them is not domiciled or ordinarily resident in this country. However, from the Clause it would appear that some adjustment is to be made to benefit the Treasury, and there has been some litigation which resulted unfavourably to the Treasury, in that other securities escape duty, which went a little outside the definition of this Clause. If I am wrong about that I wonder if we could have a brief explanation in rather simpler language than is to be found in the Clause, because the matter is of value to all of us.
Mr. Jay: It is essentially a legal point and I trespass on it with diffidence, but my right hon. and learned Friend the Attorney-General is having a deserved rest for a short time. This Clause springs out of the provisions in the Finance Acts of 1915 and 1931 giving the Treasury power to issue securities with the condition that they are exempt from all tax present or future so long as it is shown that the securities were in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the United Kingdom.
A case occurred recently where securities enjoying this privilege passed, on the death of a life tenant who was domiciled and resident in England, to beneficiaries who were domiciled and ordinarily resident abroad. In those circumstances it had always been assumed by the Inland Revenue, and, I think, by everybody else, that tax would be payable on the ground that the previous owner was domiciled in this country. However, the beneficiaries of the legacy contended that it was the domicile of the living beneficiaries that determined whether exemption was due, and finally succeeded in winning their case.
That unexpected change in the definition of the law had various unfortunate consequences. For one thing it threw doubt on the completeness of the exemption from taxation enjoyed by holders abroad, which was, of course, the whole purpose of the original exemption,

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namely, to encourage overseas residents to hold British Government securities. That main purpose would have been impeded if the definition of the law had been allowed to stand in this altered form, which had never been intended.
The Clause restores, in all aspects and with retrospective effect, what was always thought by all parties to be the position of the securities with regard to Estate Duty. That is to say, it will confer exemption where holders of such securities die and are ordinarily resident abroad and bar it where they are not. That is the simple explanation and I hope it will recommend itself to the Committee.
Clause ordered to stand part of the Bill.

Clause 31.—(RESTRICTION ON RE OPENING CASES ON THE GROUND OF LEGAL MISTAKE.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
4.45 p.m.
Mr. Manningham-Buller: I should like to ask the Financial Secretary, now that he is trespassing on the preserves of the Attorney-General, if he will commit an act of trespass again in order to answer a few simple questions about this Clause. I am sure that if he knows the anwser he will read it as well as he did the answer to the last point raised on the previous Clause.
I am a little puzzled about this Clause, because looking at Estate Duty, I find that the Clause does no more than set out what has been the law of the land not only with regard to Income Tax and Surtax, but also for Estate Duty for many years. I am not certain how long it goes back, but I think it is a long time. That being so, I ask the hon. Gentleman: What is the reason for the sudden inclusion of this provision in the Finance Bill? Is it to provide us with work to keep us occupied, or is it because of a recent decision? Is there any connection between this Clause and the decision to which the hon. Gentleman referred in his speech explaining the previous Clause in the Bill? We should like to know why suddenly it has been found necessary to put this Clause into the Bill and whether, in fact, in the opinion
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of the Attorney-General the Clause makes any difference to the law at all?
Mr. Hylton-Foster: Would the Financial Secretary explain something else? So far as I understand it, in connection with Income Tax it has always been the practice that the case could not be re-opened if the practice which had been followed was the practice generally prevailing at the time of the bargain between the Revenue and the subject. This Clause seems to do the opposite in relation to Estate Duty in so far as the matter is governed by this Clause and by the view of the law prevailing then as opposed to the practice generally prevailing.
I should be most grateful if the Financial Secretary, when he replies, could explain why this practice, if it is the right test for Income Tax, is not the right test for Estate Duty, and, if that is so, why it is not applied in this Clause, because it seems to me to demand some explanation which I feel the Committee will appreciate.
Mr. Renton: I feel that there are further matters on this Clause which require explanation. One might explain, which is possibly taken for granted, that under the general law of England a mistake in the law does not, as a rule, offer a ground for relief, when money has been paid as a result of that mistake. But in the Finance Act of 1894 there is an exception to that general rule. As I understand, the effect of this Clause is that that exception is being varied but it is being varied in a rather extraordinary way, as my hon. and learned Friend the Member for York (Mr. Hylton-Foster) has already pointed out, and in a way which I also find extraordinary for this further reason.
It is to be the law in future that if there is settlement of a claim, presumably either by negotiation or by the Commissioners themselves, and there is a subsequent change in the law or in the interpretation of the law, the settlement shall be of no effect whatsoever, even though a subsequent decision shows quite clearly what principles of law shall be applied to the settlement or adjustment of the claim.
We may reach this rather extraordinary position, that when a claim has been made, either by or against the Commissioners and has been settled on a Thursday of a particular week by the party to

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the dispute, that the next day there is a contrary decision, perhaps in the High Court on appeal from the Commission. Under those circumstances that subsequent decision shall be of no effect at all. In any event, who is to decide in interpreting this Clause or in administering it—because it would be more a matter of administration rather than a legal decision—what was the generally adopted law upon which the claim was settled or adjusted?
It may very well be that no principles of law at all were applied. It may perfectly well have been that the Commissioners made their claim without looking at the matter very much. It was accepted in those circumstances. The interests of the subject would demand a clear decision of the law, made the next day. In circumstances of that kind where does the subject stand? Who is to decide what is the generally received or adopted principle of the law?
Mr. Higgs: I had some difficulty in discovering what the Clause means, so I thought it would be better to purloin words which I have found in Green's Estate Duty, 1947. It says:
"Where estate duty was properly levied and paid as the law was believed at the time time to stand, it is not repaid on the ground that a subsequent judicial decision has shown the former view to be incorrect, or that (without any such decision) the Commissioners have since departed from the proper view."
That seems to express as accurately as possible, and rather more simply, what the Clause says. Those words are said to be the law up to 1947, and up to the date when the Bill will come into operation. When one sees that the Government take the trouble to set out in complicated language what the law shall be or what it has been in the past, it must be taken to mean something in the nature of a change in the law. I hope that the Minister will tell us, for the avoidance of doubt in the matter, why and in what way the Clause departs from the principles which have been hitherto followed.
There are particular points of detail upon which this matter has been brought into the arena. The first is in subsection (2) which relates to the transitional case, which is on the files of Somerset House at this moment. There it is said that the Clause shall come into effect from 11th April, 1951.
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"but not so as to affect any appeal to a court of law which was brought before that day under section ten of the Finance Act, 1894."
When is an appeal "brought"? Is it when notice is given of the appeal, or is it when counsel gets up to open the case?
On two other cases we ought to have information. First of all, it is said in the existing text books that where Estate Duty which has been paid and receipt given, that case may not be reopened either way. The Treasury cannot claim more duty if a subsequent decision shows that more duty could have been claimed at the time. The text books also say that, as things stand at the moment, if duty is agreed upon to be paid over a period by instalments, the matter may be reopened before the final instalment is known. Does the Clause mean any change in these arrangements that might involve any substantial difference?
The second case seems rather unfair. Sometimes people may believe that the duty should be less than Somerset House claims, but Somerset House persists. What happens when people are compelled to pay up, under duress, and it subsequently turns out that there has been a mistake? Are we to say that because people have given way to force majeure that the matter is not to be reopened? Where one has paid under firm protest, one should have the right to reopen the matter.
A question might arise, in the case of a person who was killed, whether he was killed on active service or not. When the decision in such a case was made one way or the other, duty should be repaid, one way or the other. It would be very much better that duty should be paid under firm protest, and reserve the right that the duty should go, in the end, to those whose view of the law turns out to be correct. All these cases depend on the question of whether we are making a change in the law, or are declaring what the law has been—as a result of my researches—since 1774.
The Attorney-General: This Clause is designed to create a degree of stability in an area where there has been uncertainty. The law dealing with Estate Duty has evolved over a number of years, but one occasionally gets a decision of the courts which seems to alter the settled practice in regard to

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these matters, and it is only when one looks at the thing from the commonsense point of view that there is a general acceptance in regard to the law in this class of case.
5.0 p.m.
Often a case may have been decided and acted upon for years and years in the courts. Hon. Members will have in mind various cases on which these things depend. Recently we had the case of Earl Fitzwilliam, deceased, a decision which overruled a view of law which had been entertained for nearly 44 years as it depended upon a case decided in 1905.
When we get that state of affairs, an enormous amount of money changes hand over the years. Estates are settled and wound up and everybody concerned thinks that the matter is finally disposed of. Hon. Members know that if a subsequent decision is given overruling that accepted state of the law a situation of great inconvenience may arise. The Finance Act, 1894, contains a provision in Section 24 (12) which, upon its true construction—which has now been decided as a result of advice given—provides that even though a payment may have been made to the Estate Duty Office upon an accepted view of the law it can become repayable and can be reclaimed if, subsequently, it transpires from some later judicial decision that that view of the law was wrong.
In the case of Earl Fitzwilliam, deceased, the law having been declared in that decision in a contrary sense to that which had been accepted 44 years before that, the result may be that very large sums of money may have to be repayable. That is a very disastrous state of affairs, and it does not operate only one way. It means that the estates of deceased persons have claims for repayment and it equally means that the Estate Duty Office has claims for further payments or for payments not made because those payments have been withheld upon an accepted view of the law.
The result is that unless some degree of certainty is introduced into this sphere of the law, when we get a legal decision which upsets what has been regarded as the settled law we may have a flow of claims one way or the other, either by the Estate Duty Office or by the estates of deceased persons. The Estate Duty Office has not for a long time past exercised its right
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to make claims for money which subsequent legal decisions have shown to be due to it, but, strictly, the claims can be made either way.
It was thought, particularly in view of the urgency of the problem as brought to light in the case of Earl Fitzwilliam, deceased, that it really would be in everybody's interest if we firmly laid down as a principle that once we could say that a state of law was accepted as settled and verified if payments had been made either way—to the Estate Duty Office or the other way—or a claim had not been made by the Estate Duty Office in the belief that that was the correct law, that should be final and the situation should not be liable to be overturned in the event of its subsequently transpiring—perhaps 10, 25 or 50 years hence—that the view of law was a wrong view of law.
That is the situation which the Clause is designed to remedy. If hon. Members will look at it more closely they will see that where there was a payment, in so far as it appears that the payment and its acceptance were regarded as satisfying the claim of duty and regarded on a view of the law which at the time was generally received or adopted in practice, it shall be determined for good and all upon that view and it shall not make any difference if that settled view of law is subsequently overturned by a legal decision.
That is what the Clause is designed to do, and it is, obviously, in the interests of the Revenue and equally in the interests of every testator and the estates of all deceased persons that there should be ultimate finality about the matter. Where receipts have been given and certificates issued, the matter in any case cannot be re-opened. This adds to that that when a payment has or has not been made upon an existing state of law in the belief that that existing state of law is the right state of law it cannot ultimately be re-opened.
Hon. Members have asked what is really meant by the words:
"… a view of the law which at the time was generally received or adopted in practice …"
I can only say that those words mean what they prima facie seem to mean, and that is that when everybody has acted upon a judicial decision always accepted as being correct we can say that these words are brought into operation and

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when that situation arises claims both ways are to be deemed finally settled once and for all and not subject to be re-opened in the event of the law being shown to be different from what it was supposed to be.
Mr. Renton: The Attorney-General has given us a most interesting description of the state of affairs which exists, but he has left us in a state of somewhat fascinated uncertainty about some of the matters. If he could follow the illustration he gave to its logical conclusion and tell us about the situation created by the decision in the case of Earl Fitzwilliam, deceased, it would be of interest. Can he say whether there are outstanding claims for repayment based upon the previous and different view of the law which was taken in cases decided before that case was dealt with? Are there any such cases outstanding?
Perhaps he would answer the simple but important question put by the hon. Member for Bromsgrove (Mr. Higgs), whether the Clause is declaratory or makes a change in the law. It would appear that it is declaratory or the practice which the Treasury would like to have followed but that, in fact, it makes a change in the law. May we be enlightened about that?
The Attorney-General did not say who was to be responsible for deciding what was the generally received or adopted view of the law in practice. One has to guess from the procedure which would be applied in such cases. It is not set out in the Clause. It is the procedure which follows from a claim by the Commissioners or a claim against the Commissioners after a mistake has already been made in the payment of duty, but the question is: Who will be responsible for saying what was the received or adopted view of the law in practice at a certain time? Who makes that decision, and in what circumstances?
The Attorney-General: I should like to answer those questions. The Clause makes certain what was previously somewhat uncertain. It depended upon Section 8 (12) of the Finance Act, 1894, which laid down that where it was provided to the satisfaction of the Commissioners that too much Estate Duty had been paid, the excess should be repaid by
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them. There was some uncertainty as to the effect of the words in that subsection and, in particular, whether they operated where the payment had been made under a mistake of law. The Clause finally lays down the position.
As to who is to decide this, in the first place it will be those who are immediately concerned with a particular estate. That is to say, the Estate Duty Office and the solicitors concerned in administering an estate will have to decide and advise their clients whether there is a settled state of law or not. In the event of there being a difference of view between those representing the estate and the Estate Duty Office, the matter would ultimately come before the court and it would be the court which had to decide whether there was a settled view of law at a given time.
With regard to the question of claims outstanding, if the view is right—this is the view which has recently been preferred—that money paid under a mistaken view of the law has to be repaid, the effect of the Earl Fitzwilliam, deceased, case is that claims can be made against the Estate Duty Office going back to 1905 when the principle which the Fitzwilliam case overruled was first established. Therefore, were it not for this Clause, claims might be made for years and years back; and, of course, vice versa.
If any accepted principle of law at present acted upon is decided by some future legal decision to be wrong, the Estate Duty Office, were it not for this Clause, would have claims going back for years to the date when the law upon which they had formed their claim was laid down.
Mr. Renton: I hope that the hon. and learned Gentleman will forgive me for pursuing this. He has told us what could happen as a result of the Fitzwilliam case. What I was asking is what will happen? Are there claims outstanding at the moment against the Estate Duty Office? This is an important thing, because this Clause would appear to defeat such claims and we should be clear about it.
The Attorney-General: The final subsection excludes the operation of the law in relation to any appeal to a court of law brought about after 11th April, 1951.

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So, anything outstanding in the way of an appeal there would be excepted from the Clause. The effect of the Fitzwilliam decision, and I cannot elaborate it any further, is that there would be claims against the Estate Duty Office relating to estates settled over the last 40 years, were it not for the fact that we are now settling the law once and for all, with the result that they cannot be brought except in so far as concerns any fresh appeal up to the date of the passing of the Clause.
Mr. Higgs: I did ask the right hon. and learned Gentleman if he could tell us when "brought" happens, of I may put it that way. Is it when the notice is given or when the actual hearing begins? I also asked, and this is a matter which will affect the administration of the Clause, whether this Clause over-rules what has hitherto been stated in the text books to be the law. If duty is being paid in instalments or has otherwise not been fully discharged a claim for repayment may well be entertained. Does this Clause alter the law in that rather important respect? In the case of the larger estates it is often the case that duty is paid in instalments, and if it is discovered during the currency of the payments that a mistake has been made either way is it then possible for the matter to be re-opened?
These points are dealt with in the text books and the question will arise whether the books are still correct. There is the other question of payment under protest. At present, the law appears to be that it makes no difference to the operation if one pays money under protest, but if there is anything in the nature of compulsion on the part of the Revenue then the rule does not apply. This is referred to in Halsbury's, Hailsham Edition, Vol. XXVIII, page 332, footnote (b):
"It makes no difference that the money had been paid under protest, where it was not extorted under duress and colore officii."
If that is so the position is that if one pays under protest the case cannot be reopened but if Somerset House uses compulsion, and one turns out to be right, one can. What we want to know, and what Somerset House will have to know, is whether this Clause over-rules that, or does it merely leave it as it was?
The Attorney-General: The appeal is "brought," I should have thought, when it was initiated and when the first steps to bring it before the court were taken. I think that is the position, but I cannot be bound to that without further consideration. In the case of money being paid by instalments on account of Estate Duty the Clause is expressed to operate in respect of money actually paid; that is to say, if the money has already been paid under the terms of the existing state of law it cannot be repaid. I should have thought the same applied whether under protest or under compulsion. Money paid on a view of the law generally accepted is paid once and for all and cannot be re-claimed.
5.15 p.m.
Mr. C. Williams: I think the Committee is entitled to an answer to the question put by my hon. Friend the Member for Huntingdon (Mr. Renton). We understand that this Clause may have been put down because of difficulty in paying. We also understand that the Clause will prevent certain things happening in the future and in that way will be a clarifying Clause. But I think the Committee is entitled to know whether there are many small cases—not big cases like the Fitzwilliam case—coming up over the last few years.
The Chancellor will bear me out that Clauses are not inserted needlessly into the Bill, and, therefore, the Treasury should know that they may have to deal with a number of smaller cases. I wish to know how big a clearance of smaller cases we may expect under this new Clause. That is something which the Treasury must obviously know and I cannot understand why the right hon. and learned Gentleman has not answered it. He has answered the difficult question. This is a simple one, but if he cannot answer it perhaps the Chancellor may be able to do so.
The Attorney-General: I have no doubt that over the last 40 years there are both small and large claims. That stands to reason. But I have not with me particulars of all the cases which are affected by the Fitzwilliam case stretching back over 40 years, and, with respect, I would submit that it is not necessary to have all that detailed information to decide whether this Clause is one which should be accepted or not. If we do not pass

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this Clause the results of the Fitzwilliam case, which upsets the principle which has been in existence for over 40 years, will mean that claims can be made against the Estate Duty Office in respect of estates thought to have been finally disposed of over those years. That would be a deplorable situation. There are, no doubt, large and small estates involved, but to have to re-open them now would no doubt cost a large sum of money and would really be most unfortunate.
Mr. C. Williams: I have not for one moment asked for all the facts and figures. That would be unreasonable. But my hon. Friend did put a simple question and I am sorry we have not had better luck in getting a sensible answer. I assume that there is a possibility of other cases being opened up and I am thankful that the Government put in this Clause which prevents lawyers carrying on the needless legislation which might have arisen if it had not been put into the Bill. I congratulate the Government on that. There is so little over which to congratulate them. They are mismanaging things so badly, but I think it would be ungenerous if I did not take this last point and congratulate them on this crumb of sense in the Clause.
Clause ordered to stand part of the Bill.

Clause 32.—(RESTRICTION OF CERTAIN TRANSACTIONS LEADING TO AVOIDANCE OF INCOME TAX OR PROFITS TAX.)
The Temporary Chairman (Mr. Diamond): The first three Amendments on the Order Paper relating to this Clause, namely, two in line 40 and one in line 43, are not selected.
Mr. Manningham-Buller: I beg to move, in page 23, line 46, after "resident" to insert:
"otherwise than as a result of being compulsorily wound up."
At long last we have reached the point which the Leader of the House, quite early last night, thought we might reach at about a quarter to twelve; although I think that if he had listened to all these discussions he would not think that any of them have been unfruitful or, indeed, unduly prolonged. We now come to a Clause just as important as Clause 28,
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and it falls to my lot to move the first Amendment to it. I do not propose to take very long about that.
The Committee will see that by subsection (1) of the Clause it is provided that
"… all transactions … which result or may result, directly or indirctly, in the avoidance of liability to income tax or the profits tax shall be unlawful, that is to say—
(a) for a body corporate resident in the United Kingdom to cease to be so resident."
So it is now going to become, under this Finance Bill, unlawful for a company resident in the United Kingdom to cease to be so resident, if the result may be an avoidance of liability to Income Tax or the Profits Tax.
There is no doubt, I suppose, about it that if a company is wound up compulsorily it will cease to exist, and that, if it ceases to exist it will cease to reside. If it was a company which was existing in the United Kingdom, then it will cease to reside in the United Kingdom, and if that ceasing to reside means that Income Tax may be avoided then a serious criminal offence will have been committed. The Committee will see that by subsection (2) it is provided that
"Any person who, whether within or outside the United Kingdom, does or is a party to the doing of any act which to his knowledge amounts to or results in, or forms part of a series of acts which together amount to or result in, or will amount to or result in, something which is unlawful under subsection (1) of this section shall be guilty of an offence …."
Anyone petitioning for the compulsory winding up of a limited company will appreciate that, if he is successful, that company will cease to exist and so will cease to reside in the United Kingdom, and that—to carry on with this Clause—it will mean an action for avoiding Income Tax. And so, under the strict interpretation of the Clause, it would follow that anyone petitioning for the compulsory winding up of a limited company after this Clause becomes law—if it does become law—will be liable to imprisonment for two years or to a fine of £10,000.
It may be Socialist policy to discourage the compulsory winding up of companies which are insolvent. If so, the penalties imposed should be adequate for the purpose. But really, this does indicate the nonsensical state into which this provision will bring the ordinary law of

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the land. Not only will the petitioning creditor run the grave risk of these penalties, because the result of winding up a company compulsorily will be to bring about an avoidance of liability to Income Tax, but also the director of the company is presumed to be guilty unless he has proved that the winding up was done without his consent or connivance. If a director of a company did not oppose the compulsory winding up it will be very difficult for him to prove that the winding up was not done with his consent or connivance. Thus he will become liable to the heavy penalties.
I suggest that as this is not the sort of thing anyone wants to see happening, and to secure that this fantastic result will not ensue from Socialist legislation we have put down this Amendment. I am sure that, after his dealing so valiantly and for so long with all the other legal complexities with which we have just dealt, the Committee will regret that it should not have the assistance of the learned Attorney-General upon this matter, but, no doubt, the Chancellor of the Exchequer or the Financial Secretary will be able to confirm that one of the curious consequences under this Clause of the compulsory winding up of a limited company may be to render the petitioning creditor as well as the directors of the company liable to incarceration for two years or to a fine of £10,000.
Mr. Jay: The hon. and learned Member for Northants, South (Mr. Manningham-Buller), is concerned that we, inadvertently perhaps, by this Clause impose very heavy penalties on anybody who compulsorily winds up a company. His argument is that it is illegal under this Clause—without the consent of the Treasury, of course—for any resident in the United Kingdom to cease to be so resident. If a company, he argues, is compulsorily wound up it will cease to exist and, therefore, cease to be resident in the United Kingdom, and will, therefore, transgress the law.
I think, however, that the hon. and learned Member is under a misapprehension in supposing that if a company is compulsorily wound up it ceases to exist. The fact is that if a company is compulsorily wound up it passes into the hands of the liquidator. It changes its
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form, but it does not cease to exist Indeed, one of the practical, as opposed to the formal, objections to this Amendment is that conceivably liquidation might be used as a form of evasion of this Clause—even, conceivably, compulsory liquidation.
The second objection to the Amendment is, in our view, that it is really unnecessary. I am advised that if a company ceased to exist in the full and proper sense it would not be held to have ceased to be resident in the United Kingdom. Nevertheless, although that is the advice given to me on the ground that the present drafting of the Clause is argued to be justified, I must say, speaking purely from the commonsense point of view, that it does strike me as being a slightly odd argument.
What we intend to do here—and we are not arguing the main issue of the Clause on this Amendment—is to prevent a company resident in the United Kingdom from ceasing to be resident without consent. We obviously do not wish to make it illegal for a company to cease to exist. That, I believe with the hon. and learned Gentleman, would be absurd. Therefore, although we cannot accept his Amendment, I am prepared to look into it again before the Report stage—because, at least, some doubt has been thrown upon the existing form of the Clause—to make quite certain that it is not open to that objection.
Mr. Manningham-Buller: I am glad that the hon. Gentleman says he will look into this again. In view of his assurance that he will do so, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Lyttelton: I beg to move, in page 24, line 3, after "transferred," to insert:
"otherwise than in the ordinary course of business of that body corporate."
I wonder, Mr. Diamond, whether we could take into consideration with this Amendment our Amendment to page 24, line 26, at the end, to insert:
"and
(iii) without prejudice to the power of the Treasury to give consent under proviso (ii) to any other transactions, that consent shall not be withheld from any transaction or transactions falling within any of the paragraphs of this subsection

(a) if the main purpose of the transaction is either the better development of the trade or business or part of the trade

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or business or to comply with the directions or expressed wishes of any overseas government or authority, or

(b) if as a result of the transaction a trade or business or part of a trade or business is transferred to another country, the greater part of the assets of that trade or business or that part of the trade or business is situated in that country."

If we could discuss the Amendments together it would enable me to go fairly wide, although I shall be as careful as I can not to get out of order; but I think that I could cover a good deal of ground. The whole Clause is, to our minds, pernicious. It is well nigh unamendable, like Clause 28. However, these Amendments would do something to take the inflammation out of the Clause and I shall do my best to deal with the matter on that basis. I am not going into much detail, because I am anxious to ascertain the Government's attitude and I do not wish to go into the minutiae of this question until I see how things are shaping.
5.30 p.m.
I propose to deal with this Clause mainly under two headings—first of all, the deterrents to those outside who might wish to come inside Great Britain to carry on their business or to domicile their companies here; and, secondly, deterrents to those who are inside Great Britain now and who wish to build up assets outside or carry on and expand their businesses overseas. This Clause is the worst type of Socialist isolationism; of course, isolationism and Socialism always go together. There was a time when London was regarded as the trading and financial centre of the world, when people came here of their own free will and in large numbers to make use of the facilities which London provided.
It is as well to remind ourselves what those facilities were. There was the Stock Exchange, the largest market in international securities in the world. I say, with a proper sense of responsibility, that the Stock Exchange is as necessary a raw material to industry as coal. There is, I know, a tendency among hon. Members opposite to regard the Stock Exchange and all other forms of exchange as a type of casino. In fact, the Stock Exchange is as necessary a raw material as coal for the rapid expansion of industry. There are banking, insurance and shipping facilities and there are, above all, the free markets which the Socialists do
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not like—they believe in bulk buying—like Mincing Lane, the Metal Exchange, the Rubber Exchange, the Baltic Exchange and the Liverpool Cotton Exchange.
Another thing which is often forgotten is what is known as the London Arbitration Terms of Contract. Many international contracts contain a reference to these terms so that if there is any dispute between the buyer and seller it can be settled under the London Arbitration Terms. Besides all these things thousands of standard contracts for commodities, even where formal exchanges do not exist, are used all over the world—commodities as different as mica, isinglass, quebracho, etc.
I suppose that all of us have sometimes been awakened at night in London to hear the deep hoot of the shipping in the river, and sometimes we may have caught a whiff of coffee being liquored in Mincing Lane. These are reminders of the romance of our international trade which is flowing all over the world. I would remind the Committee that these services are very small labour users—and this in a country which is very short of labour and where there are many more jobs to do than there are hands to do them with.
Services of this kind are a most desirable form of invisible export because they bring to the country returns altogether out of relation to the amount of people who are employed in providing the services. Just as Paris has for some centuries exported, at practically no cost, gaiety, chic and the can-can, so does London provide a great number of invisible exports at small labour cost. All these services are strangled by this Clause, because it is a warning to foreign companies not to get within the ring fence of the Socialist State.
We can learn from this Clause exactly what the Socialists think are the necessary penalties if people wish to leave. They assess the fine at £10,000 plus two months involuntary stay in one of His Majesty's penitentiaries. That is what they regard as the necessary deterrent to keep people here once they are here. We are very seldom given a glimpse in actual money terms of the value at which they assess the State which they built up. It is also curious to think of the irony of having a tourist drive in an effort to

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get tourists here at the same time as every means is taken to drive away companies who wish to domicile themselves in London. We used to attract overseas companies by every means possible, and much of our greatness as a mercantile trading nation is because industrial companies from overseas wished to be domiciled in London in order to cover European markets and to make use of the free facilities which our capital city provided.
I have picked out three companies—Vauxhall Motors, Ford and Monsanto Chemicals—which have come here to carry on business in our own country and to do export business because of the facilities of the free market which London provides in all these different ways. The Clause is strongly deterrent to any country, for example, the United States taking an interest in or establishing enterprises and companies here with predominantly British capital, because once in the ring fence of the Socialist State one cannot get out except at the Treasury's discretion. The world is far too dynamic for anybody to wish to come into a market which depends upon the discretion of a Government whose ideology is different from that of the immigrant and when the penalties for trying to get out may lead the immigrant to Wandsworth or Parkhurst or Maidstone or other prisons administered by the Leader of the House.
I say with the utmost sincerity and earnestness that this Clause is poison to an international centre like London, and that it is in the interests of everybody to see that the entrepreneur business and the invisible exports, which use so little labour, are built up. These are bad enough reasons on broad grounds for opposing this Clause—[Laughter.] It is perhaps excusable when we have reached a point which the Leader of the House expected to reach 18 hours ago, that I should be guilty of an occasional slip of the tongue. If I do, I hope that my reasoning does not go with it. I should have said that those are good enough reasons for opposing the Clause on these grounds.
Even worse, I think, is our own ability, which is struck at by this Clause, to build up our own assets overseas. I would remind the Committee that the effects of the Clause are to render unlawful transactions directly or indirectly
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leading to avoidance of Profits Tax or Income Tax. According to the Clause, it
"shall be unlawful … for a body corporate resident in the United Kingdom to cease to be so resident; or
(b) for the trade or business or any part of the trade or business of a body corporate so resident to be transferred from that body corporate to a person not so resident; or
(c) for a body corporate so resident to cause or permit a body corporate not so resident over which it has control to create or issue any shares or debentures."
The last subsection is of a much more limited application.
It is not an uncommon complaint of Socialists that in the last 100 years in exploiting resources overseas—perhaps minerals—we have also exploited the population; we often hear that said. I am far from thinking that it is true, except in a very limited number of cases. I do not think that the general condemnation could be borne out. But if we are to avoid falling into what Socialists regard as this particular form of capitalist exploitation, what are the types of measures which we should have thought were appropriate to prevent such exploitation taking place?
The first, I should have thought, would have been to allow nationals of the territory which is being developed to participate in the capital and in working their resources. It is made unlawful by the Clause for a British company to do so except with the Treasury's consent—I must put in that proviso all through. I should have thought that the next thing was to establish offices in these territories, to get local directors on to the boards, and to make the overseas subsidiaries representative of local interests. But that becomes unlawful under the Clause. Finally, I should have thought that what was, perhaps, the most desirable of all these measures to prevent the charge of exploiting overseas territory would be to raise, whenever appropriate, local capital to help exploitation.
This is very familiar to me in the course of my own business, and the policy which I pursue, with the support of my co-directors, has always been to try to establish a business overseas until it has come to a point where the risks attending capital have been very much reduced; this is the policy which we pursued in Australia and are now pursuing in India. We try to bring the business to a point

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where the risks can be very easily focused and at that moment—and not for altruistic reasons, but for sound commercial reasons—we try to bring in the local capital so that the people of the territory have an interest to buy our locally produced goods rather than take imports.
That is a perfectly sound piece of commercial policy, and all hon. Members who have studied the retail trade will know that it is very important when retailing in a big capital city that the nationals of that particular country should have as far as possible a participation on the capital, because that binds them towards the retail business and prevents xenophobia in the retail trade spreading.
If more specific instances are wanted, I should like to give the Committee one example because it concerns one of the very greatest businesses which has been established in this country: The British American Tobacco Company. Their Vice-Chairman recently pointed out that the growth of his company over the last 49 years, with all the services and profits which that company has brought to London, has taken place precisely by the processes which the Government now seek to prevent. It has registered this steady growth largely through the consistent policy of incorporating subsidiaries in overseas territories to take over and carry on the business of the parent company.
The subsidiaries carry on this business under the management of local directors in sympathy with local sentiment and in touch with the local capital markets and unhampered by the discriminatory tax legislation that many developing countries may impose upon purely foreign companies. The Vice-Chairman used these words:
"This has undoubtedly proved to be the right policy politically and economically."
I should have thought that it was a policy which is on the whole in accordance with the sentiments of hon. Members on the benches opposite. Yet these prohibitions apply, even although the avoidance of liability to Income Tax or Profits Tax is only indirect or incidental. It means that if the Clause was unamended, in future no overseas branch could be converted into a company formed under the local laws except with the discretion of the Treasury.
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It is not in my opinion a sufficient defence of the Clause to say that the Treasury will always act in a sensible manner, because after reading the Bill it is clear that they are not doing so. Anybody who has had long experience of Government Departments—this is not a criticism of Government Departments—knows that many things which are desirable in the ordinary course of commerce do not commend themselves particularly to the Treasury with their rather Olympic point of view on ordinary transactions.
5.45 p.m.
The second part of the Amendment is designed to differentiate between two obviously different cases. I do not know whether in this I am expressing the sentiments of the Chancellor—I think, in fact, that I am. I have no sympathy whatever with the company that has the bulk of its business in the United Kingdom transferring its head office to the Bahamas, Luxembourg or somewhere else, and any Clause designed to catch such a transaction will, of course, have our support.
But there is a wide difference between such a migration, or flitting, and the company the most of whose business is overseas and which may wish to transfer for many reasons, including that of taxation, its head office to where the main operation of the company is carried on. We have seen this happen with Treasury consent in the case of Rhodesia. Some mining companies have transferred their business there because the bulk of their operations are carried on in Rhodesia.
The whole Clause is typical of what I have already described as the Sowerby, or "sourpuss," mentality. Any damage is accepted to trade for the sake of catching a few evading sprats. The Committee have not often been reminded by a Government spokesman that the evasion of tax in many cases is fraudulent and that it is a considerable deterrent to be convicted of fraud. "Evasion" is one of those genteel words which we nowadays often hear.
In many cases, the evasion—I see the Attorney-General frowning—would be better expressed by saying "fraud against the Inland Revenue." In many things that is considered to be a considerable deterrent without adding all this mumble-jumble on top of it. The mentality of the Government over this taxation is like this. If burglary is prevalent in Muddlecombe-under-Dyke, in Blankshire,

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then the right way to deal with the burglary is to give the police in Blank-shire the right to enter any citizen's house in Blankshire without a search warrant. That is absolutely the wrong way to look at it.
Here is another instance of where the greatest possible damage will be done to our trading interests in order to catch a few rascals who want to get through the Treasury net. The thing is far too wide, and, as I said before, our task in the Committee would be very much easier if we could just disregard all the liberties of citizens, disregard all legitimate business, catch everybody and then see who we let out—the converse operation of saying, "If you want to get out on your own, £10,000 and two years in one of His Majesty's prisons."
The Inland Revenue motto—and they have again moved in on the Clause in a way which is unpardonable and, in my opinion, cannot be accepted by the Committee—is, "There is more rejoicing in Somerset House over one evader that is made to repent than over the 999 just persons who pay their taxes." I beg the Chancellor to reconsider the Clause, which I think is one of the most pernicious which I have seen as fit to be written into la statute. I hope that the Chancellor would not like to go down on record as the man who invented the Socialist penitentiary, with a fine of £10,000 and a couple of years' imprisonment for anyone who attempts to get over his latest electrified fence.
Mr. Eccles: I hope that the Committee will allow me to make two separate submissions. I should first like to add some general remarks to what my right hon. Friend the Member for Aldershot (Mr. Lyttelton) has said. Then I should like to address myself particularly to the words of the Amendment in my name, in line 3.
This Clause is the brother or sister of Clause 28 in this respect, that both are children of oppressive taxation. We have another example of one evil breeding another. A trading country like ours which cannot possibly earn its own living without selling and rendering services overseas cannot raise, by its domestic policy, its costs and prices, far out of line with the rest of the world without courting devaluation. We have been through that experience in the last five
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years. We have seen that if we get out of step with world prices the £ has to be devalued.
In the same way, if we have a taxation system in this country which is far more burdensome than the taxation systems in other countries where limited liability enterprise is carried on, the result is that business facilities in the United Kingdom lose their status. We suffer, as it were, a devaluation in the trading facilities we can offer, with the result that there is an all-round loss of earning power to this country. Of course, it does not happen suddenly. People do not suddenly take their money away from here, nor do they suddenly stop putting it here; but once the credit of a country is impugned and the world sees that it is no longer in the first class, then little by little deterioration sets in in that country's financial and business position.
This Clause is, therefore, a confession of despair that under Socialism the United Kingdom cannot provide attractions for business equal to those that can now be found in the Dominions and in the industrial nations of Europe and the New World. I take it as a sign of decay. We are acting like a miser who, feeling that his best days are over, bolts his door and hugs his possessions to himself and says, "I will not trade any more; I will keep what I have got." There is no possible end to that other than poverty and decay.
I ask the Committee to notice a most interesting parallel. Whenever a great nation begins to slip from the front rank in wealth and power one finds an agitation, ending with a law, to prevent its national art treasures from being exported. Let us look round Europe and see where in the old days the great free markets in the finest works of art were—Italy, Spain and the rest. In all those countries there are now laws preventing the export of works of art. They have all reached the miser stage of saying, "Our best days are over. Let us shut the door and keep what we have got." They have slipped out of the front line. I maintain that precisely the same sort of process is obvious in this Clause.
I ask the party opposite what sort of a chance they think the people of Great Britain have of earning their bread and their raw materials in—I was about to say a century—at all events a decade

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when the prices of those raw materials are steadily improving relative to manufactures, if we cease to be a first-class international trading nation. We cannot live by taking in each other's washing; it is an absurd doctrine.
Yet one feels that the Government must have made up their mind that the chances of maintaining and improving the standard of life in this country are better if we put a ring fence round ourselves and keep absolute control over everybody, and drop like a ton of bricks on anyone who here or there makes the slightest attempt to move out against the Government's wishes. One feels they regard that as offering a better chance than if we continued, as could be done even under the mild Socialism such as I understand to be the doctrine of the right wing of the Labour Party, to be a first-class international country trading freely all over the world, and offering these enormous advantages to other countries at the price of not discriminating against them and not putting them under difficulties that would be peculiar to this country.
If we lose a company which controls the mining of minerals in the Commonwealth by that company deciding to move its head office from London to Australia or Rhodesia, we lose not only the tax revenue on that part of its profits which are not remitted to shareholders residing in this country. In that respect, once it becomes resident, say in Australia, the Chancellor gets no tax on the retained profits in Australia, whereas while it was resident in this country he received tax in respect of the whole of its profits.
The loss is far worse than that, because when the directors of that company are in London they have only to walk a hundred yards to get to their bank, another hundred yards to get to their insurance company, there are shipping companies all round them, and they have strong reasons for marketing their product through a British firm. Apart from all the commissions which are earned for this country on the ancillary services performed because the company is resident in London, we should surely be very careful not to do anything which puts out of our sphere of influence supplies of raw materials. It is much easier to get the agency of a mine's output and so
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retain, as it were, priority for British industry in respect of those raw materials if the whole business is concentrated here in England. With the outlook for raw material supplies in the world today this kind of Clause is suicidal. It could not be more dangerous.
I feel about the Clause as I felt about Clause 28: I do not think it can be amended in any way which would make it possible for me, at all events, to agree to it. My right hon. Friend said that we realise that there have been companies who have run off to Luxembourg or some place where there is a very low taxation system but which has nothing whatever to do with their business, simply to evade tax, and that if we could frame some Clause which struck only at those people and nobody else—the person who flagrantly goes abroad for that purpose—we ought to look at it. But we ought to be most careful even there. It is well worth while allowing a few people to misbehave even in that respect rather than endanger that great complex of credit and international status on which we so much depend.
6.0 p.m.
That leads me to say that we must have from the Chancellor some estimate of what he thinks he may lose in revenue if this Clause is not placed on the Statute Book, because I fancy the calculations have been made on some very poor assumptions. I will not venture at this point to discuss the question of what would be the probable loss if the worst came to the worst and all likely companies emigrated. First, I should like to hear the Government's answer and perhaps have another opportunity to speak later.
Paragraph (b) of the Amendment in the name of my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) says roughly that one of the reasons which will count in obtaining permission to emigrate will be if the company is going to the country where its main operations are carried on. I quite understand that; of course, that is to catch the gentlemen who run to Luxembourg, but it is not quite wide enough, and for this reason.
It has been found that where there is a group of subsidiary companies in the African Colonies—Uganda, Kenya, Tanganyika and Northern Rhodesia, let

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us say—it may be very inconvenient to have a head office for each one in each of the territories. On the other hand, it may be highly convenient to manage them from Southern Rhodesia—and this is a case which has actually occurred several times. There are several other cases where it is highly convenient to have a head office in one of the West Indies and to manage branches or subsidiaries on other islands.
As the Amendment is drafted, I am afraid it is a little too narrow to bring this point into this Clause, and I commend that to the notice of the Committee. Obviously, we shall deal with this again on the Report stage. It is a point which affects some very nourishing companies which, were I to give the details, I am sure the Committee would see are absolutely genuine in their operations.
I will turn to my Amendment, which we are to discuss at the same time. It is in line 3, page 24, where, after "transferred," I ask the Committee to insert the words
"otherwise than in the ordinary course of business of that body corporate."
The subsection reads that it shall be unlawful
"for the trade or business or any part of the trade or business of a body corporate so resident to be transferred from that body corporate to a person not so resident."
What is meant by,
"trade or business or any part of the trade or business of a body corporate"?
We feel that the Government cannot be aiming at ordinary business transactions.
I should like to give one or two examples of what I think may happen if this Clause is not amended. It seems to me that selling a part of one's business might include things like this—to give a rather absurd example and then one which is more substantial. Supposing a brewer in the United Kingdom, whose business is to sell beer, sells a case of beer to a hotel in South Africa, and then the hotel in South Africa markets the beer. The beer in bottle is an asset of the brewer in the United Kingdom. He has sold some of it to someone else in South Africa, who then does the business of distribution. It is not very clear whether even such an absurd case as that would be considered as part of his business.
Much more serious cases are these. First of all, there is the question of
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whether the sale of mining leases is part of the business of the company. In London there are great mining financial houses which have brought millions and millions of pounds into this country by opening up mineral deposits in distant parts of the world. The way in which they have done it is that they have acquired the concession to look for and mine minerals over some wide area, let us say the area for which Mr. Cecil Rhodes obtained a concession and which was then vested in the British South Africa Company.
They let prospectors go out with their little mining kit to scratch around in various areas of the concession to see if they can strike a mineral, and one day one of the prospectors comes along and says, "Yes, I have found something at such and such a place. Will you, the British company, give me a right to carry out exploitation of that mineral a stage further and see whether we can develop that mine or not?" The sale of the mineral rights in respect of that promising area which the prospector has found is the way in which mines begin, and it is the ordinary business of these mining houses in London to sell such mineral rights. I think we need an assurance that that sort of business does not fall within paragraph (b).
The parallel business, of course, is the selling of patents, where we have a company registered in this country with a number of patents. Foreigners come along and say, "We should like to have your patent; we will put up a factory in our country and we will give you royalties." That is very common, but surely under the Clause these people would not be able to sell a patent any more than the mining company would be able to sell a mineral right, without getting the permission of the Treasury. I suggest that that will not do, because this sort of thing goes on all the time in very small packets and it would be absurd to bring it within the Clause.
Perhaps I may turn for a moment to Clause 33, which gives power to the Government to revise the price at which the transaction was carried out in the ordinary course of business if they consider that the British company has sold too cheaply to the ovrseas company, or, alternatively, bought something too dear from overseas.

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In other words, if anyone has tried to dodge tax by selling part of his business at a phoney price, then in the next Clause there is power for the Government to revise that price.
Taking that power together with the arguments which I have previously advanced, there cannot be much to be said against our Amendment. It would very much restore the confidence of these companies in London, many of whom have quite deliberately stayed here although their operations are overseas. I think they stayed partly from sentiment. There is still a great preference for people who have always done their business in the United Kingdom—as have their fathers—to stay here. Hon. Gentlemen opposite need not think that everyone is trying to get out of this country. It takes a Socialist Government to push them out. On the whole, everybody wants to stay here. It would restore the confidence of these people if this Amendment were accepted.
Mr. Colegate: I share the fears of my hon. and right hon. Friends about the effect of this Clause. To anyone actively engaged in the sort of businesses referred to, it is almost fantastic to think that the Treasury should have produced a Clause of this kind. I should like to illustrate how subsection after subsection of this Clause interferes with a legitimate business which is of great advantage to this country because it is situated here. The business I have in mind is in London. It is mainly a holding company owning stores in the West Indies, in Capetown, and in Wellington, New Zealand, and also certain other businesses.
It does not merely own these businesses and sit here to receive the profits. It does what is very common in these cases. It runs a buying department. It buys goods all over this country and in London it buys what are known as fashion goods. It has at its disposal the financial resources to feed the overseas concerns with the goods, hardware, fashion goods, and whatever else it may be. But in the ordinary course of its business it constantly has to consider such questions as whether it would be wise to buy lumber not through London but through its Jamaican concern, or whether it should buy other goods in South Africa or New
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Zealand, even if the goods bought in New Zealand may be destined for the West Indies.
That is not unique. That is a common type of business which goes on in London in a great many different forms. Each of these businesses has to consider from day to day and week to week where they should situate each piece of their business. This firm has its buying department in London, but it has recently transferred—and no doubt in future it will transfer other sections—part of its buying department to different places in the Dominions. It may also bring back to London other pieces of business which are at present conducted in Jamaica or in Wellington, New Zealand.
In addition, it must constantly consider that, for nationalistic reasons, it is wise to raise capital from the subsidiary companies in the countries where they are situated. To do otherwise is to fly in the face of the nationalistic sentiment which has spread not only over the Empire but over the whole of the world. Nothing could create a more disastrous impression abroad than that businesses in London, with a dog-in-the-manger policy, were trying to prevent any of the local inhabitants where they had branches participating in the profits of the business carried on with those places.
Subsection after subsection of this Clause interferes with those business operations which I have described. They would be cured to some extent if the Amendment of my hon. Friend the Member for Chippenham (Mr. Eccles) were accepted by the Government. I cannot help feeling, though I may be wrong, that the Chancellor started out with a perfectly legitimate desire to stop the people who had been referred to who, for what I should call fraudulent reasons, want to take a business to Luxembourg or some other place with the only object of defrauding the Revenue. In trying to spread the net wide he seems to have caught more than three-quarters of the mercantile and financial businesses situated in the City of London. I appeal to him to consider this Amendment and the whole Clause with a view to seeing that the main mercantile businesses are adequately safeguarded from any imputation of fraud upon the Revenue.
6.15 p.m.
Mr. Gaitskell: The criticisms which have been levelled against this Clause in the debate on the two Amendments we are now considering can be divided into two classes. First, there is the more general criticism which the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) put forward, which really condemned the whole Clause root and branch, because the right hon. Gentleman said that he thought it would have very grave effects on the economic health of the country; that we should suffer serious economic loss; and that the various advantages which the City of London brings to the nation would cease to be advantages.
The second line of criticism was developed from instances where legitimate transactions would be caught by the Clause and it was said, therefore, there would be a great deal of interference with legitimate business. I appreciate that the two lines of criticism obviously join up, but there is a broad distinction of that kind. Both the hon. Member for Burton (Mr. Colegate) and the hon. Member for Chippenham (Mr. Eccles) gave a number of examples. I should like to answer both these lines of criticism.
I will begin with the more general type. It is natural that the Opposition should concentrate—it is their duty, after all—on what they regard as the weaknesses of the Clause, but I do not think that they paid enough attention to the circumstances in which the Government decided that it was necessary to introduce this provision. I must remind the Committee of what those circumstances were. The fact was that over a period of at least a year there was a growing tendency for companies to migrate to avoid paying taxation.
Mr. Assheton: Excessive taxation.
Mr. Gaitskell: Whether it was excessive or not is a matter of opinion. There is no doubt about their motives. It is true that some of those companies had good reasons for migrating. I do not question that. Others had less good reasons.
The fact is, however, that there was a growing tendency, for the purpose of avoiding taxation, to transfer the control and management of these companies abroad. These were largely companies who operated to a considerable extent overseas and who, thereby, could escape
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Profits Tax and Income Tax on undistributed profits. Income Tax, was paid on the dividends distributed to the United Kingdom shareholders, but otherwise they escaped tax.
I was asked how much I thought was at stake here. It is impossible to say; I cannot answer that question precisely. I can only say that, if we take companies operating overseas, the maximum amount which the Revenue might lose if they all moved abroad would certainly be over £100 million of tax, which is quite a serious sum. I am not suggesting, of course, that we have lost anything like that, but there has been a serious drift, involving a loss to the Revenue, I should say, of several millions, which might have become many millions a year.
That was the circumstance with which we were confronted. It was not a question of fraud, or of what has been called the Luxembourg case, though there may be some of these instances as well. All this was perfectly legitimate under the existing law, but we were warned that it would go further. It is true that the British Overseas Mining Association warned us that, unless the Profits Tax was reduced, there would inevitably be an increase in the number of companies migrating, and the question was what we were to do in those circumstances.
I could understand the hon. Member for Chippenham saying that this is the child of high taxation if he were also to say, "I will vote against the increase in the Profits Tax to 50 per cent." If hon. Members were to take that line and were to say, "We will not re-arm," or, "We will smash the social services," or what have you, that would be legitimate, but if they are saying, as they have been throughout this debate, "You should allow this and that here and there," and yet they make no serious proposal for large reductions in taxation, they avoid this problem of what to do in these circumstances.
Are they going to allow these companies to migrate and avoid tax? Is that fair to other companies, which do not migrate? What is their attitude going to be? These are serious issues, which could not be ignored by any Chancellor of the Exchequer to whatever party he belongs. We considered the matter, and we decided that we would have to take action about it.

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I should say straight away that, in making this decision, we took into account the fact that this was not, of course, the first time that there had been restraint placed upon the migration of companies. There was a perfectly clear Defence Regulation during the war, but what is more important is that that was, to a considerable extent, at any rate, replaced by the Exchange Control Act, under which there are quite severe restrictions placed upon companies moving, at any rate, outside the sterling area. The use of the Exchange Control Act would not have been appropriate. We could have risked it, but I do not think it would have been appropriate when our real motive was to prevent the loss of tax.
Mr. Colegate: Has not the Exchange Control Act always been regarded as a temporary Measure, to be removed as soon as possible?
Mr. Gaitskell: I could not agree with the hon. Member there. I do not think that, when it went through the House, it was so described. It is not for me to say whether we shall be able to dispense with exchange control, but I think that most hon. Members expect it to go on for some considerable time. It is worth while mentioning that, because hon. Members are saying that this Clause will have the most disastrous consequences, when, to some extent, it is already upon the Statute Book in the Exchange Control Act, the consequences of which I do not think have been disastrous.
I do not think it is necessary for me to explain the Clause in any great detail at this stage. Hon. Members have read it, and they know the four points on which, in the subsection, the restrictions are imposed. At a later stage, we can discuss the reasons why these particular restrictions have had to be imposed.
I should like to turn now to the rather wider issue of just how this Clause can be administered. If the Opposition were right in saying that it will have the most disastrous effects and will prevent companies from allowing local interests to have shares in subsidiaries—which is a very fair and reasonable point—and if it will hamper, trade excessively, that would have been a most important consideration. It is not our intention that it should operate in that way. We have to balance these things, and we have on the one
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side the fact that a serious amount of tax was being lost and that more was likely to be lost.
We cannot draw the line which the right hon. Gentleman, the hon. Member for Chippenham and also the hon. Member for Burton tried to draw between the so-called Luxembourg companies and the others. There is no exact dividing line there. There are, after all, some companies with more reason to move abroad than others. I grant that, but there is no point at which we can say "This is in some way or other fraudulent, but that is not." It is a question of balancing one thing against another.
On the other hand, we do not want to impose unnecessary restrictions or hamper trade and commerce or clutter up the Treasury with a great deal of unnecessary work, and we do not believe that it is necessary. During the Second Reading debate, I said that, as far as the administration is concerned, I had it in mind to set up an advisory tribunal, consisting of persons whose experience is such as to give confidence to the business community that there will be an independent examination before permission is in any case refused, and the way in which we expect that that administration will work is something like this.
First of all, if there is obviously no difficulty about the case, the Revenue would report on it and permission would be granted at once. If they held it up, it would go to the advisory panel or tribunal, and it would be for them to consider all the circumstances and advise me whether they thought that the company should be allowed to go, or whether they thought that, on balance, it should not be allowed to go. I emphasised that, because I must repeat, as I said on second Reading, that we do not intend to administer the Clause solely because of Revenue considerations. We take into account the desirability of encouraging local interests in concerns overseas and so on.
May I also say that we have no intention whatever of allowing this to interfere with development in the Colonial Territories? The point has been raised again, and I make no apology for repeating that in the administration of this Clause there is no doubt at all that development in the colonial territories must loom large in any considerations of public policy. I have no doubt at all

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that the advisory panel would take them into account, and I, as Chancellor, certainly would do so as well. I would say frankly, that, normally, if there was no question of tax avoidance and no such motive, colonial development would be a decisive consideration in making up our minds whether to allow the migration or not.
Mr. Donner: Has the right hon. Gentleman in mind the desirability of making any difference between the ordinary company which desires to migrate to the Colonies and the purely mining company which is dealing with a wasting asset, and which therefore, quite naturally thinks that it ought not to be taxed like a company not operating wasting assets?
Mr. Gaitskell: I do not think the hon. Member will expect an answer to such specific questions. I am trying to show the kind of consideration which we would take into account in making up our minds.
Mr. Julian Amery: Can the Chancellor say whether what he said just now about the importance in developing Colonial Territories would apply equally to the development of the sovereign nations of the Commonwealth?
Mr. Gaitskell: Yes, I would certainly say that, too.
The second line of criticism is related to the anxiety about the interference which will take place with particular transactions of a genuine commercial character. The last thing in the world that we want is to get the Treasury cluttered up with people seeking permission for all kinds of unobjectionable transactions, and I can understand that hon. Members opposite, in putting down these Amendments, have been anxious to try to exclude from the Clause things which they think may be regarded as harmless.
Perhaps I may at this point say a word or two about the Amendments before the Committee. I think it is understood that we are having a rather wide debate, following the speech of the right hon. Gentleman the Member for Aldershot on the Amendment standing in the name of the hon. Member for Chippenham. He asked me a number of questions as to how, precisely, the Clause as it now stands would affect the case of, for example, mining leases being transferred, and he gave one or two other frivolous examples
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which I think he himself realised were not intended to be caught at all.
6.30 p.m.
On that, I want to say that the transfers which we have it in mind to catch by this are not transfers of individual assets—still less, of course, stock in trade or anything of that kind—but the transfer of parts of the trade or business which really are going concerns. In this connection, I would be prepared to add, if it were thought suitable on the Report stage, a proviso making it clear that a mere transfer of assets which did not materially alter the trade or business carried on by the company should not be covered by the subsection. I am anxious to try to reassure not only hon. Members in this Committee regarding our intentions, but, of course, persons outside. We want to be in a position to prevent tax avoidance, and to do it with as little interference and damage to legitimate business as possible.
Then, as I said, the hon. Member mentioned mining leases. I think, therefore, if I were to put in a proviso of that kind it would probably exclude them. At any rate, I would normally think they should be excluded by the Clause, particularly if we make the Amendment I have suggested. But I cannot accept the Amendment as it stands because it is, of course, tremendously wide. What precisely the ordinary course of business of the body corporate is, we cannot say, but it would leave them open to do almost anything. That really is going much too wide.
Mr. Lyttelton: In the ordinary course of business it is a short term of art commonly used about bankers' advances. It is not an undefinable phrase.
Mr. Gaitskell: I am afraid that for this purpose we should be letting out a lot of people whom even hon. Members opposite would not wish to let out.
The Amendment in the name of the hon. and learned Member for Wirral (Mr. Selwyn Lloyd), to which the right hon. Gentleman spoke, again suggests that we should exclude transactions where the main purpose is the development of the trade or business, transactions where the main purpose is to comply with the directions of an overseas Government or authority or where the greater part of the assets is situated in

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an overseas territory. I do not think that the first part of paragraph (a) will do. It is far too vague. Almost anything could be covered by transactions where the main purpose is the better development of the trade or business. That is one of the considerations which would be borne in mind when a case came up to the Treasury for decision.
The second part of paragraph (a), concerning the attitude of an overseas Government or authority would, again, obviously be very important. But, frankly, I would not think it wise to put that into the Bill. To do so would be rather to invite some overseas Government or authority to do things which all of us might not wish to happen. I cannot accept paragraph (b) of the hon. and learned Member's Amendment, because it is precisely the companies with overseas resources, with United Kingdom shareholders, which are the ones tending to migrate and which we are trying at any rate to control so that they do not avoid tax unless there are very strong grounds indeed for allowing them to do so.
On the other hand, I do not want to have a lot of unnecessary applications made to us, and it may be advisable—and I put this to the Committee—that we should introduce into this Clause an arrangement like that which we have under the Exchange Control Act, under which the Treasury has power to exempt particular classes of transactions from the operation of the Clause or the subsection, whichever it is.
I have it in mind, therefore, to draft before the Report stage an Amendment which would confer some dispensing power of this kind. Until we have some experience, I cannot lay down precisely at this stage the kind of transactions which we might exclude altogether, but there is no doubt about it that in the case of the Exchange Control Act, that power has been a great convenience both for the Treasury and the Bank of England and also for the trading community generally. I think it would also be useful here, but I will give a few examples of the kind of thing I have in mind, without at this stage committing myself to the particular list which we might introduce under such a dispensation.
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I think this is a case which we could, perhaps, deal with—the case of a company which was coming to the United Kingdom from abroad. The right hon. Gentleman made a good deal of play with the deterrent effect the Clause would have on companies coming here. I think that is a fair point, and I do not see why we should not say, as we do in the case of some foreign investment today, "If you come here from abroad to set up a business with substantial foreign capital, we are prepared to exempt such companies," Again, I must guard myself; I am not making promises, but merely giving the Committee an idea of the kind of thing we have in mind. I should certainly want to discuss it more fully with the Inland Revenue.
It might also be that we could give authority under the dispensation for the issue of shares by an overseas company for the establishment of a new business where there was no danger of any monkey business such as the issuing of shares and the paying back of the capital immediately afterwards to avoid tax. I dare say there may be quite a number of other cases. Reference has already been made to the case of the subsidiary companies wishing to interest local inhabitants in their affairs and issuing shares to them, and so on. It may be that we could exempt the parent company from obtaining Treasury permission for the issue by the subsidiary of additional shares to it for cash as part of a programme for development. That, I think, is certainly something which could be considered.
Mr. Lyttelton: Or for local investment.
Mr. Gaitskell: One would, of course, have to safeguard oneself against the danger which paragraph (c) of subsection (1) is designed to prevent, namely, the avoidance of tax by capital repayment. That paragraph is the corresponding measure to Clause 27 of this Bill in so far as the United Kingdom is concerned. I do not think, therefore, that hon. Members opposite need feel quite such great anxiety about the consequences of this Clause as at first sight they seemed to feel. I realise that the Clause was drafted very widely, but we had to draft it very widely.
We are, however, prepared to make some amendments. I have referred to one or two—one, at any rate—which I suggested might be made to meet the

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point of the hon. Member for Chippenham, and by this dispensing power, to which I attach a great deal of importance, I think we shall go a very long way towards meeting the criticisms which have been advanced.
I would also remind the Committee of the way in which we intend to administer this Clause. A tribunal will be appointed to advise me in the matter so that there may be a feeling and a realisation that what we are out to do is not to prevent capital development or to discourage invisible exports—far from it—but to prevent tax avoidance.
I beg the Committee to realise that at this time when, after all, we are having to carry heavier burdens, when we have the defence programme to carry out, and when, as the hon. Member for Chippenham said, the terms of trade are turning against us, the Government cannot tolerate or allow the avoidance of tax by migration in wholly unjustifiable circumstances. For that reason we say we must have this control. We want to exercise it in a reasonable and sensible manner. That is really the case for the Clause as a whole—though I must not go too far in that direction, Sir Charles—and I think it is the case for approving the main points in the first subsection.
Mr. Selwyn Lloyd: As so many of my hon. Friends wish to speak on this Amendment I will only take a few minutes, but I must point out to the Chancellor that I think there is a fundamental difference of opinion between the two sides of the Committee on this matter. I firmly believe that if the Chancellor wants to keep people in this country he must not try to imprison them here. He must make them stay because of the additional facilities and advantages they get. He must endeavour to make the terms of their personal existence here sufficiently attractive to make them desire to stay.
So far as the Clause itself is concerned, it was such a shocking Clause that it is not altogether surprising that the Chancellor should have put forward some amelioration. But I think he has put the Committee in some difficulty, because I understand that the Report stage of the Bill is to take place the week after next. I gathered that, assuming the Committee stage concludes this week, the intention of the Government was to have the Report stage the week
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after next. The alterations which the right hon. Gentleman has put forward are very considerable. They will have to be scrutinised very carefully. One has to take a good deal of advice on this matter and I should have thought it was only fair to let us have at least one week to see them, to scrutinise them and to consider them before the right hon. Gentleman seeks to put them in the Bill.
That brings us straight against the time-able and I think we have legitimate grounds for complaints. To this Clause drafted many weeks ago, the right hon. Gentleman is seeking to put forward substantial changes, and this is the first intimation of these changes. In view of the serious practical difficulty it would be much better if he dropped the Clause altogether. He has indicated that he is going to incorporate in the Clause a proviso to permit the transfer of certain assets, in particular mining leases, and a proviso to exempt certain classes of transactions and to consider Government exemption with regard to companies coming into the United Kingdom.
Mr. Gaitskell: That is one of the dispensations I thought might be made in the Amendment I proposed giving the Treasury power to make dispensations.
Mr. Lloyd: I thought the Chancellor intended to write those dispensations into the Clause. I seriously assure him that if he wants to avoid the very injurious effect this Clause will have on people considering coming into this country from overseas it would be very much better to put those into the Clause and make it mandatory upon the Treasury to give these people permission to come as a sort of exempted class. Next, there is the category where authority might be given for the issue of shares by overseas companies to establish new business and new development and there is the question of the issue of shares for cash for capital development.
We should look very closely at what the Chancellor proposes to put before us. One does not wish to seem disobliging or ungrateful. They are concessions to some extent, but they do not satisfy me personally nor do they satisfy my hon. Friends. This is an evil and pernicious Clause which will do great damage in the long run to the standard of life of the people, of this country.
6.45 p.m.
Mr. Maclay: One of the disturbing things about this debate was the laughter that came when my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) suggested it was right to take this Clause out of the Bill. I wonder if hon. Members opposite realise that after the many hours during which we have sat, there has been a high standard of debate all through. We have been studying matters of vital economic importance to the nation.
Mr. Keenan: A section of the nation.
Mr. Maclay: The hon. Member for Kirkdale (Mr. Keenan), who, I know, thinks seriously about the nation, is really quite wrong. It is not a question of any section. We have not the slightest opportunity of maintaining full employment if we lose our position as the great centre of world trade.
Mr. Keenan: That is not the point at all. The point that not merely amuses some of us but disgusts us is that for two nights and a day we have had discussions of proposals for protecting property and finance. All that has been asked for by hon. and right hon. Members opposite is concession after concession to allow a greater volume of profit to be retained.
Mr. Maclay: This is a fundamental matter. Surely the whole object of this debate, and particularly of this Clause that affects the whole prosperity of our country, has nothing to do with property itself. Our object is to get industry moving and to keep it moving and, in the difficult years that lie ahead, to see that Britain remains the centre of world trade. Anyway, I do not think that we can carry this argument any further.
To come to the Clause, the point I want to raise is that the Chancellor has clearly realised, as my hon. and learned Friend the Member for Wirral said, that some alteration was necessary in this Clause. The Chancellor also spoke to a certain extent of the intentions of the Government about how the Clause was to operate. We have had "intentions" too often in the last six years. Intentions are not good enough. To a certain extent damage has already been done by this Clause, just as the threat of nationalisation did serious damage to insurance companies all over the world.
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I have had distressing talks with people abroad who are now writing us off as a centre of world operations, and this Clause has played a great part in encouraging that attitude. It is going to be extremely difficult for the Chancellor, when he has worked out his concessions, to make up the ground lost all over the world by this Clause among people who are thinking of foreign investments and of their implications.
Ever since the war one of the major worries and studies of the United Nations experts and everybody else interested in rebuilding the world economy, has been to try and get a climate for foreign investment. A report on the fair treatment of foreign investments was prepared by a chamber of commerce with which I am connected and it was submitted to the United Nations and all member nations. The whole purpose was to try and create an atmosphere where foreign investments, both Government and private, can flow.
I am grateful that it has been made clear by the Chancellor that it is not intended to stop people coming in or to put difficulties in their way, but the fact that our own people are to be restricted in this way will have an effect on foreign nations. Of all the Governments in the world ours is the one which should be giving the greatest possible example of encouraging free deployment of goods, people, material and everything else. Britain stands to gain more by freedom than any other nation and if we do not have other nations giving us full freedom of investment and operations then we are going down and no plan in the world can sustain us. That is really the substance of the case against this Clause.
There was another horrifying thing the Chancellor said. That was about the Exchange Control Act. He implied that he looked upon it as a modern, permanent feature. He qualified that slightly because he said, "in the foreseeable future." But one of his predecessors, I am certain it was the Minister of Local Government and Planning, said quite flatly from those benches that he considered the Exchange Control Act a permanent feature of British policy under Socialism. If ever there was a counsel of dispair, that is it.

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It is tragic that this kind of message should go out to the world from any Government of Britain. Are we to live with an Exchange Control Act, with this kind of legislation creeping in—for good reasons, I agree? I agree with the Chancellor that we must stop tax evasion by some means—[HON. MEMBERS: "Oh!"] Wait—but if the methods that have to be used to stop it will deter others and set a bad example, it can do infinitely more damage than tax evasion. I agree with my hon. Friends that we must take that risk.
Further, the Chancellor said it was a growing tendency, that the figures so far as incalculable, they may be small or they may be great. Surely in Britain we can take some risks in a matter like this. How did we build up this nation? We took risks. We are getting more and more restricted. We are frightened to cooperate with foreign Governments. We went into E.P.U. with great hesitancy and reluctance and created a bad atmosphere on the Continent. I know that some of the reasons why the Government were careful were good, but the fact remains that created an impression all over the Continent that we were more concerned with maintaining full employment at home than with anything else. Worse than that, that we believed we could maintain it by our own actions. They knew it was impossible. They realised that we were following the path of those countries which forbade the export of their art treasures.
Mr. Higgs: The reasons why this Clause has been put before the Committee shook me to the core, and I wonder that it ever reached the Bill. One matter that has surprised me in the two Budget debates in which I have now participated has been the way in which this Government have found themselves compelled, when they come up against a specific and easily definable evil practice that they wish to stop, to cast their net far and wide. Then, when we came to discuss the Clause drawn for that purpose, when we ask questions about the kinds of transaction that will be caught and those that will not be caught, what is intended to be caught and what is intended to be let through, we find that the Treasury give us practically no help at all.
I tried last year, on the Committee and the Report stages of the Budget, to get
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some help both from the economic team and the legal team on the Government Front Bench about the intention and the classes of case which would be caught in the restrictive covenant Clause of that Finance Bill. Nobody had the faintest idea what sort of transaction would be caught by that Clause, except the two specific cases which, for entirely domestic political reasons, they wanted to catch. In other words, they wanted to hold their supporters together.
This year we have a Clause which is drawn as widely as may be, a Clause which, as has already been shown by my hon. and right hon. Friends, wilt prohibit many transactions which the right hon. Gentleman has himself admitted would be directly desirable. Not until the Committee stage did he begin to confess that his net might catch a good deal that it was never intended to catch. Then, when we get to this stage, the right hon. Gentleman begins to show signs of thinking again, with the consequences which have been mentioned. The thing will be upon us before we have time to give proper deliberation to it. That is the first thing which shocks me about the outlook of right hon. Gentlemen opposite when dealing with matters of this kind.
The next thing which I regard as evil about this Clause—here I think I can claim that both the Amendments to which we are now talking deal specifically with this point—is that we are quite accustomed in this country to regard as legitimate play the game between taxpayer and tax collector. We have long accepted the fact that the tax collector—I use the expression in its broadest sense as the Treasury—has a great many advantages not ordinarily enjoyed in the game. For instance, once a year the tax collector can come down to the House of Commons and, because of the majority it has, make a change in the rules of the game. That is a great convenience when one is playing a game. From time to time we have had suggestions that we should change the rules retrospectively in order to disallow a goal that has quite legitimately been secured against one.
Mr. Houghton: If the hon. Gentleman will allow me to interrupt, may I put it to him that tax gathering is not a game? Tax gathering consists of gathering the Revenue which is vital to the machinery and government of the nation and to its

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wellbeing. So why talk about it as if it were a game with rules?
Mr. Higgs: I do not think that either tax gathering or tax paying is any fun. I took this analogy of sport because, as a rule, amongst British people one finds the sense of justice most apparent. It was for that reason I chose the analogy of sport. If the hon. Member who has strong views on these matters I know, will follow me a little further, he will see my point.
What is happening in this Clause is that not only should the tax gatherer's team apparently be given the right to change the rules every year, but now it seems to have the right to appoint the referee as well. That is going very far. If the Clause goes through as drafted its effect will be that when one wants to make a move in the game or, to leave that analogy, enter into a change in one's commercial dealings, one goes along to the Treasury and says, "If I do this, I shall have to pay less tax. Will you decide whether it is fair that I should do this or not?"
It has been an ancient part of our English law that no person should be allowed to be in a position in which there shall be a conflict between his pocket and his duty. To take the simplest instance, no trustee may have any dealings in his trust estate. If this Clause is passed as it is, we shall be asking the Treasury to decide whether what is a good move on the part of a concern which has interests here and overseas is proper, and the Treasury will lose if it says "yes" and will gain if it says "no."
I regard that principle, which goes to the root of this Clause, as being evil. That is why I speak in support of the two Amendments. I welcome the words of the right hon. Gentleman which maybe, in the end, will go a little further towards making the task of the Treasury easier when coming to a decision. After all, the Treasury themselves have this thrust upon them, and theirs will be the unenviable task, if they do have to make the decision. So any Amendment to this Clause which seeks to find the cases in which they have no choice and those in which they have to exercise a discretion, and any help that we can get from the
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Treasury Bench as to the sort of rules that will be exercised in applying the discretion, anything that can be laid down in advance, anything which will tell us how this Clause will work, will improve it.
For those reasons, I earnestly support these two Amendments which will not only go some little way towards removing an inevitable evil in this Clause if it remains in the Bill in any form, but will also, I believe, help to allay some of the apprehensions of my hon. Friends who have spoken from the commercial angle—apprehensions which may have very disastrous consequences for the economy of the country.
7.0 p.m.
Mr. John Arbuthnot: In his speech just now the Chancellor told us that the motive which prompted the putting of this Clause into the Bill was that a number of companies were migrating, and he went on to say that they were largely companies operating overseas. The income which he is therefore proposing to tax by preventing them from migrating arises largely outside this country, so that it seems a little questionable whether everybody who is taxed in this way on income which arises outside the country will feel that it is a fair tax to which they are subjected here, in addition to the tax they pay in the area in which they mainly operate. The Clause says, in effect: "Now that we have got you here we are going to tie you down in order that we may pluck you full well, and so that there will not be very much left for you for distribution to the owners of the business and the people who built it up."
The Chancellor has made a few concessions—although I must say I thought they were thoroughly inadequate. His concession to exempt new companies from the operations of the Clause seems to be comparatively valueless, because if in the Clause the Chancellor says "Now that we have got you here we are going to tie you down and pluck you thoroughly," what will he say in a few years' time to the new companies which have come to this country and registered here, relying on being exempted from the provisions of this Clause? Will he then say to them exactly what he is saying now to the companies which came to this country in years gone by because it was

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a centre from which they could work effectively? I think that they will have very great hestitation in coming to this country because of this Clause, and because of the fact that similar provisions may apply to them if we still have a Socialist Chancellor of the Exchequer in a few years' time.
The Chancellor also suggested that it was not his intention to operate the Clause in such a way as to prevent local interests from participating in enterprises in their own countries. There are various classes of case which the Chancellor says he would exempt from this Clause by the way in which he would administer it. If these exemptions are made by administrative methods, it seems to me that Parliament is abrogating its proper duties to the executive. If exemptions are to be made—although I, personally, should like to see the Clause wiped out altogether—Parliament should say definitely what those exemptions are, and there should be no giving away to the Executive of the proper functions of Parliament.
For the moment I should like to deal with the Amendment in page 24, line 26, which seems to me to be particularly important. I instance one type of case in which it would operate, and in drawing attention to this particular type of case it is only right that I should declare my interest and say that I have a certain amount of experience of it. I have in mind the case of companies, the majority of whose assets are in India, which also have assets in other countries. If the majority of a company's assets are in India, that company is regarded as being resident in India for Indian tax purposes and pays Indian tax on its world income.
Take, for example, a company that has the majority of its assets in India, has some property in Ceylon, and is registered in and run from this country. Between India and Ceylon, reciprocal relief is granted to the extent of one-half of the lower of those two countries' charges for Income Tax. Between Ceylon and the United Kingdom there is double taxation relief. So far as India is concerned, unilateral relief is granted whereby three-quarters of the United Kingdom tax or the Indian tax, whichever is the lower, is deducted from the United Kingdom taxes payable, and
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the balance of unrelieved tax is allowed as a deduction from profits in arriving at the United Kingdom taxable profits.
The effect of all these three factors is that for every £100 a company in that position earns in Ceylon it pays Ceylon tax of £34, Indian tax of £46 and United Kingdom tax of £37, making a total payment of £117 in taxation for every £100 earned. That is the type of case which this Amendment would cover effectively. It would allow such a company to take action, which would seem to be only fair, to avoid having to pay £117 per cent. in taxation, which it might have to pay at the present moment.
Mr. Maudling: I think it is now pretty generally agreed that the original draft of this Clause was far too wide. The moment it appeared it gave rise to a storm of protest from people who were in a position to know what its effect would be, and I doubt whether the Treasury at the time could be included among those people who knew what the effects of the Clause would be. Certainly, it now appears that that storm of public protest and the number of representations the Treasury must have received from people with experience of these matters have borne some fruit, because the Chancellor, has, in effect, admitted that the Clause is far too wide and that many exceptions may be made.
This afternoon the right hon. Gentleman enumerated so many exceptions that it almost seemed that we were reaching a position where the exceptions outnumbered the inclusions, which is perhaps not a very surprising situation when we consider the argument advanced by my hon. Friend the Member for Bromsgrove (Mr. Higgs), that it is the normal practice of this Government to try to deal with small specific abuses by creating wide blanket prohibitions. This is the natural result of pursuing that particular line of policy and adopting that attitude.
I want particularly to stress to the Chancellor the importance of including these concessions in the Bill. It is of no use whatsoever, from the point of view of British businesses operating overseas, merely to say that the Treasury shall have the power by regulation to make dispensations. I appeal to him to regard this as a point of cardinal importance, because there is no doubt that British companies operating overseas at the moment are

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having to face the growing difficulty of economic nationalism, or parochialism, or regionalism, or whatever you call it, both inside and outside the Commonwealth.
That is a very real and very growing danger which must be faced, and it is because of this danger that many wise companies have always taken the precaution of ensuring that the control and management of their subsidiaries operating overseas should be exercised by the nationals of the country in which they are operating. In other words, the subsidiary of the British company operating in Australia, for example, should be controlled by the Australians. Our competitors in that country cannot then point the finger and say that the company is merely a puppet manipulated by the men in London.
Wise companies in the past have been careful to ensure that so far as possible control and management should be exercised where each subsidiary operating company is located. The whole effect of that policy will be spoilt by this Clause. People abroad will say that this is a façade, that it is pure nonsense and that control resides in London.
If control did not reside in London, this Clause would be meaningless. This Clause pre-supposes that a British company has the power to cause people in Australia to do something and to permit or refuse them doing things normally done in the operation of their business. Where is the control? Is it there or here? If the control is not here, the Chancellor's Clause, in my submission, is meaningless, and if the control is not there, and it is proved to people living in these countries abroad by this Bill that control in fact resides in this country a great deal of the good done by years of policy-building by British companies will be undone. The Chancellor must include these things in the Bill itself if these concessions are to be of any real value.
Mr. S. N. Evans: At a time when taxation is almost of a penal character this question of tax evasion is of great importance. I do not think that anything upsets people quite so much as thinking that the other chap is getting away with something. Therefore, to me it seems quite right that everything should be done to prevent tax evasion.
Mr. Eccles: The Chancellor has made clear that this is not a Clause designed at evasion. He says that the migration that has been going on is quite legal. It is not a Clause to catch the tax dodger but to prevent something going abroad, according to its legal rights, simply in order to hold up revenue here.
Mr. Evans: I think that it is aimed at somebody who has done very well out of this country over a long period of years and who now, seeing that we have a struggle to get by quite comfortably—although I do not share that view—and may not succeed, is deserting the ship. [HON. MEMBERS: "No."] Oh, yes. He is going abroad for the purpose of escaping taxation which he will have to pay if he stays in this country. We all know that is the reason why this legislation is contemplated.
7.15 p.m.
Mr. Arbuthnot: The Chancellor said that this Clause was aimed largely at companies which operate overseas. It is not a question of companies which have done well in this country but of companies operating overseas.
Mr. Evans: The point is that they are controlled here. Because they are controlled here, they pay taxes here. If they carry their headquarters abroad, they are hoping that they will pay less taxation. I support everything that the Chancellor is doing to get at these people, but I think that we ought to be careful not to use a steam hammer to crack a nut.
I think that the loss of invisible exports to this country are not sufficiently understood. I take the view that we shall never be able to make enough motor cars or weave enough cloth or hew enough coal to enable us to pay for all that we have to import if we are to feed and clothe our people and furnish our industries adequately. These invisible exports—banking, shipping, insurance, marketing services, no less than-income from investments—are enormously important to the living standards of even the poorest of our people, and it is important that we should all thoroughly understand that.
It is also important that we recognise that the people of this country must have their carrot in whatever strata of society they are, and that people who invest

2209
money abroad and run great risks, and who often lose money, must not be denied a moderate return when they succeed, especially having regard to the fact that their efforts when successful play a tremendous part in maintaining the living standards of our people. I say this because I think that it ought to be emphasised.
In 1938, we imported about £900 million worth of goods a year, mainly as raw materials. We paid £600 million for them by the export of our motor cars, textiles, coal and engineering products, but £300 million of that £900 million worth of imports were paid for by invisible exports. They were and remain of immense importance. Let me quote this one illustration which I may have given the Committee on previous occasions, but which will be none the worse for that.
The effect of these invisible exports is, I think, well exemplified by the case of the Argentine railways. They were a British investment, built up over the years, which we had to get rid of to help pay our war debts. We sold them for £150 million, if I recall the sum aright. Assuming the return on that £150 million investment at 5 per cent., that meant a yearly income of £7½ million from that investment, but we did not take that £7½ million. We said to the Argentine, "We will have £7½ million of beef, hides and maize." So year after year there came into this country £7½ million of beef, hides and maize without any British miner hewing a hundredweight of coal, a textile worker weaving a yard of cloth or a motor car engineer helping to build one motor car.
This came in without any effort on the part of the British working people. Of course, it is the absence of this income and of these things which came in as a kind of rent which is making our problem so terribly grievous today, hence the demand all the time for higher and higher output. We have to replace this income which we received from invisible exports which have gone.
I would say to the Chancellor: by all means take care of these people who seek to go abroad to escape taxation commitments in this country. I know the character of the Chancellor—I hope this does not sound too patronising
2210
—that he has great ability and also great courage, and I am sure that he will not be deterred from doing what he thinks to be right because there may not be in all quarters a thorough understanding of the importance of invisible exports.
Mr. Remnant: I do not want to interfere in the slight difference of opinion between the hon. Member for Wednesbury (Mr. S. N. Evans) and the Chancellor of the Exchequer, but I take it that they agree that the Clause is right from every angle. If what they mean is that they regret such firms having come to this country as those named by my right hon. Friend the Member for Aldershot (Mr. Lyttelton), they regret Vauxhalls having come. Fords of Dagenham, Hoover and other firms of that sort, who have brought employment to this country as well as foreign capital and foreign ingenuity. If a Clause of this sort had been in operation 10, 20 or 30 years ago none of those firms would have come here and given employment.
The Chancellor quite quietly and with a sense of calm says that he proposes to give power to the Treasury to exempt firms, but surely it is for this Committee to decide what it should do instead of making another abhorent type of delegated legislation. Does the right hon. Gentleman really imagine, if he gives the Treasury power to exempt, that an American, Canadian or Australian firm that wants to come here will go cap in hand to the Treasury and say, "Please, will you exempt me from Clause 32 so that I can come into your country?"
If the Treasury do exempt such a firm from the Clause and give permission to start in this country, are they prepared to tell such people that they can take their capital out at any time they like? If they are not prepared to go that far, then they may as well give up any hope of foreign capital coming to this country. I am perfectly well aware that there is full employment here and that we do not need foreign money at present, but let us look a little further ahead. The time may well come, which ever Government or which ever party is in power, when the Government of the day may be thankful for help from such sources, not only in this country but also in the Dominions.
If I might use phraseology which is current in another popular centre today,

2211
nothing that the Chancellor has yet said prevents me from thinking that if this Clause had a pedigree it would be written down as born from spite out of bad temper. Although we understand perfectly what has given rise to both those feelings, let us be extremely careful that in trying to correct those faults, if faults they be, that we do not do a great deal more damage.
I want to put one particular aspect of the matter to the Chancellor, a subject which was touched on by my hon. Friend the Member for Dover (Mr. John Arbuthnot). I will be perfectly frank about it, because I am interested in it. Let us think of a tea company which is a sterling company and registered in this country, though operating in North-East India. Under the Indian income tax rules, where the greater part of the revenue arises in that country, it is for Indian purposes resident there. For the purposes of United Kingdom tax, because it is registered in this country, that company is also classed as being resident here. It appears to be the case of the body corporate having two legal homes, and it apparently is for the Treasury to decide to which home it may go.
Under this Clause, which makes it illegal
"for the trade or business or any part of the trade or business of a body corporate so resident to be transferred from that body corporate to a person not so resident;"
I take it that the company would be in order if it sold more tea in Calcutta than at the London auctions, though it would be opposed to the policy designed by the Minister of Food, but that is another matter. What this company is not allowed to do under this Clause is to sell one of its tea gardens to an Indian, a person who is not resident in this country. That garden can be uneconomic and making a loss, but according to this Bill the company will not be allowed to sell it without Treasury consent.
I have one more point to make. Recently we have seen examples of the way some of the unwise actions of this Government are copied elsewhere. Do not let us give a further example which might well be copied to the disadvantage of the people of this country. There can be no doubt in my mind that the Chancellor of the Exchequer, by his
2212
speech on this Clause, punctured it so effectively that it will not hold water at all. He would be much better to wipe it out and start all over again.
Sir Harold Webbe: I intend to take only a very few minutes. I am sure there is no need for me, even if I could, to add to the admirable and complete case which has been made out by my right hon. Friend the Member for Aldershot (Mr. Lyttelton) and by my hon. Friend the Member for Renfrew, West (Mr. Maclay), as well as that which has been made out with peculiar force and for peculiar reasons by the hon. Member for Wednesbury (Mr. S. N. Evans). Indeed, there is only one other thing I want to say.
I am sure I need not tell the Chancellor, because he must be better informed than I am, through his many contacts in the City, that there is nothing which has been proposed by the Government for very many years which has caused so much genuine alarm and despondency in the City of London and in the great trading centres connected with it than this proposal. There can be no doubt that both in this country and in America, too, the proposal the Chancellor has made has caused an almost complete hold up in many plans for development which were in contemplation.
I want to bring the Chancellor down to a very much simpler point. He has been good enough to indicate to us the way in which he proposes that this Clause can be administered. I am afraid he is taking a much too optimistic view of its practical workability. He has been asked to exempt from the operations of this Clause transactions which take place in the ordinary course of a company's business. He says that that is too wide a definition.
As a matter of fact that phrase, "the ordinary course of business." is one thoroughly well understood, which the courts are constantly interpreting. I do not believe that the term is too wide, but unless the Chancellor is prepared to make a much more general exemption than he has indicated, then I am quite certain that, not only will the Treasury be completely cluttered up with applications, but the deterrent effect on development will be very much greater than he has imagined.

2213
7.30 p.m.
Might I, very briefly, give an example of what "normal development in the ordinary course of business" means by quoting the facts in connection with a company in which I must declare my interest? This company, before the war and most dramatically since the war, has developed a very large world-wide business. It manufactures a product which it is now selling all over the world in no fewer than 59 countries, practically every country outside the Iron Curtain. It has developed a business several times as large as it had in the total field before the war.
"The normal course of development" means that manufacturers of goods in this country have sold them directly overseas through the ordinary distributors. When any particular market showed signs of being permanent and substantial they moved a stage forward and sold through representative agents. There came a point when, in many countries—for instance, Switzerland, South Africa, Australia and Belgium—the market reached such a size and importance that the proper approach to it was to form in those countries sales companies to undertake the selling part of the ordinary process of distribution.
The effect of all this has been to transfer from this country some of the profit which would have accrued to the British company direct if they had retained the complete cycle of operations in their own hands. Whether that would have been regarded by the Treasury as the purpose of the development or not is, for the moment, immaterial to my argument.
The next stage has been that in certain countries, for political and local reasons, it is found desirable to develop the sales companies into organisations not only to sell the goods but to import the parts of the goods and assemble them. That stage has already been reached in three European countries and one other. The final stage is where, for local reasons and possibly because of local import restrictions, the company has to manufacture its product actually in the countries in which it desires to sell. That has happened over the years to the organisation to which I have referred. At every stage of that development there is undoubtedly a transfer of tax from this country.
Mr. Houghton: The key word is "avoidance."
Sir H. Webbe: Whether the purpose of "a development" is to avoid taxation by transferring the taxable profit abroad is the very point on which the Treasury are to be consulted. I am certain that the Financial Secretary and the Chancellor would tell me that all the developments I have outlined are normal and desirable developments with which they would not seek to interfere and that the Treasury would automatically and, without any special dispensation, agree with developments of that kind. The net result of the development of the particular company was that last year the Treasury had about 10 times as much in tax as before the war. That was the result of the great development of overseas trade through the various stages.
At what point in the consideration of a development will the Treasury give consent? I do not know whether any hon. Members in this Committee have tried to get the answer to a hypothetical question. They would never get it, I think quite properly. Therefore, Treasury consent will not be sought until the scheme of development can be presented complete in such a form that the Treasury can study it in all its details. The process of development and the working out of details of a development of that kind is a long and expensive business.
When it was considered desirable to create and afterwards to increase the size of the subsidiary company in Australia, consideration had to be given to the three alternatives: to create or develop a sales company; to create or develop an assembly company; to create or develop a manufacturing company. Investigation of those alternatives not only occupied considerable time but involved considerable expense. What company can undertake the heavy preliminary work and expenditure in examining a matter of that kind before they submit it to the Treasury, with the risk that in the end the Treasury may take an adverse view?
I suggest that it is essential for the Chancellor to find some much more general form of exemption which will enable businesses desiring to extend in a normal, reasonable and ordinary manner to go ahead with their expansion without the fear that Treasury consent may not be available. Unless some simplification of that kind can be devised, I am sure that the Treasury will be cluttered up with

2215
many thousands of cases and that the scheme will not work.
Mr. Jay: As this is a very important Clause and a number of hon. Members have spoken on it, perhaps I might now make a brief reply.
First of all, it is complained against us that we have proposed some modification of the original plan and it is suggested that it should have been made public at an earlier stage. Surely it is right for us to take account of the public comments made in this Committee and in the expert and other Press, and to representations made by industrial bodies. The Federation of British Industries made detailed and full representations on the matter to us. The Attorney-General and I had a long conversation on the subject with highly qualified representatives of the F.B.I. If we had taken no account of any of these representations we should surely have been accused of unreasonable obstinacy.
The anxieties expressed by the hon. Member for Renfrew, West (Mr. Maclay), are perfectly genuine and are shared by a considerable number of people beside himself. I fully agree with what the hon. Gentleman said, and with what was said by my hon. Friend thè Member for Wednesbury (Mr. S. N. Evans) about the importance of international business and of invisible exports for this country. Of course, invisible exports, in our position in international banking, shipping and trade, are absolutely vital to our economic position and to our standard of living. I would suggest to those hon. Gentlemen that it is just the very importance of that international business which proves that their genuine anxieties are considerably exaggerated.
We have for more than 10 years had a very full exchange control system in force in this country which, as far as the principle of the argument goes, bears many similarities to the proposal before us now. That system affects our international trade and commerce at all sorts of points and thousands of transactions which are taking place have to have the permission of the Exchange Control. It is in the last 10 years, particularly in the last three or five years, that there has been a tremendous development in our exports, and of our invisible exports in the last two or three years. That seems
2216
to show that these fears are greatly exaggerated. Very many of the things which have been said today could have been said—I remember that they were said—in 1946 when the Exchange Control Act was passing through the House.
Mr. Maclay: Will the hon. Gentleman watch very closely the developments in Holland where many things which used to happen in this country are beginning to take place? He will find that it is very disturbing there.
Mr. Jay: I shall be very glad to do so.
The Opposition neglect one very essential moral basis for the Clause. The shareholders in the companies which will be affected by the control are very largely persons resident in the United Kingdom, and persons resident in the United Kingdom will all get the benefit of the very expensive re-armament programme which we are now financing to strengthen our defences. Surely it would be unreasonable that these persons, while claiming that benefit, should contract out of making a fair contribution through taxation to the cost of the programme.
The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) suggested that the right solution to the problem—I assume he shares our general objectives—was not to imprison people here but to induce them to stay here, but neither he nor any other hon. Member opposite seemed to be facing the facts of the situation. There was no doubt about it that companies were proposing on a growing scale to migrate from this country in order to evade Profits Tax and, to some extent, Income Tax. As my right hon. Friend said, the memorandum from the Overseas Mining Association itself said that unless taxation was reduced this movement was likely to continue. Surely it is not for that body or any individual taxpayer but for this House to decide what the level of taxation shall be.
It may be that the Opposition would be entitled to argue that that is so in principle and that if they were responsible at this moment there would be a lower level of direct taxation, but the remarkable fact is that the Opposition have refrained on this Bill from voting against the increase in the distributed Profits Tax and the increase in Income Tax. Therefore, they are committed by this action to the present level of direct taxation in

2217
this country. [HON. MEMBERS: "No!"] On the evidence of the votes on this Bill in the last few days, how can they claim to be really facing the problem?
The threat of tax evasion is there, and we have brought forward the only practical measure with all due safeguards to restrain it, and if hon. Members who have accepted the level of taxation—[HON. MEMBERS: "NO."]—continue to oppose this provision despite the safeguards, it is not surprising that many people in the country will comment that they claim in theory to be opposed to tax evasion but do not seem to oppose it in practice.
7.45 p.m.
Mr. Lyttelton: The speech which the hon. Gentleman has just made is very much below the occasion and is unworthy of him. He attempted to meet none of the points raised. First of all, he talked about paying lip service to the importance of invisible exports, pooh-poohed the idea that the Clause would affect our invisible exports and pointed to the increase which had taken place in the last few years. That was largely as a result of the rise in the freight market which largely escapes the mysteries of the Clause. He was merely making a dialectical point in which there was very little substance.
He went on to argue—I could hardly follow it—that a shareholder resident in the United Kingdom could not contract out of his tax obligations. I have still to learn how, if dividends are remitted to him here, he can escape tax because the domicile of the company is in some place other than London.
Mr. Jay: He would escape Profits Tax.
Mr. Lyttelton: That is another matter. The hon. Member said "Income Tax." Perhaps that was a slip of the tongue. I remain completely unconvinced and I am also rather resentful of the attitude which the Government have taken up over the Amendment. With the permission of the Chair, the debate has gone far wider than the Amendment might have warranted but all we have got out of the Treasury is the proposal to set up another advisory committee. This is like the use of protective colouring by an animal when it is driven into a difficult place. The animal here will be throwing off a slough of committees hoping by that means to protect itself.
2218
Every hon. Member of the Committee who is engaged in business knows that the operations of the famous Capital Issues Committee works in the most unsatisfactory and wayward manner that one could ever imagine. One of the minor reasons why companies do not like to come to London is that they have to go to this body, which appears to be worked on the advice of one of Hitler's astrologers, to raise new capital. Now we shall have a situation where another Committee will advise the Treasury when a transaction is permissible and whether it would escape the mischief of the Clause. That gets us absolutely nowhere.
When the Chancellor was speaking, I made the mistake of thinking that he was about to write into the statute a definite dispensation for transactions which he thought were quite legitimate, but apparently I was mistaken. He expressed it a little obscurely, and later he said that all that was to be done was that the Treasury would convey to the new committee the sort of cases which they thought this expert committee might advise upon in the future. This matter is far more serious than the Government have made out. I remain completely unconvinced by the paltry and partial measure which the Government propose to undo the evils of this tax. I assure the Government that for every pound which they lose by tax evasion under the Clause they will lose 25s. or 30s. by loss of trade.
The last remarks of the Financial Secretary represented a typical piece of the New College, Winchester, type of argument, which is that because somebody did not vote against a certain form of taxation he must accept the present level of taxation and that we were, therefore, committed to these payments. That is an absurd argument and I am surprised that he put it forward. Expert bodies concerned with this matter believe that very serious consequences will flow from these provisions. We shall, of course, look with great attention at anything which the Chancellor chooses to introduce between now and the Report stage, but from what he has said so far I do not think he is likely to satisfy us, and so we shall have to carry on the debate on minor points to see if we can make the Clause less vicious.
I only want, in conclusion, to read one paragraph from a memorandum by the B.O.M.A.:

2219
"If this important branch of the national economy is to be preserved, the remedies must be immediate and drastic, for under present conditions the inducement for existing companies to emigrate and for new companies to be set up overseas is very strong indeed. Merely to prohibit the emigration of mining companies would be no permanent solution and would certainly preclude the possibility of re-establishing London in its leading position in overseas mining."
The Chancellor, on this particular point, has said that he would give the expert committee instructions that certain dispensations might be extended to overseas companies who contemplated coming to London, but I can tell him straightaway that that will not do at all. The main reason at present why overseas companies will not wish to establish themselves in London are things like the C.I.C. and the new committee, and, incidentally, the existence of the Socialist Government, with always more and more regulations
which make it unable to move in any direction without Treasury permission, and being taxed if the Commissioners deem a particular transaction to be this, that and the other.
The Government are gradually tying up all these things so that we will just not get the establishment in London of companies now working overseas. We shall gradually decline as an international market and all that that means to our invisible exports, to which the Financial Secretary has merely paid lip service in stating none of the measures which are necessary to preserve it.
Several Hon. Members Several Hon. Members rose—
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."
The Committee divided: Ayes, 294; Noes, 287.

Division No. 127.]

AYES

[7.56 p.m.

Acland, Sir Richard

Crawley, A.

Hale, Joseph (Rochdale)

Adams, Richard

Crosland, C. A. R.

Hale, Leslie (Oldham, W.)

Albu, A. H.

Crossman, R. H. S.

Hall, Rt. Hon. Glenvil (Colne Valley)

Allen, Arthur (Bosworth)

Cullen, Mrs. A.

Hall, John (Gateshead, W.)

Allen, Scholefield (Crewe)

Daines, P.

Hamilton, W. W.

Anderson, Alexander (Motherwell)

Dalton, Rt. Hon. H.

Hannan, W.

Anderson, Frank (Whitehaven)

Darling, George (Hillsborough)

Hardman, D. R.

Awbery, S. S.

Davies, A. Edward (Stoke, N.)

Hardy, E. A.

Ayles, W. H.

Davies, Harold (Leek)

Hargreaves, A.

Bacon, Miss Alice

de Freitas, Geoffrey

Hastings, S.

Baird, J.

Deer, G.

Hayman, F. H.

Balfour, A.

Delargy, H. J.

Henderson, Rt. Hon. Arthur (Tipton)

Barnes, Rt. Hon. A. J.

Dodds, N. N.

Herbison, Miss M.

Bartley, P.

Donnelly, D.

Hewitson, Capt. M.

Bellenger, Rt. Hon. F. J.

Driberg, T. E. N.

Hobson, C. R.

Bonn, Wedgwood

Dugdale, Rt. Hon. John (W. Bromwich)

Holman, P.

Benson, G.

Dye, S.

Holmes, Horace (Hemsworth)

Beswick, F.

Ede, Rt. Hon. J. C.

Houghton, D.

Bevan, Rt. Hon. A. (Ebbw Vale)

Edelman, M.

Hoy, J.

Bing, G. H. C.

Edwards, John (Brighouse)

Hubbard, T.

Blenkinsop, A.

Edwards, Rt. Hon. Ness (Caerphilly)

Hudson, James (Ealing, N.)

Blyton, W. R.

Edwards, W. J. (Stepney)

Hughes, Emrys (S. Ayrshire)

Boardman, H.

Evans, Albert (Islington, S. W.)

Hughes, Hector (Aberdeen, N.)

Booth, A.

Evans, Edward (Lowestoft)

Hughes, Moelwyn (Islington, N.)

Bottomley, A. G.

Evans, Stanley (Wednesbury)

Hynd, H. (Accrington)

Bowles, F. G. (Nuneaton)

Ewart, R.

Hynd, J. B. (Attercliffe)

Braddock, Mrs. Elizabeth

Field, Capt. W. J.

Irvine, A. J. (Edge Hill)

Brooks, T. J. (Normanton)

Finch, H. J.

Irving, W. J. (Wood Green)

Broughton, Dr. A. D. D.

Fletcher, Eric (Islington, E.)

Isaacs, Rt. Hon. G. A.

Brown, Rt. Hon. George (Belper)

Follick, M.

Janner, B

Brown, Thomas (Ince)

Foot, M. M.

Jay, D. P. T.

Burke, W. A.

Forman, J. C.

Jeger, George (Goole)

Burton, Miss E.

Fraser, Thomas (Hamilton)

Jeger, Dr. Santo (St. Pancras, S.)

Butler, Herbert (Hackney, S.)

Freeman, John (Watford)

Jenkins, R. H.

Callaghan, L. J.

Freeman, Peter (Newport)

Johnson, James (Rugby)

Carmichael, J.

Gaitskell, Rt. Hon. H. T. N.

Johnston, Douglas (Paisley)

Castle, Mrs. B. A.

Ganley, Mrs. C. S.

Jones, David (Hartlepool)

Champion, A. J.

Gibson, C. W.

Jones, Frederick Elwyn (West Ham, S.)

Chetwynd, G. R.

Gilzean, A.

Jones, Jack (Rotherham)

Clunie, J.

Gooch, E. G.

Jones, William Elwyn (Conway)

Cocks, F. S.

Granville, Edgar (Eye)

Keenan, W.

Coldrick, W.

Greenwood, Anthony (Rossendale)

Kenyan, C.

Collindridge, F.

Greenwood, Rt. Hon. Arthur (Wakefield)

Key, Rt. Hon. C. W.

Cook, T. F.

Grenfell, D. R.

King, Dr. H. M.

Cooper, Geoffrey (Middlesbrough, W.)

Grey, C. F.

Kinghorn, Sqn. Ldr. E.

Cooper, John (Deptford)

Griffiths, David (Rother Valley)

Kinley, J.

Corbet, Mrs. Freda (Peckham)

Griffiths, Rt. Hon. James (Llanelly)

Kirkwood, Rt. Hon. D.

Cove, W. G.

Griffiths, William (Exchange)

Lang, Gordon

Craddock, George (Bradford, S.)

Gunter, R. J.

Lee, Miss Jennie (Cannock)

Lever, Harold (Cheetham)

Paget, R. T.

Taylor, Bernard (Mansfield)

Lever, Leslie (Ardwick)

Paling, Rt. Hon. Wilfred (Dearne V'lly)

Taylor, Robert (Morpeth)

Lewis, Arthur (West Ham, N.)

Paling, Will T. (Dewsbury)

Thomas, David (Aberdare)

Lewis, John (Bolton, W.)

Pannell, T. C.

Thomas, George (Cardiff)

Lindgren, G. S.

Pargiter, G. A.

Thomas, Iorwerth (Rhondda, W.)

Lipton, Lt.-Col. M.

Parker, J.

Thomas, Ivor Owen (Wrekin)

Logan, D. G.

Paton, J.

Thorneycroft, Harry (Clayton)

Longden, Fred (Small Heath)

Pearson, A.

Thurtle, Ernest

McAllister, G.

Pooie, C.

Timmons, J.

MacColl, J. E.

Popplewell, E.

Tomney, F.

McGhee, H. G.

Porter, G.

Turner-Samuels, M.

McGovern, J.

Price, Philips (Gloucestershire, W.)

Ungoed-Thomas, Sir Lynn

McInnes, J.

Proctor, W. T.

Usborne, H.

Mack, J. D.

Pryde, D. J.

Vernon, W. F.

McKay, John (Wallsend)

Pursey, Cmdr. H.

Viant, S. P.

Mackay, R. W. G. (Reading, N.)

Rankin, J.

Wallace, H. W.

McLeavy, F.

Rees, Mrs. D.

Watkins, T. E.

MacMillan, Malcolm (Western Isles)

Reeves, J.

Webb, Rt. Hon. M. (Bradford, C.)

McNeil, Rt. Hon. H.

Reid, Thomas (Swindon)

Weitzman, D.

MacPherson, Malcolm (Stirling)

Reid, William (Camlachie)

Wells, Percy (Faversham)

Mainwaring, W. H.

Rhodes, H.

Wells, William (Walsall)

Mallalieu, E. L. (Brigg)

Richards, R.

West, D. G.

Mallalieu, J. P. W. (Huddersfield, E.)

Robens, Rt. Hon. A.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Mann, Mrs. Jean

Roberts, Goronwy (Caernarvonshire)

White, Mrs. Eirene (E. Flint)

Manuel, A. C.

Robertson, J. J. (Berwick)

White, Henry (Derbyshire, N. E.)

Marquand, Rt. Hon. H. A.

Rogers, George (Kensington, N.)

Wigg, G.

Mathers, Rt. Hon. G.

Ross, William

Wilcock, Group Capt. C. A. B.

Mellish, R. J.

Royle, C.

Wilkes, L.

Messer, F.

Shackleton, E. A. A.

Wilkins, W. A.

Middleton, Mrs. L.

Shawcross, Rt. Hon. Sir Hartley

Willey, Frederick (Sunderland)

Mikardo, Ian.

Shinwell, Rt. Hon. E.

Willey, Octavius (Cleveland)

Mitchison, G. R.

Shurmer, P. L. E.

Williams, David (Neath)

Moeran, E. W.

Silverman, Julius (Erdington)

Williams, Rev. Llywelyn (Abertillery)

Monslow, W.

Silverman, Sydney (Nelson)

Williams, Ronald (Wigan)

Moody, A. S.

Simmons, C. J.

Williams, Rt. Hon. Thomas (Don V'lly)

Morgan, Dr. H. B.

Slater, J.

Williams, W. T. (Hammersmith, S.)

Morley, R.

Smith, Ellis (Stoke, S.)

Wilson, Rt. Hon. Harold (Huyton)

Morris, Percy (Swansea, W.)

Smith, Norman (Nottingham, S.)

Winterbottom, Ian (Nottingham, C.)

Mort, D. L.

Snow, J. W.

Winterbottom, Richard (Brightside)

Moyle, A.

Sorensen, R. W.

Wise, F. J.

Mulley, F. W.

Soskice, Rt. Hon. Sir Frank

Woodburn, Rt. Hon. A.

Murray, J. D.

Sparks, J. A.

Woods, Rev. G. S

Nally, W.

Steele, T.

Wyatt, W. L.

Neal, Harold (Bolsover)

Stewart, Michael (Fulham, E.)

Yates, V. F.

Noel-Baker, Rt. Hon. P. J

Stokes, Rt. Hon. R. R.

Younger, Rt. Hon. K.

O'Brien, T.

Strachey, Rt. Hon. J.

Oldfield, W. H

Strauss, Rt. Hon. George (Vauxhall)

TELLERS FOR THE AYES:

Oliver, G. H.

Stross, Dr. Barnett

Mr. Bowden and

Orbach, M.

Summerskill, Rt. Hon. Edith

Mr. Kenneth Robinson.

Padley, W. E.

Sylvester, G. O.

NOES

Aitken, W. T.

Bromley-Davenport, Lt.-Col. W.

de Chair, Somerset

Alport, C. J. M.

Brooke, Henry (Hampstead)

De la Bère, R.

Amery, Julian (Preston, N.)

Browne, Jack (Govan)

Deedes, W. F.

Amory, Heathcoat (Tiverton)

Buchan-Hepburn, P. G. T.

Digby, S. Wingfield

Arbuthnot, John

Bullock, Capt. M.

Dodds-Parker, A. D.

Ashton, H. (Chelmsford)

Bullus, Wing Commander E. E.

Donner, P. W.

Assheton, Rt. Hon. R. (Blackburn, W.)

Burden, F. A.

Douglas-Hamilton, Lord Malcolm

Astor, Hon. M. L.

Butcher, H. W.

Drayson, G. B.

Baker, P. A. D.

Carr, Robert (Mitcham)

Drewe, C.

Baldock, Lt.-Cmdr. J. M.

Carson, Hon. E.

Dugdale, Maj. Sir Thomas (Richmond)

Baldwin, A. E.

Channon, H.

Duncan, Capt. J. A. L.

Banks, Col. C.

Churchill, Rt. Hon. W. S.

Dunglass, Lord

Baxter, A. B.

Clarke, Col. Ralph (East Grinstead)

Duthie, W. S.

Beamish, Maj. Tufton

Clarke, Brig. Terence (Portsmouth, W.)

Eccles, D. M.

Bell, R. M.

Clyde, J. L.

Elliot, Rt. Hon. W. E.

Bennett, Sir Peter (Edgbaston)

Colegate, A.

Erroll, F. J.

Bennett, Dr. Reginald (Gosport)

Conant, Maj. R. J. E.

Fisher, Nigel

Bennett, W. G. (Woodside)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Fort, R.

Bevins, J. R. (Liverpool, Toxteth)

Cooper-Key, E. M.

Foster, John

Birch, Nigel

Corbett, Lt.-Col. Uvedale (Ludlow)

Fraser, Hon. Hugh (Stone)

Bishop, F. P.

Craddock, Beresford (Spelthorne)

Fraser, Sir I. (Morecambe & Lonsdale)

Black, C. W.

Cranborne, Viscount

Fyfe, Rt. Hon. Sir David Maxwell

Boles, Lt.-Col. D. C. (Wells)

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

Gage, C. H.

Boothby, R.

Crosthwaite-Eyre, Col. O. E.

Galbraith, Cmdr. T. D. (Pollok)

Bossom, A. C.

Crouch, R. F.

Galbraith, T. G. D. (Hillhead)

Bowen, E. R. (Cardigan)

Crowder, Capt. John (Finchley)

Gammans, L. D.

Boyd-Carpenter, J. A.

Crowder, Petre (Ruislip—Northwood)

Garner-Evans, E. H. (Denbigh)

Boyle, Sir Edward

Cundiff, F. W.

Gates, Maj. E. E.

Bracken, Rt. Hon. B.

Cuthbert, W. N.

George, Lady Megan Lloyd

Braine, B. R.

Darling, Sir William (Edinburgh, S.)

Glyn, Sir Ralph

Braithwaite, Sir Albert (Harrow, W.)

Davidson, Viscountess

Gomme-Duncan, Col. A.

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Davies, Nigel (Epping)

Gridley, Sir Arnold

2222

2223

Grimond, J.

Lyttelton, Rt. Hon. O.

Roper, Sir Harold

Grimston, Hon. John (St. Albans)

McCorquodale, Rt. Hon. M. S

Ropner, Col. L

Grimston, Robert (Westbury)

Macdonald, A. J. F. (Roxburgh)

Russell, R. S.

Harden, J. R. E.

Macdonald, Sir Peter (I. of Wight)

Ryder, Capt. R. E. D.

Hare, Hon. J. H. (Woodbridge)

Mackeson, Brig. H. R

Salter, Rt. Hon. Sir Arthur

Harris, Frederic (Croydon, N.)

McKibbin, A.

Sandys, Rt. Hon. D.

Harris, Reader (Heston)

McKie, J. H. (Galloway)

Savory, Prof. D. L.

Harvey, Air Codre. A. V. (Macclesfield)

Maclay, Hon. John

Scott, Donald

Harvey, Ian (Harrow, E.)

Maclean, Fitzroy

Shepherd, William

Harvie-Watt, Sir George

MacLeod, Iain (Enfield, W.)

Smithers, Peter (Winchester)

Hay, John

MacLeod, John (Ross and Cromarty)

Smyth, Brig. J. G. (Norwood)

Head, Brig. A. H.

Macpherson, Major Niall (Dumfries)

Snadden, W. McN

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

Maitland, Cmdr. J. W.

Soames, Capt. C.

Heald, Lionel

Manningham-Buller, R. E.

Spearman, A. C. M.

Heath, Edward

Marlowe, A. A. H.

Spence, H. R. (Aberdeenshire, W.)

Henderson, John (Cathcart)

Marples, A. E.

Spens, Sir Patrick (Kensington, S.)

Hicks-Beach, Maj. W. W.

Marshall, Douglas (Bodmin)

Stanley, Capt. Hon. Richard (N Fylde)

Higgs, J. M. C.

Marshall, Sidney (Sutton)

Stevens, G. P.

Hill, Mrs. E. (Wythenshawe)

Maude, Angus (Ealing, S.)

Steward, W. A. (Woolwich, W.)

Hinchlngbrooke, Viscount

Maude, John (Exeter)

Stewart, Henderson (Fife, E.)

Hirst, Geoffrey

Maudling, R.

Stoddart-Scott, Col. M.

Hollis, M. C.

Medlicott, Brig. F.

Storey, S.

Holmes, Sir Stanley (Harwich)

Mellor, Sir John

Strauss, Henry (Norwich, S.)

Hope, Lord John

Molson, A. H. E.

Stuart, Rt. Hon. James (Moray)

Hopkinson, Henry

Monckton, Sir Waller

Studholme, H. G.

Hornsby-Smith, Miss P.

Moore, Lt.-Col. Sir Thomas

Summers, G. S.

Horsbrugh, Rt. Hon. Florence

Morris, Hopkin (Carmarthen)

Sutcliffe, H.

Howard, Gerald (Cambridgeshire)

Morrison, John (Salisbury)

Taylor, Charles (Eastbourne)

Howard, Greville (St. Ives)

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

Taylor, William (Bradford, N.)

Hudson, Sir Austin (Lewisham, N.)

Mott-Radolyffe, C. E.

Teeling, W.

Hudson, Rt. Hon. Robert (Southport)

Nabarro, G.

Teevan, T. L.

Hudson, W. R. A. (Hull, N.)

Nicholls, Harmar

Thomas, J. P. L. (Hereford)

Hurd, A. R.

Nicholson, G.

Thompson, Kenneth Pugh (Walton)

Hutchinson, Geoffrey (Ilford, N.)

Nield, Basil (Chester)

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)

Noble, Comdr. A. H. P.

Thorneycroft, Peter (Monmouth)

Hutchison, Colonel James (Glasgow)

Nugent, G. R. H.

Thornton-Kemsley, Col. C. N.

Hyde, Lt.-Col. H. M

Nutting, Anthony

Thorp, Brig. R. A. F.

Hylton-Foster, H. B.

Oakshott, H. D.

Tilney, John

Jeffreys, General Sir George

Odey, G. W.

Turner, H. F. L.

Jennings, R.

O'Neill, Rt. Hon. Sir Hugh

Turton, R. H.

Johnson, Howard (Kemptown)

Ormsby-Gore, Hon. W. D.

Tweedsmuir, Lady

Jones, A. (Hall Green)

Orr, Capt. L. P. S.

Vane, W. M. F.

Joynson-Hicks, Hon. L. W.

Orr-Ewing, Charles Ian (Hendon, N.)

Vaughan-Morgan, J. K.

Kaberry, D.

Orr-Ewing, Ian L. (Weston-super-Mare)

Wakefield, Edward (Derbyshire, W.)

Kerr, H. W. (Cambridge)

Osborne, C.

Wakefield, Sir Wavell (Marylebone)

Kingsmill, Lt.-Col. W. H.

Peake, Rt. Hon. O.

Walker-Smith, D. C.

Lambert, Hon. G.

Perkins, W. R. D

Ward, Hon. George (Worcester)

Lancaster, Col. C. G.

Peto, Brig. C. H. M.

Ward, Miss I. (Tynemouth)

Langford-Holt, J.

Pickthorn, K.

Waterhouse, Capt. Rt. Hon. C.

Law, Rt. Hon. R. K

Pitman, I. J.

Watkinson, H.

Leather, E. H. C.

Powell, J. Enoch

Webbe, Sir H. (London & Westminster)

Legge-Bourke, Maj. E. A. H.

Price, Henry (Lewisham, W.)

White, Baker (Canterbury)

Lennox-Boyd, A. T.

Prior-Palmer, Brig. O.

Williams, Charles (Torquay)

Lindsay, Martin

Profumo, J. D.

Williams, Gerald (Tonbridge)

Linstead, H. N.

Raikes, H. V.

Williams, Sir Herbert (Croydon, E.)

Llewellyn, D.

Rayner, Brig. R.

Wills, G.

Lloyd, Rt. Hn. Geoffrey (King's Norton)

Redmayne, M.

Wilson, Geoffrey (Truro)

Lloyd, Maj. Guy (Renfrew, E.)

Remnant, Hon. P.

Winterton, Rt. Hon. Earl

Lloyd, Selwyn (Wirral)

Ronton, D. L. M.

Wood, Hon. R.

Lockwood, Lt.-Col. J. C.

Roberts, Emrys (Merioneth)

York, C.

Longden, Gilbert (Herts, S. W.)

Roberts, Maj. Peter (Heeley)

Low, A. R. W.

Robertson, Sir David (Caithness)

TELLERS FOR THE NOES:

Lucas, Sir Jocelyn (Portsmouth, S.)

Robinson, Roland (Blackpool, S.)

Major Wheatley and Mr. Vosper.

Lucas, P. B. (Brentford)

Robson-Brown, W.

Lucas-Tooth, Sir Hugh

Rodgers, John (Sevenoaks)

8.0 p.m.
Mr. Eccles: I should like to ask leave to withdraw the Amendment in view of the Chancellor's undertaking to put into this part of the Clause words which go a long way, we hope, to carry out our intentions.
The Chairman: I must, of course, put the Question, the Closure having been carried.
Question, "That those words be there inserted," put accordingly, and negatived.
Mr. Eccles: I beg to move, in page 24, line 5, to leave out paragraph (c).
This paragraph defines one of these classes of transactions that shall be unlawful. It says that it
"shall be unlawful ….
(c) for a body corporate so resident to cause or permit a body corporate not so resident over which it has control to create or issue any shares or debentures;"
without the consent of the Treasury. This restriction goes against the whole trend of modern finance, that is to say, of associating the overseas company in the financial

2225
structure of a business where the control is still operated from the United Kingdom.
I begin by reminding the Committee how reactionary this paragraph is. I have always taken a great interest in the development or rather the lack of development of the Spanish empire in South America. It is clear to anyone who studies that history that one of the main causes why industry and commerce never flourished in South America as it did in North America was the absurd way in which the King of Spain demanded to have the right to give a permit for every kind of new business or business extension in the Spanish Colonies. I do not doubt that the reason why our kinsmen in North America got on so much better than the Spanish did in South America was that they had to ask no Government's leave to get on with their business.
The Labour Government here is reverting to the practice of the kings of Spain. They may be sure that the same consequences will follow. I hope now to describe those consequences. On a previous Amendment, my hon. Friend the Member for Barnet (Mr. Maudling) gave the Committee a very lucid description of how, after a time, we have evolved a typcial British compromise in the structure of business overseas. He reminded the Committee that there are very often companies which are subsidiaries of United Kingdom companies, but the control and management of which are effectively exercised in the country of operation.
We do not want to say too much about this system. It is one of the worst features of this Clause that it makes us drag out into the light of day the very sensible compromise whereby the British have got the best of both worlds. We do, in fact, still control a large number of companies operating overseas though from the nationalistic point of view of those companies they have their own locals as directors, they own a large part of the capital, their titles are expressed in the language of the country and they look local. This is a system which suits both parties. It suits the country concerned to have that sort of company operating and it suits us to continue to have a big stake in those overseas concerns.
In Committee on the Coal Industry Nationalisation Act we raised the question of concerns such as coal bunkering
2226
stations, oil depots and merchanting businesses which belonged to colliery groups in this country which were operating overseas, and were highly important to British interests. We frequently said at the time, that those companies should remain under the influence of this country.
Fuel being a strategic material, many countries have for some time past insisted that where fuel is imported on to their territory and stored it shall be through a company in which the majority of the capital is owned locally. I apologise to the Committee for not having looked up the list of the countries who insist upon that provision. It is very extensive, but countries such as Egypt and Spain spring to my mind, although there are many others.
This is obviously a delicate business. We have only to see what is happening in Persia to realise that the partnership between a highly industrialised country like ourselves and an under-developed country like Persia is a delicate matter, but we have to make this partnership work and we have to realise that the local susceptibilities of the people in the overseas countries must be taken into consideration. What does this extraordinary paragraph say? It says that in the case of the sort of company which I have been describing to the Committee, that company may not create or issue any shares or debentures without the leave of His Majesty's Treasury.
If we can, let us put ourselves in the position of a foreign Government which, perhaps, has its fuel supply depots in the hands of subsidiaries—Cory Brothers or Shell or whoever it may be. The population is growing; let us assume that they want to build new oil tanks or a new wharf or something of that kind. They are not allowed to raise the money except with the permission of a foreign State-that is, the British Government. Is that likely to promote good business relationships between the two countries?
There is a great tide of economic nationalism flowing in the world. It is referred to in Asia as a revolution. Surely we should be on the side of the revolution. [HON. MEMBERS: "Oh."] It is we on this side of the Committee who are on the side of the revolution now. This is a ridiculous and reactionary Clause which attempts to reintroduce colonial

2227
exploitation, controlled by the United Kingdom, over enterprises in other peoples' territories. It is an extraordinary thing—and if it were not so late in the day I would dilate on it further—that the Labour Party should have produced such a reactionary Measure.
Apart from the fundamental issue, which is the international politics of this paragraph, hon. Members will surely be anxious about the strict financial consequences. To help to finance re-armament, the Chancellor of the Exchequer has taken the decision to run down our favourable balance of overseas trade this year. That means that, deliberately, we shall not have any capital to leave abroad in investments. That is an extremely serious thing at a time when all these companies are, like our own companies, affected by rising prices and, therefore, are in need of more working capital.
No doubt we have to run down our balance of trade—and I am not quarrelling with the decision for the moment—but the fact is that for the purpose of financing our own re-armament we are quite deliberately reducing our ability to help these people. It must, therefore, be in the highest interests of the United Kingdom that we should borrow locally as much of the additional working capital as we can to meet the needs of these companies. I do not know whether it is because of the length of time during which the debate has continued, but I must say that all these propositions seem so obvious that I cannot understand how the paragraph could ever have been inserted in the Bill.
8.15 p.m.
These local directors have perhaps for many years been running the whole business locally, on the loosest of loose strings with London, under one of those arrangements which my right hon. Friend the Member for Aldershot (Mr. Lyttelton) described when he was talking about the British American Tobacco Company—a company whose success, I suppose, gives pride and pleasure to every one of us. Is it likely to help these people if they have to get a certificate from Whitehall every time they want to raise money locally?
How do the Government think that the Clause will operate? I gathered from the Chancellor's first intervention on this question that he was thinking of setting
2228
up a sort of advisory body which I suppose would be an overseas Capital Issues Committee. As my right hon. Friend has said, that simply will not do. It is only a mask for the same thing, and the foreigner would say, "We do not really care whether the decision is made by a Treasury official or by a committee appointed by the Chancellor of the Exchequer." As far as the foreigner is concerned, it will be a case of London dominating him; that is what he will say, and even if he did not say it we must bear in mind that this operation would take time. Submissions have to be made to these people and it may be months before they are able to study all the facts and give permission for a particular issue of debentures or shares.
That is not the way business is done. When one suddenly gets an Offer of money in a foreign centre one has to close with it or lose the offer, for people who have capital to invest will say, "We have some alternative suggestions and, as you cannot make up your mind, we shall put our money somewhere else." Apart from the politics of this question, if we erect this great sort of steeplechase track around which companies have to go before they can obtain permission to borrow—not our money, but the money of local people in another country—then the position is absurd.
I do not want to sit down without frankly admitting to the Committee that it is possible for a transaction to take place in the form of an issue of debentures or ordinary shares in an overseas country which will reduce liability to tax in this country. It is not use blinking the fact that in certain cases it is possible to make a transaction of that kind. But I venture to say—and one cannot be certain—that the overwhelming probability is that the number and effect of those transactions which avoid tax is nothing compared with the great and general damage which we do here to what I again submit is the flowing tide of economic revolution or nationalism in the world.
If we do not accommodate ourselves to this great change in the relationship between the British capitalist and overseas resources—and here I agree with the hon. Member for Wednesbury (Mr. S. N. Evans)—I do not think we shall be able to earn a full supply of food and raw materials for this country. This is one

2229
of the most profitable ways of putting British brains and experience to work, and I cannot believe that the Treasury consulted either the Foreign Office or the Office for Commonwealth Relations before they wrote in this Clause.
I think it is wrong to quote from distinguished Dominion nationals who have made pronouncements on paragraph (c). It is a little unfair, for they cannot make another statement after that. But I have heard most distinguished people, who happened to be in London at a conference the other day, comment that they thought this would damage our business relations with the Dominions.
The hon. Member for Renfrew, West (Mr. Maclay), spoke the truth when he said that a lot of damage had already been done. That is the trouble. If we once threaten people and let them see the red light, they do not wait to be hurt: they begin to run. We could improve the position if we deleted this provision. I hope that the Government will look at this matter in the broadest sense. Let them think much wider and further than the two or three transactions which avoided tax, and which have been brought to their notice. Let them think of the whole future of the partnership between this highly populated industrial country and the under-developed territories overseas.
Mr. Colegate: The case for deleting this provision has been put very clearly by my hon. Friend, particularly in relation to its effect and operation in foreign countries. I wish to speak on its effect in the Dominions. The Dominions will feel this even more than the foreign countries. Rightly, the Dominions are extremely sensitive about their position. They do not feel in the least inferior to us. They are equal partners. In matters of this kind, we must be even more careful with the Dominions than we have to be with foreign nations.
I should like to outline the way in which this will operate. A great many companies are built up in the Dominions in this way. There is not a very great permanent export of British capital, but by means of a British company's credit—by means of an overdraft and acceptance credits—a company is built up. The time comes when that company issues capital locally, with perhaps some small
2230
British participation, and that money or credit, comes back to London. The overdraft is paid off, and the Dominion subsidiary is working satisfactorily. The local people have been interested, there is local capital and, if the organisers have any sense at all, there is a majority of local directors.
At the same time, an invaluable trade connection has been preserved. It is almost certain that a great deal of the buying and mercantile business of these subsidiary companies will come to London where we—or, at least, the Chancellor—will get a very heavy rake off in one form or another. I cannot help feeling that the omission of this provision would be an excellent move. It would be reported all over the world, especially in the Dominions. It would tend to make good some of the damage which has been done. Perhaps I am too optimistic, but I think that it would fit in with what I felt that the Chancellor was trying to do when he promised concessions on this Clause.
We shall be even more dependent in the future than we have been in the past on maintaining our trade connections with the Dominion. We shall be dependent upon them for essential raw materials and we shall depend very much on the fact that, whether there is an actual legal preference or not, we still have a great fund of good will as a result of which we shall get preference in the trade. But it is one thing to rely on that and it is another to have one's own permanent subsidiary company, even if one has only a small holding. One is able to work together with the subsidiary.
On two or three occasions in the last year I have had the pleasure of entertaining here overseas directors of subsidiary companies. They were immensely interested in our procedure in the House and in our way of life. Although one does not wish to exploit that, one must remember that it is on this kind of thing, on these sometimes invisible bonds, that the strength of the British Commonwealth has been built up.
Mr. Grimond: There has been a tendency in all the financial legislation of this sort in recent years to devise an instrument which has widespread effects on legitimate transactions when they are

2231
used to deal with some question of evasion which may, in its scope, be comparatively small. It seems to me that this is one more instance of an attempt to cut off one's nose to spite one's face. One may do a great deal of damage to perfectly legitimate trade for the sake of catching out the few cases which we all agree may be deliberately designed to evade taxation. The words "tax evasion" are very vague. A man may be evading taxation in the ordinary language of today although he is doing something which is perfectly legitimate and within the law which, in the long run, may do this country considerable good.
I take it that the intention of the Government is to catch only the body which deliberately sets out to evade its responsibilities to the country at a difficult time when the country is forced to raise great sums of money for re-armament, principally, and for other purposes as well. But in the setting of the rearmament programme, we have to think what will be the secondary effects of catching out a certain number of people who may be trying to evade their responsibilities. Is the game worth the candle?
I agree that the moral effect is important. It is important that large-scale evasion should not exist. It has a moral effect in the country. But will even the moral effect, far less the financial effect, justify the possible damage which this will do? We depended a great deal on the confidence which the world has in us as a centre of a free market—a free capital market—and on our attitude to the countries we have developed. We have always raised capital in foreign countries and put capital into them, and the reason why I think we have been successful, both from the point of view of the ordinary people here and from that of the ordinary people in the foreign countries, is that, on the whole, we play fair.
We have not tried to bring undue influence, particularly Government influence, to bear on the affairs of these foreign countries. This is a matter of importance to everyone in this country. It is not only of importance to the City of London. As has been said by the hon. Member for Wednesbury (Mr. S. N. Evans), the invisible trade of this country is of the greatest importance to the standard of life of everyone. The standard of the whole country has depended a
2232
great deal on our conduct of foreign trade and foreign finance.
This subsection has been likened by my hon. Friend the Member for Chippenham (Mr. Eccles) to a return to the ways of the Spanish Empire. I put another consideration to the Financial Secretary. It used to be a powerful argument of the Left in this country that the capitalist system led inevitably to conflict between large groups of capital and that that conflict might, in the end, even lead to war. One of the great benefits which some of us believed might happen through planning, especially on an international scale, was that we should break up those conflicts and antagonisms between large economic groups and, by that means, we should get greater confidence and prosperity in the world. But now, when so many States are planning their own economies, experience does not seem to me to bear that out.
8.30 p.m.
So far from the era of individual nations each planning their own economies leading to sweeping away all barriers to international trade, it is doing just the opposite. So far from each planned economy taking account of the difficulties of other countries in the world, and trying to do its best for the wealth and happiness of the whole world, they are doing very much what old capitalist private business was accused of doing. They are trying to export their troubles and make someone else bear their burdens. We see it in our relations with Denmark and the Argentine, and in the campaign against the Schuman Plan. In that campaign it was argued that the standard of living in this country was threatened. We did not hear so much about the standard of living of the French or German workers.
I ask the Financial Secretary to take these things into account. Are we really helping the standard of living of the workers of the Dominions or of foreign countries, where we may have subsidiary firms, if these are not allowed to raise more capital in those countries, exploit their resources and so add to their wealth? Can we really say that we are in this matter moved by anything except mere considerations of our own wealth? Cannot we consider the matter in a wider setting? If we consider the case only from the national point of view, is that really consistent with building up the Atlantic

2233
Pact and the great alliance for democracy and freedom and higher living standards throughout the world?
Mr. Hollis: It is a very great pleasure indeed not only to follow, but entirely to agree with, the hon. Member for Orkney and Shetland (Mr. Grimond). The paragraph in the Bill which has given rise to this debate makes me feel very old. I can remember, as short a time ago as my early boyhood, when one of the main points which Socialist propagandists used against the stupid capitalist imperialists was that they were foolish to imagine that the exceptionally privileged position of the British capitalist would last for ever. On the contrary, they said, that it was not to be expected that the other nations of other Continents would be willing to use tools and machines for the rest of time solely for the benefit of British capital, and that we must make up our minds to the fact that these other peoples would insist upon using those things for their own advantage.
That is what we were told in the prophecies of the Socialists of our boyhood, and, of all their prophecies—every other was proved wrong—this one was the only one in which they were proved right. Of course, they ought to be right about one, but, when they were right about one and when they might have stuck to the one on which they were right what happened? A few weeks ago, at Strasbourg, I heard a brilliant speech from M. Reynaud, the French statesman, in which he said that the one successful advance of nationalisation in the post-war world was the nationalisation of Socialism. That is perfectly true.
This fantastically reactionary paragraph, which the party of the Brontosaurus insists on inserting in the Bill, is just as unworkable in practice as it is deficient in morals. I agree, of course, that there is a certain problem concerning a few people who, in raising capital, may escape liability to taxation. Even from the point of view of the collection of taxation, to suggest that this paragraph would be to the advantage of the Government is fantastic. It is true that there are ways of curing every problem. It is one way of curing a cold in the head to cut off the man's head, but it is not a very good way to cure a cold in the head.
2234
It is perfectly obvious that, if hon. Gentlemen opposite insist on pushing through this paragraph in the hope of laying by the heels one or two people who are trying to evade taxation, they will, in fact, obviously be putting this body corporate which is resident in the United Kingdom and carrying on business abroad in such a position that it is fantastic to imagine that, in the modern world, it would be able to enjoy any prosperity and make its contribution to the nation's taxation in the long run.
I am not advocating, any more than my hon. Friend the Member for Chippenham (Mr. Eccles), that British capital should make a panic flight from those parts of the world in which it has played a very useful part in the past, where it is still playing that part today and where it will continue if allowed to do so in the future. But British capital must have flexibility of manoeuvre if it is to be forbidden by Acts of Parliament and without licence of the British Government, which is under suspicion throughout the nationalist movements in other countries, to come to any terms with the incipient nationalism of those other countries. The British company is, under this Clause, to be placed in a position where it will not indeed be able to earn the tax revenue which the Chancellor is so anxious about.
Mr. Jay: The hon. Member for Chippenham (Mr. Eccles), in introducing the Amendment, spoke of the importance of the development of overseas subsidiaries, local contacts and methods of extending British trade. I fully agree with that. Clearly, it is important that business of that kind should develop, and that there should be overseas subsidiaries of United Kingdom companies, and, indeed, that those subsidiaries should raise capital in the countries where they are operating. This subsection is not designed to stop any of these things happening. What this subsection is designed to do, and what it will be so administered as to do, is to prevent those subsidiaries being misused as an instrument of tax evasion by United Kingdom companies, and, therefore, United Kingdom shareholders.
I agree with a great deal of what the hon. Member for Chippenham said about the advantages of this class of business, although I thought he lapsed into extravagance when he talked about colonial exploitation in the Empire and things of that

2235
kind. Hon. Members opposite are really not facing the facts of the problem if they suggest, as the hon. Member for Orkney and Shetland (Mr. Grimond), did, and I am sure he believes it to be the case, that this is simply a case of a few possible minor evasions of the Clause.
The fact is that, if we were to pass this Clause without this subsection—that is to say, if we were to apply the control on the United Kingdom company transferring its management abroad and leave it completely free to raise capital from subsidiaries in this way—it is very doubtful whether the Clause will be worth passing at all. It would, indeed—and I think the hon. Member for Chippenham admitted this—drive a carriage and horses right through the Clause, since it would be possible for the United Kingdom company with sufficient resources from their existing subsidiaries, or by forming new subsidiaries in some overseas countries, where there was little or no Income Tax and Profits Tax, to make an issue—for instance a bonus issue of preference shares, or debentures to the parent company—and then, by immediate repayment of that capital, to hand back what were profits earned on a large scale, but without any taxation at all.
This is no figment of the imagination of the Inland Revenue. These cases were actually occurring. Indeed, one of the cases which as I indicated roughly in my speech on Second Reading—most led us to the conclusion that we must take action in this matter was that of a large and well-known British company which was forming a subsidiary in, as a matter of fact, a British Colony where there is no Income Tax or Profits Tax, with a view to a transaction of precisely that kind.
Mr. H. Fraser: The hon. Gentleman's argument really amounts to this, that he would not have allowed Cabot to sail from these ports on the grounds that he would not have been subject to tax.
Mr. Pitman: The hon. Gentleman is talking about profit balances which have been properly made in, say, New Zealand and which are capitalised and continue to belong to the parent company. I do not see how that is in any way an evasion of tax of any kind whatever. If the Financial Secretary will turn to Clause 33 he will see that it is impossible for the New Zealand company to have made
2236
these profits other than fairly and in accordance with what the Chancellor himself would agree to if he were there. Therefore, those must be the genuine profits of the New Zealand company, and, as such, I do not see how their capitalisation and issue to the people who own the business is in any way an offence.
Mr. Jay: That does not affect the issue. They may be quite genuine profits, but, as a result of a transaction such as I have described, quite a large number of profits hitherto accruing to the United Kingdom company and stockholders bearing Income Tax and Profits Tax could be made to bear neither of those taxes through their being made available to the parent company in a non-taxable form.
I wanted to make it quite clear to the hon. Member for Orkney and Shetland that this is not a figment of the imagination of the Inland Revenue, but that cases have actually occurred, and that it would have been possible for other companies in the same position, had this continued, to carry out transactions of that kind.
Sir J. Mellor: When the hon. Gentleman was referring to subsidiaries he was referring to wholly owned subsidiaries. We contemplate the case where there would be independent shareholders in the overseas company. Surely, in that case, the parent company would have a duty to permit any financial transactions which were beneficial to them, and, surely, it would be quite immoral to require the parent company to refrain from entering into a transaction which was for the benefit of the minority shareholders overseas.
Mr. Jay: But in the normal case of a device of this kind one would expect the subsidiary to be wholly owned.
The hon. Member for Chippenham put a perfectly reasonable point, that this Clause, in order that it should operate in the only way in which we believe this difficulty can be met, would, of course, require the United Kingdom parent company to get permission from the British Government in order that the subsidiary might raise capital in the overseas country. He spoke of London domination—I think that was his phrase—and suggested that this might give rise to political difficulties. I think that is exaggerated. He told us he had been talking to various persons interested in this.

2237
8.45 p.m.
I happened to discuss this particular aspect of the problem a week or two ago with a director of one of our largest parent companies with subsidiaries abroad, and he, very naturally from his point of view, put to me the inconvenience of this arrangement. But when I asked him whether in any case his board sitting in London would not require their subsidiary overseas to refer a question of this kind to them in London, he admitted that, in fact, they would. Therefore, as far as London domination is concerned, it is no doubt there already in many cases of this kind owing to the financial structure of the company.
This subsection does not interpose regulations between the United Kingdom and the overseas country, whichever it may be; but merely interposes them between the United Kingdom parent company in London or elsewhere in this country, and the British Government here. Therefore, when one takes account of that fact, I think it is clear that those anxieties are considerably exaggerated. I do not think it can be contested that this loophole does exist, that it would be a serious gap in the Clause, and that, provided the whole Clause is administered as my right hon. Friend undertook that it should be, simply to stop flagrant cases of tax evasion, and, of course, to give consent to all genuine cases for the raising of new capital for business reasons, we are perfectly justified and, indeed, in order to protect the Revenue, in duty bound, to include this subsection in the Clause.
Sir A. Salter: I was, of course, glad to hear from the Financial Secretary that this part of the Clause was not designed to interfere with the operations of the companies operating overseas and to prevent the association of British with local capital. But, of course, what matters is not what was intended so much as what will be the effect of such a provision. I am not concerned to deny that there are cases of avoidance of tax, and that the Treasury is entitled to find some safeguards against such avoidance. But, of course, it is not desirable to diminish or abolish the avoidance of tax on a kind of earnings by a provision which will abolish the earnings themselves. Really the kind of earnings with which we are concerned tonight, as I will venture to
2238
argue in a moment or two, are fragile and precarious.
As I look at this Clause as a whole, I have an impression that there is an extraordinary inversion of values; that what should be a subsidiary interest is elevated over what should be a major interest of a country. The Chancellor of the Exchequer really has three functions. He is master of the collecting machinery for taxation—of the Inland Revenue—he is also concerned with the financial policy of the country and, in recent years, he is further concerned with the economic strategy and policy of the country. It is perfectly clear that this Clause has been drafted and pressed upon his attention by the department which I mentioned first. But surely as regards policy, that function should be regarded as subordinate to the other two greater functions and duties of the Chancellor of the Exchequer.
It happens that over the last 20 years, though I have not, as many of my hon. Friends have been, been responsible for the administration of overseas companies of this kind and seen the difficulties and problems from the point of view of those managing the companies, I have seen some problems from the complementary point of view of an official adviser, sometimes advising an overseas Eastern country, sometimes British authorities in relation to overseas investments, sometimes international banks and sometimes a Commonwealth country.
I have had occasion frequently to study the difficult, dangerous and increasingly delicate conditions under which the companies we now have in mind have to develop or indeed maintain the business they established under less unfavourable conditions. It happens that during the last year I have been brought into consultation with some of the leading authorities both in America and in this country with regard to possible forms of foreign investment of this kind. One of the most important problems of those with whom I consulted was to utilise the experience of great capital countries which had been responsible for the development of so many enterprises in countries which are now determined much more than before to manage their own affairs and are increasingly sensitive about external capitalism.

2239
Everyone I consulted was concerned with the question of how to associate capital from what were previously the great capital exporting countries with local capital so as not to give those in the country where the enterprise was being developed the impression that the control was from an outside capital exporting country which they would regard as an exploiting country.
In the extremely difficult conditions of the present world where local sensitivity is so great and so much greater than it was, it is very desirable that the association of a British company of the kind we have in mind should be enabled to be subtle, flexible and, so far as there is anything like a control from this country, as far as possible invisible.
When I think of a provision like this which requires every operation which, if it is not to be unlawful and subject to penalty, to be subject to specific and prior Treasury consent, I am appalled at the prospects in the development and maintenance of business of that kind. I should like to remind the Committee of the way in which this Clause is framed. It says:
"(1) Subject to the provisions of this subsection,"—
and the most relevant one is the provision that the Treasury may give specific consent—this Clause provides that
"all transactions of the following classes … shall be unlawful …."
It says "All shall be unlawful" not "If they are designed to avoid tax." Then comes the provision that it shall be unlawful
"(c) for a body corporate so resident to cause or permit a body corporate not so resident over which it has control to create or issue any shares or debentures; …"
That is to say, one of the most promising ways in which we can continue the association with great and profitable enterprises overseas is to be gravely jeopardised by a provision of this kind which makes the most promising form of association unlawful except with specific Treasury consent. This is really to invert the order of priorities of the duties for which the Chancellor of the Exchequer is responsible.
The Treasury ought first to try to form and follow a policy which will encourage
2240
the development of enterprises of this kind. Then, as a secondary matter, the Treasury should see if there is any way in which, without destroying or substantially impairing the profits upon which they seek to levy taxes, they can deal with the specific danger of tax avoidance, without impeding the effort of the bulk of these great companies upon which the prosperity of this country has depended and may depend in the future. I think their prospects will be endangered by the Clause if this Amendment which I now support is not passed.
Mr. Boyd-Carpenter: I have always regarded my hon. Friend the Member for Devizes (Mr. Hollis) as being endowed with prophetic gifts. He certainly gave an exhibition of that this evening when he gave in advance a most accurate description of the mentality which dominated the speech of the Financial Secretary—narrow, old-fashioned, economic nationalism of about the date and of about the character of the late Lord North; indeed, the attitude of Lord North, that he could not possibly risk tax evasion in the Port of Boston on imported tea, regardless of the consequences to British rule in North America, was precisely the attitude which the Financial Secretary has displayed today.
Mr. Butcher: My hon. Friend will remember that Lord North had a very successful record in the Division Lobbies.
Mr. Boyd-Carpenter: Lord North, of course, had at his disposal less patronage than the Patronage Secretary has today, but no doubt he had other methods for securing obedience to disagreeable policies. However, Mr. Touche, if I proceed to discuss that more fully, you will rule me out of order. Quite clearly the hon. Gentleman was far more concerned lest one or two companies succeeded in reducing their tax liability than with all the infinitely complicated repercussions of this proposal upon the fabric of our foreign commerce and trade. My hon. Friend was quite right when he described the narrow, old-fashioned, economic nationalism which appears to dominate what courtesy demands I should describe as the thinking of the Financial Secretary.
Because the whole characteristic in recent years of the financial and commercial, as well as of the administrative and political policy of this country, has

2241
been the decentralisation of control, the deliberate building up throughout the Empire of units which, as rapidly as possible, were given increasing degrees of responsibility for their own affairs. That has been the theme, economic and political, of our history over the last 50 years or more.
Yet we come back now in 1951 to the Financial Secretary, terrified apparently above all things of tax evasion, solemnly now providing that subsidiary companies, whether in the Empire or in foreign countries, shall find themselves controlled in a vital feature of the conduct of their affairs not merely by companies in this country but ultimately—and from their point of view it is far more significant and serious—by the British Treasury.
I do not think the hon. Gentleman appreciates sufficiently the natural reaction in both Empire and foreign countries to any suggestion that economic organisations vital to the prosperity of those countries should, however indirectly, be controlled by the British Government from Whitehall. I do not think the Financial Secretary can have appreciated that. I wonder whether he consulted the Foreign Secretary. I know, of course, that the Foreign Secretaryship is now held on a part-time basis, and that perhaps the Foreign Secretary, with all his responsibilities for the Festival of Britain, Government publicity, and so on—
Mr. Ellis Smith: Cheap.
9.0 p.m.
Mr. Boyd-Carpenter: I appreciate that the Foreign Secretary may not have had time, with all those responsibilities, to concern himself with these sorts of matters. None the less, I should like to know whether the Treasury, in bringing forward these proposals, did consult the Foreign Office, and, for that matter, the Commonwealth Relations and Colonial Offices, as to the reactions and repercussions of this proposal in countries outside this country.
Has the Financial Secretary, either through those Departments or through his own inquiries, considered the possible repercussions and reactions? Has he considered the possibility of retaliatory action by foreign countries who will resent, as I have tried to suggest, the control of important factors in their economic life
2242
by the British Treasury? Has that been considered? If it has been considered, has it been weighed carefully against the possibilities of tax evasion in the way I have mentioned?
It seems to me that, all through this Bill, the Financial Secretary has been obsessed by this fear of tax evasion, which to him has mattered so much more than anything else. That has been the approach throughout this Bill, and is, of course, the cause of what I am bound to say I regard as the worst paragraph in the worst Clause of the worst Bill that even this Government have produced.
Mr. Pitman: I am very glad indeed to follow my hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), because he has outlined what my right hon. Friend the Member for Ormskirk (Sir A. Salter) also underlined, namely, the horrific aspect of paragraph (c). I think there is common agreement that it is only because of the alleged tax—shall I use the word "diminution," which is in the Bill, rather than "evasion" or "avoidance"?—that there is any suggestion of putting this paragraph in at all.
I think that my right hon. Friend was too generous to the Financial Secretary in thinking that there might even be the possibility of tax reduction in cases under paragraph (c). I would submit that this issue of tax reduction is a figment of the Socialist Party, and is based very largely on the fact that at Winchester they seem to teach Thucydides much better than they taught bookkeeping.
The Financial Secretary chose his own terms, and I refer him to the fact that in the case of, say, this New Zealand company. Clause 28 prevents any transaction which might have a tax-reducing effect. Clause 33, to which we are coming, will prevent any normal current transaction having any such effect, and the profit balances which are in the New Zealand company can be there only as a result of perfectly straightforward, profitable trading in accordance with the wishes and expressed approval of the Chancellor of the Exchequer himself. The Financial Secretary says in some airy way that in that connection, by some bonus issue, it is possible to avoid tax. I see the Financial Secretary signifying that my right hon. Friend gave certain semblance to that view, but I maintain that he has

2243
not considered the fact that Clauses 28 and 33 cut off altogether any possibility of evasion in such a case.
Let us take simple figures. Such an overseas company has an original capital of £100 and an accumulated profit balance of £100. Supposing that is issued as a bonus issue to the parent company. We then have exactly the same position before that bonus issue as we have after it, namely, that the parent company owns £200 of capital invested in the business abroad. Moreover, it is invested now in an undistributable fashion whereas before it was definitely distributable.
Let us make these shares redeemable preference shares, if the Committee wish. Having made that free bonus issue of shares, that does not alter the situation or the tax position in the slightest. What the company has done is to pay £100 worth of cash. It has moved £100 of cash from one side of the globe to the other side of the globe which could have been moved as easily by any other means and which is in the accounts of the parent company and its subsidiary.
If the Financial Secretary is trying to make as the justification for the inclusion of this Clause the supposition that there is tax evasion of that kind, for goodness sake let him make his case to the Committee, so that we can understand it. He is keeping his case undisclosed like the old thimble rigging man. If there is the possibility of tax evasion, then let him bring it out to prove his case. Since this is of the essense of this horrific subsection, it is surely up to him to make his case and to produce the evidence that there has been tax evasion in these cases, and let the Committee look at it. I submit that in fact he will find himself to be wholly without justifying evidence and to have been misled.
Mr. Jennings: The Committee ought to be grateful to the hon. Member for Chippenham (Mr. Eccles) for bringing forward this Amendment. I have had a great deal of experience, extending over many years, of the financing of companies abroad for the direct help of companies in this country. I would like to give the Committee an example. I know a bridge building company in this country which make bridges for almost every country in the world. They have
2244
to have, in various parts of the world, erecting companies—local people and local organisations to erect the bridges in those countries. They often had to send out not only controlled shares but shareholdings in order to start these erecting companies. Without these erecting companies they would not have got the bridges properly erected. This meant hundreds of thousands of pounds worth of work to this bridge building company in this country.
I can give another example. A particular class of machinery is made in this country. The company send these machines to countries in various parts of the world, and in each country they have a selling side and form a small company in order to get selling agents and build up a selling organisation. I must tell the Financial Secretary that to put this subsection into the Bill is playing with fire. We do a tremendous amount of trade with other countries from this country by the very fact that we may have an interest in a company in another country. I have seen this built up over a period of 30 years. Vast orders come to our manufacturing companies here simply because we have had some financial tie-up in a particular country to which our products are going.
I could give many instances where, if this restriction is made, it will almost certainly do untold harm to our trade here. The Financial Secretary cannot have any idea of the vastness of this problem, or, indeed, how industry works here and throughout the world. If the Financial Secretary knew the problem he was playing with he would know that it is dangerous. I would ask him to eradicate that restriction and allow a free flow of trade throughout the world, otherwise a very damaging blow will be struck at our own manufacturers.
My hon. Friend the Member for Chippenham said that unless we get a free flow of trade and our industrialists are allowed to build up some organisation in a foreign country or in the Empire, then we are going to do irreparable harm to our own trade. It will not do for the Financial Secretary to be content with the explanation which he has given us, for it does not explain the situation. This is a damaging Clause, and the Amendment ought to be accepted in the interests of full employment in this land.
Sir J. Mellor: I should like to carry a little further this question of subsidiary companies which are not wholly earning, because when I put a question to the Financial Secretary, when he was good enough to give way he replied by saying that normally the shareholders were resident in this country. I think he is a long way out. A very large number of these subsidiary companies will have minority shareholders resident in overseas countries. That is a thing which we ought to encourage. What better way can businesses overseas obtain goodwill in overseas territories than by getting their shares widely held in overseas countries.
I feel that in such cases, where there are such shareholders this Clause will defeat any attempt by the parent company to arrange for the shares of a subsidiary to be widely distributed in overseas countries. Not only do I think it is most desirable that it should be arranged for shares to be held in that way, but I think that when an appreciable proportion of the shares are so held for the parent company to refrain from carrying through a capital transaction, which would be beneficial for those minority shareholders, would be contrary to all principles of proper company management.
A parent company ought not to arrange things solely from the point of view of the majority. It should have full regard to the rights of the minority shareholders overseas, and, therefore, if His Majesty's Government are to step in and stop what it is normally proper to do in the interests of overseas minority shareholders, then His Majesty's Government will be putting the company in an awkward position and will go far to damage British credit overseas. Instead of the minority shareholders overseas knowing, as they do at present, that they will get fair, just and generous treatment from parent companies in this country, they will realise that, however much that company may desire to trade, it is being prevented by His Majesty's Government. That is not going to be good for British goodwill, trade or British credit.
9.15 p.m.
Mr. Frederic Harris: I would remind the Government, with regard to what has just been said by my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor), that a short while ago the
2246
Colonial Secretary was saying, in connection with the Overseas Development Corporation, that as companies became established overseas it was the intention to let the minority shareholders come in quite strongly on the overseas investments.
The Financial Secretary said that he had been talking to a director of a business who told him that it was natural for a subsidiary company abroad to consult its parent company for permission to increase its capital. That may be true in some instances, but it does not apply generally. In companies of which I know something it is common for a subsidiary controlled by the parent company in this country to be given power to increase its capital as far as it may seem necessary to do so, and without consultation with the parent company, as long as a reasonable proportion of control is maintained, such as in regard to preference capital needed for the financing of the business. If the justification for the present proposal which the Financial Secretary has tried to put across to us is based on advice which the so called "director" gave him, I would suggest that the advice is utter nonsense.
My hon. Friend the Member for Chippenham (Mr. Eccles) has done a very great service to us all by raising this matter tonight. It seems extraordinarily short-sighted for the Government not to see what they are gradually being led into here. The Financial Secretary has tried to justify the proposal entirely on the ground of preventing tax evasion, yet he has not given us any reasons for believing that there is tax evasion. My hon. Friend the Member for Bath (Mr. Pitman) clearly asked the Financial Secretary to prove that there is tax evasion.
It would benefit all our people for us to develop companies abroad which have the ability to make good profits on colonial or Dominion territories where taxation is extremely low, by comparison. Such progress must benefit the people of this country. The Financial Secretary ought to start thinking a little bit for himself on these matters.
I really despair about some of the advice that must be coming to members-of the Government lately. If it comes solely from the Treasury, surely the Colonial Secretary and heads of other Departments ought to be consulted about the-results of following such advice. The

2247
only justification that has been advanced by the Financial Secretary tonight has been the possibility of tax evasion, but he has not given us one case of the possibility of tax evasion.
Mr. Jay: Does the hon. Gentleman expect me to give the names of companies, which are given to us confidentially?
Mr. Harris: I can understand, after 30 hours, that the Financial Secretary should be a bit dim in his outlook. [HON. MEMBERS: "Oh."] I say that quite definitely. Other hon. Members are also a bit dim, after 30 hours debate. Nobody is suggesting that the Financial Secretary should give us the names of companies who may be guilty of tax evasion. I asked for instances where these provisions could apply, for a hypothetical case which the Government could suggest where tax evasion might take place in these circumstances. [Interruption.] Hon. Members opposite ought not to shout their heads off merely because they are taking no interest in the debate. Many of us on this side of the Committee are interested in this on behalf of the Dominions and the Colonies. My hon. Friend the Member for Chippenham has raised a matter of deep concern to the Colonies. [An HON. MEMBER: "So what?"] An hon. Member shouts "So what?" An inter-
jection like that displays the utter ignorance of the person who makes it.
The Colonies today are marching with the times and they are becoming more and more self-supporting. If the Financial Secretary thinks that they will abide by a Clause such as this and come cap in hand to the Government here for permission when they wish to increase their own capital, it is about time he got better advice and thought again. It is an extremely retrograde step. He is miles behind the times.
The Financial Secretary has tried to justify the Clause only by suggesting possible cases of tax evasion, but he has given us no reasonable facts to satisfy us that tax evasion would take place under the circumstances which he has tried to indicate to us. I sincerely hope that my hon. Friends will strongly support my hon. Friend the Member for Chippenham. In so doing we shall be rendering a great service to all who may eventually be effected by the Measure.
Several Hon. Members Several Hon. Members rose—
Mr. R. J. Taylor Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."
Question put, "That the Question be now put."
The Committee divided: Ayes, 301; Noes, 281.

Division No. 128.]

AYES

[9.23 p.m.

Acland, Sir Richard

Brown, Rt. Hon. George (Belper)

Dodds, N. N.

Adams, Richard

Brown, Thomas (lnce)

Donnelly, D.

Albu, A. H.

Burke, W. A.

Driberg, T. E. N.

Allen, Arthur (Bosworth)

Burton, Miss E.

Dugdale, Rt. Hon. John (W. Bromwich)

Allen, Scholefield (Crwe)

Butlet, Herbert (Hackney, S.)

Dye, S.

Anderson, Alexander (Motherwell)

Callaghan, L. J.

Ede, Rt. Hon. J. C.

Anderson, Frank (Whitehaven)

Carmichael, J.

Edelman, M.

Awbery, S. S.

Castle, Mrs. B. A.

Edwards, John (Brighouse)

Ayles, W. H.

Champion, A. J.

Edwards, Rt. Hon. Ness (Caerphilly)

Bacon, Miss Alice

Chetwynd, G. R.

Edwards, W. J. (Stepney)

Baird, J.

Clunie, J.

Evans, Albert (Islington, S. W.)

Balfour, A.

Cooks, F. S.

Evans, Edward (Lowestoft)

Barnes, Rt. Hon. A. J.

Coldrick, W.

Evans, Stanley (Wednasbury)

Bartley, P.

Collick, P.

Ewart, R.

Bellinger, Rt. Hon. F. J.

Collindridge, F.

Field, Capt. W. J.

Benn, Wedgwood

Cook, T. F.

Finch, H. J.

Benson, G.

Cooper, Geoffrey (Middlesbrough, W.)

Fletcher, Eric (Islington, E.)

Beswick, F.

Cooper, John (Deptford)

Follick, M.

Bevan, Rt. Hon. A. (Ebbw Vale)

Corbet, Mrs. Freda (Peckham)

Foot, M. M.

Bing, G. H. C.

Cove, W. G.

Forman, J. C.

Blenkinsop, A.

Crawley, A.

Fraser, Thomas (Hamilton)

Blyton, W. R.

Cresland, C. A. R.

Freeman, John (Watford)

Boardman, H.

Crossman, R. H. S.

Freeman, Peter (Newport)

Booth, A.

Cullen, Mrs. A.

Gaitskell, Rt. Hon. H. T. N.

Bottomley, A. G.

Daines, P.

Ganley, Mrs. C. S.

Bowden, H. W.

Dalton, Rt. Hon. H.

George, Lady Megan Lloyd

Bowen, E. R. (Cardigan)

Darling, George (Hillsborough)

Gibson, C. W.

Bowles, F. G. (Nuneaton)

Davies, A. Edward (Stoke, N.)

Gilzean, A.

Braddock, Mrs. Elizabeth

Davies, Harold (Leek)

Glanville, James (Consett)

Brook, Dryden (Halifax)

de Freitas, Geoffrey

Gooch, E. G.

Brooks, T. J. (Normanton)

Deer, G.

Granville, Edgar (Eye)

Broughton, Dr. A. D. D.

Delargy, H. J.

Greenwood, Anthony (Rossendale)

Greenwood, Rt. Hn. Arthur (Wakefield)

McInnes, J.

Shinwell, Rt. Hon. E.

Grenfell, D. R.

Mack, J. D.

Shurmer, P. L. E.

Grey, C. F.

McKay, John (Wallsend)

Silverman, Julius (Erdington)

Griffiths, David (Rother Valley)

Mackay, R. W. G. (Reading, N.)

Silverman, Sydney (Nelson)

Griffiths, Rt. Hon. James (Llanelly)

McLeavy, F.

Simmons, C. J.

Griffiths, William (Exchange)

MacMillan, Malcolm (Western Isles)

Slater, J.

Grimond, J.

McNeil, Rt. Hon. H.

Smith, Ellis (Stoke, S.)

Gunter, R. J.

MacPherson, Malcolm (Stirling)

Smith, Norman (Nottingham, S.)

Hale, Joseph (Rochdale)

Mainwaring, W. H.

Snow, J. W.

Hale, Leslie (Oldham, W.)

Mallalieu, E. L. (Brigg)

Sorensen, R. W.

Hall, Rt. Hon. Glenvil (Coins Valley)

Mallalieu, J. P. W. (Huddersfield, E.)

Soskice, Rt. Hon. Sir Frank

Hall, John (Gateshead, W.)

Mann, Mrs. Jean

Steele, T.

Hamilton, W. W.

Manuel, A. C.

Stewart, Michael (Fulham, E.)

Hannan, W.

Marquand, Rt. Hon. H. A.

Stokes, Rt. Hon. R. R.

Hardman, D. R.

Mathers, Rt. Hon. G.

Strachey, Rt. Hon. J.

Hardy, E. A.

Mellish, R. J

Strauss, Rt. Hon. George (Vauxhall)

Hargreaves, A.

Messer, F.

Stross, Dr. Barnett

Hastings, S.

Middleton, Mrs. L.

Summerskill, Rt. Hon. Edith

Hayman, F. H.

Mikardo, Ian.

Sylvester, G. O.

Henderson, Rt. Hon. Arthur (Tipton)

Mitchison, G. R.

Taylor, Bernard (Mansfield)

Herbison, Miss M.

Moeran, E. W.

Taylor, Robert (Morpeth)

Hewitson, Capt. M.

Monslow, W.

Thomas, David (Aberdare)

Hobson, C. R.

Moody, A. S.

Thomas, George (Cardiff)

Holman, P.

Morgan, Dr. H. B.

Thomas, Iorwerth (Rhondda, W.)

Holmes, Horace (Hemsworth)

Morley, R.

Thomas, Ivor Owen (Wrekin)

Houghton, D.

Morris, Percy (Swansea, W.)

Thorneycroft, Harry (Clayton)

Hoy, J.

Mort, D. L.

Thurtle, Ernest

Hubbard, T.

Moyte, A.

Timmons, J.

Hudson, James (Ealing, N.)

Mulley, F. W.

Tomney, F.

Hughes, Emrys (S. Ayrshire)

Murray, J. D.

Turner-Samuels, M.

Hughes, Hector (Aberdeen, N.)

Nally, W.

Ungoed-Thomas, Sir Lynn

Hughes, Moelwyn (Islington, N.)

Neal, Harold (Bolsover)

Usborne, H.

Hynd, H. (Accrington)

Noel-Baker, Rt. Hon. P. J.

Vernon, W. F.

Hynd, J. B. (Attercliffe)

O'Brien, T.

Viant, S. P.

Irvine, A. J. (Edge Hill)

Oldfield, W. H.

Wade, D. W.

Irving, W. J. (Wood Green)

Oliver, G. H.

Wallace, H. W.

Isaacs, Rt. Hon. G. A.

Orbach, M.

Watkins, T. E.

Janner, B.

Padley, W. E.

Webb, Rt. Hon. M. (Bradford, C.)

Jay, D. P. T.

Paget, R. T.

Weitzman, D.

Jeger, George (Goole)

Paling, Rt. Hon. W. (Dearne Valley)

Wells, Percy (Faversham)

Jeger, Dr. Santo (St. Pancras, S.)

Paling, Will T. (Dewsbury)

Wells, William (Walsall)

Jenkins, R. H.

Pannell, T. C.

West, D. G.

Johnson, James (Rugby)

Pargiter, G. A.

Wheatley, Rt. Hon. John (Edinb'gh E.)

Johnston, Douglas (Palsley)

Parker, J.

White, Mrs. Eirene (E. Flint)

Jones, David (Hartlepool)

Paton, J.

White, Henry (Derbyshire, N. E.)

Jones, Frederick Elwyn (W. Ham, S.)

Poole, C.

Whiteley, Rt. Hon. W.

Jones, Jack (Rotherham)

Popplewell, E.

Wigg, G.

Jones, William Elwyn (Conway)

Porter, G.

Wilcock, Group Capt. C. A. B.

Keenan, W.

Price, Philips (Gloucestershire, W.)

Wilkes, L.

Kenyon, C.

Proctor, W. T.

Wilkins, W. A.

Key, Rt. Hon. C. W.

Pryde, D. J.

Willey, Frederick (Sunderland)

King, Dr. H. M.

Pursey, Cmdr. H.

Willey, Octavius (Cleveland)

Kinghorn, Sqn. Ldr. E.

Rankin, J.

Williams, David (Neath)

Kinley, J.

Rees, Mrs. D.

Williams, Rev. Llywelyn (Abertillery)

Lang, Gordon

Reeves, J.

Williams, Ronald (Wigan)

Lee, Miss Jennie (Cannock)

Reid, Thomas (Swindon)

Williams, Rt. Hon. Thomas (Don V'lly)

Lever, Harold (Cheetham)

Reid, William (Camlachie)

Williams, W. T. (Hammersmith, S.)

Lever, Leslie (Ardwick)

Rhodes, H.

Wilson, Rt. Hon. Harold (Huyton)

Lewis, Arthur (West Ham, N.)

Richards, R.

Winterbottom, Ian (Nottingham, C.)

Lewis, John (Bolton, W.)

Robens, Rt. Hon. A.

Winterbottom, Richard (Brightside)

Lindgren, G. S.

Roberts, Emrys (Merioneth)

Wise, F. J.

Lipton, Lt.-Col. M.

Roberts, Goronwy (Caernarvonshire)

Woodburn, Rt. Hon. A.

Logan, D. G.

Robertson, J. J. (Berwick)

Woods, Rev. G. S.

Longden, Fred (Small Heath)

Robinson, Kenneth (St. Pancras, N.)

Wyatt, W. L.

McAllister, G.

Rogers, George (Kensington, N.)

Yates, V. F.

MacColl, J. E.

Ross, William

Younger, Rt. Hon. K.

Macdonald, A. J. F. (Roxburgh)

Royle, C.

McGhee, H. G.

Shackleton, E. A. A.

TELLERS FOR THE AYES:

McGovern, J.

Shawcross, Rt. Hon. Sir Hartley

Mr. Pearson and Mr. Sparks

NOES

Aitken, W. T.

Baxter, A. B.

Bossom, A. C.

Alport, C. J. M.

Beamish, Maj. Tufton

Boyd Carpenter, J. A.

Amery, Julian (Preston, N.)

Bell, R. M.

Boyle, Sir Edward

Amory, Heathcoat (Tiverton)

Bennett, Sir Peter (Edgbaston)

Bracken, Rt. Hon. B.

Arbuthnot, John

Bennett, Dr. Reginald (Gosport)

Braine, B. R.

Ashton, H. (Chelmsford)

Bennett, Willam (Woodside)

Braithwaite, Sir Albert (Harrow, W.)

Assheton, Rt. Hon. R. (Blackburn. W.)

Bevins, J. R. (Liverpool, Toxteth)

Braithwaite, Lt.-Cr G. (Bristol, N. W.)

Astor, Hon. M. L.

Birch, Nigel

Bromley-Davenport, Lt.-Col. W.

Baker, P. A. D.

Bishop, F. P.

Brooke, Henry (Hampstead)

Baldock, Lt.-Cmdr. J. M.

Black, C. W.

Browne, Jack (Govan)

Baldwin, A. E.

Boles, Lt.-Col. D. C. (Wells)

Buchan-Hepburn, P. G. T.

Banks, Col. C.

Boothby, R.

Bullock, Capt. M.

2250

2251

Bullus, Wing Commander E. E.

Howard, Gerald (Cambridgeshire)

Perkins, W. R. D.

Burden, F. A.

Howard, Greville (St. Ives)

Peto, Brig. C. H. M.

Butcher, H. W.

Hudson, Sir Austin (Lewisham, N.)

Pickthorn, K.

Carr, Robert (Mitcham)

Hudson, Rt. Hon. Robert (Southport)

Pitman, I. J.

Carson, Hon. E.

Hudson, W. R. A. (Hull, N.)

Powell, J. Enoch

Channon, H.

Hurd, A. R.

Price, Henry (Lewisham, W.)

Churchill, Rt. Hon. W. S.

Hutchinson, Geoffrey (Ilford, N.)

Prior-Palmer, Brig. O.

Clarke, Col. Ralph (East Grinstead)

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Profumo, J. D.

Clarke, Brig. Terence (Portsmouth, W.)

Hutchison, Col. James (Glasgow)

Raikes, H. V.

Clyde, J. L.

Hyde, Lt.-Col. H. M.

Rayner, Brig. R.

Colegate, A.

Hylton-Foster, H. B.

Redmayne, M.

Conant, Maj. R. J. E.

Jeffreys, General Sir George

Remnant, Hon. P.

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Jennings, R.

Renton, D. L. M.

Cooper-Key, E. M.

Johnson, Howard (Kemptown)

Roberts, Maj. Peter (Heeley)

Corbett, Lt.-Col. Uvedale (Ludlow)

Jones, A. (Hall Green)

Robertson, Sir David (Caithness)

Craddock, Beresford (Spelthorne)

Joynson-Hicks, Hon. L. W.

Robinson, Roland (Blackpool, S.)

Cranborne, Viscount

Kaberry, D.

Robson-Brown, W.

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

Kerr, H. W. (Cambridge)

Rodgers, John (Sevenoaks)

Crosthwaite-Eyre, Col. O. E.

Kingsmill, Lt.-Col. W. H.

Roper, Sir Harold

Crouch, R. F.

Lambert, Hon. G.

Ropner, Col. L.

Crowder, Capt. John (Finchley)

Lancaster, Col. C. G.

Russell, R. S.

Crowder, Petre (Ruislip—Northwood)

Langford-Holt, J.

Ryder, Capt. R. E. D.

Cundiff, F. W.

Law, Rt. Hon. R. K.

Salter, Rt. Hon. Sir Arthur

Cuthbert, W. N.

Leather, E. H. C.

Sandys, Rt. Hon. D.

Darling, Sir William (Edinburgh, S.)

Legge-Bourke, Maj. E. A. H

Savory, Prof. D. L.

Davidson, Viscountess

Lennox-Boyd, A. T.

Scott, Donald

Davies, Nigel (Epping)

Lindsay, Martin

Shepherd, William

de Chair, Somerset

Linstead, H. N.

Smithers, Peter (Winchester)

De la Bère, R.

Llewellyn, D.

Smyth, Brig. J. G. (Norwood)

Deedes, W. F.

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Snadden, W. McN.

Digby, S. Wingfield

Lloyd, Maj. Guy (Renfrew, E.)

Soames, Capt. C.

Dodds-Parker, A. D

Lloyd, Selwyn (Wirral)

Spearman, A. C. M.

Donner, P. W.

Lockwood, Lt.-Col. J. C.

Spence, H. R. (Aberdeenshire, W.)

Douglas-Hamilton, Lord Malcolm

Longden, Gilbert (Herts, S. W.)

Spens, Sir Patrick (Kensington, S.)

Drayson, G. B.

Low, A. R. W.

Stanley, Capt. Hon. Richard (N. Fylde)

Dugdale, Maj. Sir Thomas (Richmond)

Lucas, Sir Jocelyn (Portsmouth, S.)

Stevens, G. P.

Duncan, Capt. J. A. L.

Lucas, P. B. (Brentford)

Steward, W. A. (Woolwich, W.)

Dunglass, Lord

Lucas-Tooth, Sir Hugh

Stewart, Henderson (Fife, E.)

Duthie, W. S.

Lyttelton, Rt. Hon. O.

Stoddart-Scott, Col. M.

Eccles, D. M.

McCorquodale, Rt. Hon. M. S.

Storey, S.

Elliot, Rt. Hon. W. E.

Macdonald, Sir Peter (I. of Wight)

Strauss, Henry (Norwich, S.)

Erroll, F. J.

Mackeson, Brig. H. R.

Stuart, Rt. Hon. James (Moray)

Fisher, Nigel

McKibbin, A.

Studholme, H. G.

Fort, R.

McKie, J. H. (Galloway)

Summers, G. S.

Foster, John

Maclay, Hon. John

Sutcliffe, H.

Fraser, Hon. Hugh (Stone)

Maclean, Fitzroy

Taylor, Charles (Eastbourne)

Fraser, Sir Ian (Morecambe & Lonsdale)

MacLeod, Iain (Enfield, W.)

Taylor, William (Bradford, N.)

Fyfe, Rt. Hon. Sir David Maxwell

MacLeod, John (Ross and Cromarty)

Teeling, W.

Gage, C. H.

Macpherson, Major Niall (Dumfries)

Teevan, T. L.

Galbraith, Cmdr. T. D. (Pollok)

Maitland, Cmdr. J. W.

Thomas, J. P. L. (Hereford)

Galbraith, T. G. D. (Hillhead)

Manningham-Buller, R. E.

Thompson, Kenneth Pugh (Walton)

Gammans, L. D.

Marlowe, A. A. H.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Garner-Evans, E. H. (Denbigh)

Marples, A. E.

Thorneycroft, Peter (Monmouth)

Gates, Maj. E. E.

Marshall, Douglas (Bodmin)

Thornton-Kemsley, Col. C. N.

Glyn, Sir Ralph

Marshall, Sidney (Sutton)

Thorp, Brig. R. A. F.

Gomme-Duncan, Col. A.

Maude, Angus (Ealing S.)

Tilney, John

Gridley, Sir Arnold

Maude, John (Exeter)

Turner, H. F. L.

Grimston, Hon. John (St. Albans)

Maudling, R.

Turton, R. H.

Grimston, Robert (Westbury)

Medlicott, Brig. F.

Tweedsmuir, Lady

Harden, J. R. E.

Mellor, Sir John

Vane, W. M. F.

Hare, Hon. J. H. (Woodbridge)

Molson, A. H. E.

Vaughan-Morgan, J. K.

Harris, Frederic (Croydon, N.)

Monckton, Sir Walter

Wakefield, Edward (Derbyshire, W.)

Harris, Reader (Heston)

Moore, Lt.-Col. Sir Thomas

Wakefield, Sir Wavell (Marylebone)

Harvey, Air Cdre, A. V. (Macclesfield)

Morris, Hopkin (Carmarthen)

Walker-Smith, D. C.

Harvey, Ian (Harrow, E.)

Morrison, John (Salisbury)

Ward, Hon. George (Worcester)

Harvie-Watt, Sir George

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

Ward, Miss I. (Tynemouth)

Hay, John

Mott-Radclyffe, C. E.

Waterhouse, Capt. Rt. Hon. C.

Head, Brig. A. H.

Nabarro, G.

Watkinson, H.

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

Nicholls, Harmar

Webbe, Sir H. (London & Westminster)

Heald, Lionel

Nicholson, G.

Wheatley, Maj. M. J. (Poole)

Heath, Edward

Nield, Basil (Chester)

White, Baker (Canterbury)

Henderson, John (Cathcart)

Noble, Cmdr. A. H. P.

Williams, Charles (Torquay)

Hicks-Beach, Maj. W. W.

Nugent, G. R. H.

Williams, Gerald (Tonbridge)

Higgs, J. M. C.

Nutting, Anthony

Williams, Sir Herbert (Croydon, E.)

Hill, Mrs. E. (Wythenshawe)

Oakshott, H. D.

Wills, G.

Hinchingbrooke, Viscount

Odey, G. W.

Wilson, Geoffrey (Truro)

Hirst, Geoffrey

O'Neill, Rt. Hon. Sir Hugh

Winterton, Rt. Hon. Earl

Hollis, M. C.

Ormsby-Gore, Hon. W. D.

Wood, Hon. R.

Holmes, Sir Stanley (Harwich)

Orr, Capt. L. P. S.

York, C.

Hope, Lord John

Orr-Ewing, Charles Ian (Hendon, N.)

Hopkinson, Henry

Orr-Ewing, Ian L. (Weston-super-Mare)

TELLERS FOR THE NOES:

Hornsby-Smith, Miss P.

Osborne, C.

Mr. Drewe and Mr. Vosper

Horsbrugh, Rt. Hon. Florence

Peake, Rt. Hon. O.

Question put, accordingly, "That the words proposed to be left out stand part of the Clause."
The Committee divided: Ayes, 294; Noes, 285.

Division No. 129.]

AYES

[9.36 p.m.

Acland, Sir Richard

Finch, H. J.

MacColl J. E.

Adams, Richard

Fletcher, Eric (Islington, E.)

McGhee, H. G.

Albu, A. H.

Follick, M.

McGovern, J.

Allen, Arthur (Bosworth)

Foot, M. M.

McInnes, J.

Allen, Scholefield (Crewe)

Forman, J. C.

Mack, J. D.

Anderson, Alexander (Motherwell)

Fraser, Thomas (Hamilton)

McKay, John (Wallsend)

Anderson, Frank (Whitehaven)

Freeman, John (Watford)

Mackay, R. W. G. (Reading, N.)

Awbery, S. S.

Freeman, Peter (Newport)

McLeavy, F.

Ayles, W. H.

Gaitskell, Rt. Hon. H. T. N.

MacMillan, Malcolm (Western Isles)

Bacon, Miss Alice

Ganrey, Mrs. C. S.

McNeil, Rt. Hon. H.

Baird, J

Gibson, C. W.

MacPherson, Malcolm (Stirling)

Balfour, A.

Gilzean, A.

Mainwaring, W. H.

Barnes, Rt. Hon. A.J.

Glanville, James (Consett)

Mallalieu, E. L. (Brigg)

Bartley, P.

Gooch, E. G.

Mallalieu, J. P. W. (Huddersfield. E.)

Bellenger, Rt. Hon. F. J.

Greenwood, Anthony (Rossendale)

Mann, Mrs. Jean

Bonn, Wedgwood

Greenwood, Rt. Hn. Arthur (Wakefield)

Manuel, A. C.

Benson, G.

Grenfell, D. R.

Marquand, Rt. Hon. H. A.

Beswick, F.

Grey, C. F.

Mathers, Rt. Hon. G.

Bevan, Rt. Hon. A. (Ebbw Vale)

Griffiths, David (Rother Valley)

Mellish, R. J.

Bins, G. H. C.

Griffiths, Rt. Hon. James (Llanelly)

Messer, F.

Blenkinsop, A.

Griffiths, William (Exchange)

Middleton, Mrs. L.

Blyton, W. R.

Gunter, R. J.

Mikardo, Ian.

Boardman, H.

Hale, Joseph (Rochdale)

Mitchison. G. R.

Booth, A.

Hale, Leslie (Oldham, W.)

Moeran, E. W.

Bottomley, A. G

Hall, Rt. Hon. Glenvil (Colne Valley)

Monslow, W.

Bowden, H. W.

Hall, John (Gateshead, W.)

Moody, A. S.

Bowles, F. G. (Nuneaton)

Hamilton, W. W.

Morgan, Dr. H. B.

Braddock, Mrs. Elizabeth

Hannan, W.

Morley, R.

Brook, Dryden (Halifax)

Hardman, D. R.

Morris, Percy (Swansea, W.)

Brooks, T. J. (Normanton)

Hardy, E. A.

Mort, D. L.

Broughton, Dr. A. D. D.

Hargreaves, A.

Moyle, A.

Brown, Rt. Hon. George (Belper)

Hastings, S.

Mulley, F. W.

Brown, Thomas (Ince)

Hayman, F. H.

Murray, J. D.

Burke, W. A.

Henderson, Rt. Hon. Arthur (Tipton)

Nally, W.

Burton, Miss E.

Herbison, Miss M.

Neal, Harold (Bolsover)

Butler, Herbert (Hackney, S.)

Hewitson, Capt. M.

Noel-Baker, Rt. Hon. P. J.

Callaghan, L. J.

Hobson, C. R.

O'Brien, T.

Carmichael, J.

Holman, P.

Oldfield, W. H.

Castle, Mrs. B. A.

Holmes, Horace (Hemsworth)

Oliver, G. H.

Champion, A. J.

Houghton, D.

Orbach, M.

Chetwynd, G. R.

Hoy, J.

Padley, W. E.

Clunie, J.

Hubbard, T.

Paget, R. T.

Cocks, F. S.

Hudson, James (Ealing, N.)

Paling, Rt. Hon. W. (Dearne Valley)

Coldrick, W.

Hughes, Emrys (S. Ayrshire)

Paling, Will T. (Dewsbury)

Collick, P.

Hughes, Hector (Aberdeen, N.)

Pannell, T. C.

Collindridge, F.

Hughes, Moelwyn (Islington, N.)

Pargiter, G. A.

Cook, T. F.

Hynd, H. (Accrington)

Parker, J.

Cooper, Geoffrey (Middlesbrough, W.)

Hynd, J. B. (Attercliffe)

Paton, J.

Cooper, John (Deptford)

Irvine, A. J. (Edge Hill)

Poole, C.

Corbet, Mrs. Freda (Peekham)

Irving, W. J. (Wood Green)

Popplewell, E.

Cove, W. G.

Isaacs, Rt. Hon. G. A.

Porter, G.

Craddock, George (Bradford, S.)

Janner, B.

Price, Philips (Gloucestershire, W.)

Crawley, A.

Jay, D. P. T.

Proctor, W. T.

Crosland, C. A. R.

Jeger, George (Goole)

Pryde, D. J.

Crossman, R. H. S.

Jeger, Dr. Santo (St. Pancras. S.)

Pursey, Cmdr. H.

Cullen, Mrs. A.

Jenkins, R. H.

Rankin, J.

Daines, P.

Johnson, James (Rugby)

Rees, Mrs. D.

Dalton, Rt. Hon. H.

Johnston, Douglas (Paisley)

Reeves, J.

Darting, George (Hillsborough)

Jones, David (Hartlepool)

Reid, Thomas (Swindon)

Davies, A. Edward (Stoke, N.)

Jones, Frederick Elwyn (W. Ham, S.)

Reid, William (Camlachie)

Davies, Harold (Leek)

Jones, Jack (Rotherham)

Rhodes, H.

de Freitas, Geoffrey

Jones, William Elwyn (Conway)

Richards, R.

Doer, G.

Keenan, W.

Robens, Rt. Hon. A.

Delargy, H. J.

Kenyon, C.

Roberts, Goronwy (Caernarvonshire)

Dodds, N. N.

Key, Rt. Hon. C. W.

Robertson, J. J. (Berwick)

Donnelly, D.

King, Dr. H. M.

Robinson, Kenneth (SI. Pancras, N.)

Driberg, T. E. N.

Kinghorn, Sqn. Ldr. E.

Rogers, George (Kensington, N.)

Dugdale, Rt.Hon. John (W. Bromwich)

Kinley, J.

Ross, William

Dye, S.

Lang, Gordon

Royle, C.

Ede, Rt. Hon. J. C.

Lee, Miss Jennie (Cannock)

Shackleton, E. A. A.

Edelman, M.

Lever, Harold (Cheetham)

Shawcross, Rt. Hon. Sir Hartley

Edwards, John (Brighouse)

Lever, Leslie (Ardwick)

Shinwell, Rt. Hon. E

Edwards, Rt. Hon. Ness (Caerphilly)

Lewis, Arthur (West Ham, N.)

Shurmer, P. L. E.

Edwards, W. J. (Stepney)

Lewis, John (Bolton, W.)

Silverman, Julius (Erdington)

Evans, Albert (Islington, S. W.)

Lindgren, G. S.

Silverman, Sydney (Nelson)

Evans, Edward (Lowestoft)

Lipton, Lt.-Col. M.

Simmons, C. J.

Evans, Stanley (Wednesbury)

Logan, D. G.

Slater, J.

Ewart, R.

Longden, Fred (Small Heath)

Smith, Ellis (Stoke, S.)

Field, Capt. W. J.

McAllister, G.

Smith, Norman (Nottingham, S.)

Snow, J. W.

Tomney, F.

Wilkins, W. A.

Sorensen, R. W.

Turner-Samuels, M.

Willey, Frederick (Sunderland)

Soskice, Rt. Hon. Sir Frank

Ungoed-Thomas, Sir Lynn

Willey, Octavius (Cleveland)

Steele, T.

Usborne, H.

Williams, David (Neath)

Stewart, Michael (Fulham, E.)

Vernon, W. F.

Williams, Rev. Llywelyn (Abertillery)

Stokes, Rt. Hon. R. R.

Viant, S. P.

Williams, Ronald (Wigan)

Strachey, Rt. Hon. J.

Wallace, H. W.

Williams, Rt. Hon. Thomas (Don V'lly)

Strauss, Rt. Hon. George (Vauxhall)

Watkins, T. E.

Williams, W. T. (Hammersmith, S.)

Stross, Dr. Barnett

Webb, Rt. Hon. M. (Bradford, C.)

Wilson, Rt. Hon. Harold (Huyton)

Summerskill, Rt. Hon. Edith

Weitzman, D.

Winterbottom, Ian (Nottingham, C.)

Sylvester, G. O.

Wells, Percy (Faversham)

Winterbottom, Richard (Brightside)

Taylor, Bernard (Mansfield)

Wells, William (Walsall)

Wise, F. J.

Taylor, Robert (Morpeth)

West, D. G.

Woodburn, Rt. Hon. A.

Thomas, David (Aberdare)

Wheatley, Rt. Hon. John (Edinb'gh E.)

Woods, Rev. G. S.

Thomas, George (Cardiff)

White, Mrs. Eirene (E. Flint)

Wyatt, W. L.

Thomas, Iorwerth (Rhondda, W.)

White, Henry (Derbyshire, N. E.)

Yates, V. F.

Thomas, Ivor Owen (Wrekin)

Whiteley, Rt. Hon. W.

Younger, Rt. Hon. K.

Thorneycroft, Harry (Clayton)

Wigg, G.

Thurtle, Ernest

Wilcock, Group Capt. C. A. B.

TELLERS FOR THE AYES:

Timmons, J.

Wilkes, L.

Mr. Pearson and Mr. Sparks.

NOES

Aitken, W. T.

Davidson, Viscountess

Howard, Grevlle (St. Ives)

Alport, C. J. M.

Davies, Nigel (Epping)

Hudson, Sir Austin (Lewisham, N.)

Amery, Julian (Preston, N.)

de Chair, Somerset

Hudson, Rt. Hon. Robert (Southport)

Amory, Heathcoat (Tiverton)

De la Bère, R.

Hudson, W. R. A. (Hull, N.)

Arbuthnot, John

Deedes, W. F.

Hurd, A. R.

Athton, H. (Chelmsford)

Digby, S. Wingfield

Hutchinson, Geoffrey (Ilford, N.)

Assheton, Rt. Hon. R. (Blackburn, W.)

Dodds-Parker, A. D.

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Astor, Hon. M. L.

Donner, P. W.

Hutchison, Col. James (Glasgow)

Baker, P. A. D.

Douglas-Hamilton, Lord Malcolm

Hyde, Lt.-Col. H. M.

Baldock, Lt.-Cmdr. J. M.

Drayson, G. B.

Hylton-Foster, H. B.

Baldwin, A. E.

Drewe, C.

Jeffreys, General Sir George

Banks, Col. C.

Dugdale, Maj. Sir Thomas (Richmond)

Jennings, R.

Baxter, A. B.

Duncan, Capt. J. A. L.

Johnson, Howard (Kemptown)

Beamish, Maj. Tufton

Dunglass, Lord

Jones, A. (Hall Green)

Bell, R. M.

Duthie, W. S.

Joynson-Hicks, Hon. L. W.

Bennett, Sir Peter (Edgbaston)

Eccles, D. M.

Kaberry, D.

Bennett, Dr. Reginald (Gosport)

Elliot, Rt. Hon. W. E.

Kerr, H. W. (Cambridge)

Bennett, William (Woodside)

Erroll, F. J.

Kingsmill, Lt.-Col. W. H.

Bavins, J. R. (Liverpool, Toxtath)

Fisher, Nigel

Lambert, Hon. G.

Birch, Nigel

Fort, R.

Lancaster, Col. C. G.

Bishop, F. P.

Foster, John

Langford-Holt, J.

Black, C. W.

Fraser, Hon. Hugh (Stone)

Law, Rt. Hon. R. K.

Boles, Lt.-Col. D. C. (Wells)

Fraser, Sir Ian (Morecambe & Lonsdale)

Leather, E. H. C.

Boothby, R.

Fyfe, Rt. Hon. Sir David Maxwell

Legge-Bourke, Maj. E. A. H.

Bossom, A. C.

Gage, C. H.

Lennox-Boyd, A. T.

Bowen, E. R. (Cardigan)

Galbraith. Cmdr. T. D. (Pollok)

Lindsay, Martin

Boyd-Carpenter, J. A.

Galbraith, T. G. D. (Hillhead)

Linstead, H. N.

Boyle, Sir Edward

Gammans, L. D.

Llewellyn, D.

Bracken, Rt. Hon. B.

Garner-Evans, E. H. (Denbigh)

Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)

Braine, B. R.

Gates, Maj. E. E.

Lloyd, Maj. Guy (Renfrew, E.)

Braithwaite, Sir Albert (Harrow, W.)

Glyn, Sir Ralph

Lloyd, Selwyn (Wirral)

Braithwaite, Lt.-Cr. G. (Bristol, N. W.)

Gomme-Duncan, Col. A.

Lockwood, Lt.-Col. J. C.

Bromley-Davenport, Lt.-Col. W.

Granville, Edgar (Eye)

Longden, Gilbert (Herts, S. W.)

Brooke, Henry (Hampstead)

Gridley, Sir Arnold

Low, A. R. W.

Browne, Jack (Govan)

Grimond, J.

Lucas, Sir Jocelyn (Portsmouth, S.)

Buchan-Hepburn, P. G. T.

Grimston, Hon. John (St. Albans)

Lucas, P. B. (Brentford)

Bullock, Capt. M.

Grimston, Robert (Westbury)

Lucas-Tooth, Sir Hugh

Bullus, Wing Commander E. E.

Harden, J. R. E.

Lyttelton, Rt. Hon. O.

Burden, F. A.

Hare, Hon. J. H. (Woodbridge)

McCorquodale, Rt. Hon. M. S.

Butcher, H. W.

Harris, Fredarie (Croydon, N.)

Macdonald, Sir Peter (I. of Wight)

Carr, Robert (Mitcham)

Harris, Reader (Heston)

Mackeson, Brig. H. R.

Carson, Hon. E.

Harvey, Air Cdre. A. V. (Macclesfield)

McKibbin, A.

Channon, H.

Harvey, Ian (Harrow, E.)

McKie, J. H. (Galloway)

Churchill, Rt. Hon. W. S.

Harvie-Watt, Sir George

Maclay, Hon. John

Clarke, Col. Ralph (East Grinstead)

Hay, John

Maclean, Fitzroy

Clarke, Brig. Terence (Portsmouth, W.)

Head, Brig. A. H.

MacLeod, Iain (Enfield, W.)

Clyde, J. L.

Headlam, Lt.-Col. Rt. Hon. Sir Cuthbert

MacLeod, John (Ross and Cromarty)

Colegate, A.

Heald, Lionel

Macpherson, Major Niall (Dumfries)

Cooper, Sqn. Ldr. Albert (Ilford, S.)

Henderson, John (Cathcarf)

Maitland, Cmdr. J. W.

Cooper-Key, E. M.

Hicks-Beach, Maj. W. W.

Manningham-Buller, R. E.

Corbett, Lt.-Col. Uvedale (Ludlow)

Higgs, J. M. C.

Marlowe, A. A. H.

Craddock, Beresford (Spelthorne)

Hill, Mrs. E. (Wythenshawe)

Marples, A. E.

Cranborne, Viscount

Hinchingbrooke, Viscount

Marshall, Douglas (Bodmin)

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

Hirst, Geoffrey

Marshall, Sidney (Sutton)

Crosthwaite-Eyre, Col. O. E.

Hollis, M. C.

Maude, Angus (Ealing S.)

Crouch, R. F.

Holmes, Sir Stanley (Harwich)

Maude, John (Exeter)

Crowder, Capt. John (Finchley)

Hope, Lord John

Maudling, R.

Crowder, Petre (Ruislip—Northwood)

Hopkinson, Henry

Medlicott, Brig. F.

Cundiff, F. W

Hornsby-Smith, Miss P.

Mellor, Sir John

Cuthbert, W. N.

Horsbrugh, Rt. Hon. Florence

Molson, A. H. E.

Darling, Sir William (Edinburgh, S.)

Howard, Gerald (Cambridgeshire)

Monckton, Sir Walter

2256

2257

Moore, Lt.-Col. Sir Thomas

Roberts, Maj. Peter (Heeley)

Teevan, T. L.

Morris, Hopkin (Carmarthen)

Robertson, Sir David (Caithness)

Thomas, J. P. L. (Hereford)

Morrison, John (Salisbury)

Robinson, Roland (Blackpool, S.)

Thompson, Kenneth Pugh (Walton)

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

Robsorn-Brown, W.

Thompson, Lt.-Cmdr. R. (Croydon, W.)

Mott-Radclyfle, C. E.

Rodgers, John (Sevenoaks)

Thorneycroft, Peter (Monmouth)

Nabarro, G.

Roper, Sir Harold

Thornton-Kemsley, Col. C. N.

Nicholls, Harmar

Ropner, Col. L.

Thorp, Brig. R. A. F.

Nicholson, G.

Russell, R. S.

Tilney, John

Nield, Basil (Chester)

Ryder, Capt. R. E. D.

Turner, H. F. L.

Noble, Cmdr. A. H. P.

Salter, Rt. Hon. Sir Arthur

Turton, R. H.

Nugent, G. R. H.

Sandys, Rt. Hon. D.

Tweedsmuir, Lady

Nutting, Anthony

Savory, Prof. D. L.

Vane, W. M. F.

Oakshott, H. D.

Scott, Donald

Vaughan-Morgan, J. K.

Odey, G. W.

Shepherd, William

Vosper, D. F.

O'Neill, Rt. Hon. Sir Hugh

Smithers, Peter (Winchester)

Wakefield, Edward (Derbyshire, W.)

Ormshy-Gore, Hon. W. D.

Smyth, Brig. J. G. (Norwood)

Wakefield, Sir Wavell (Marylebone)

Orr, Capt. L. P. S.

Snadden, W. McN.

Walker-Smith, D. C.

Orr-Ewing, Charles Ian (Handon, N.)

Soames, Capt. G.

Ward, Hon. George (Worcester)

Orr-Ewing, Ian L. (Weston-super-Mare)

Spearman, A. C. M.

Ward, Miss I. (Tynemouth)

Osborno, C.

Spence, H. R. (Aberdeenshire, W.)

Waterhouse, Capt. Rt. Hon. C.

Peake, Rt. Hon. O.

Spens, Sir Patrick (Kensington, S.)

Watkinson, H.

Perkins, W. R. D

Stanley, Capt. Hon. Richard (N. Fylde)

Webbe, Sir H. (London & Westminster)

Peto, Brig. C. H. M.

Stevens, G. P.

Wheatley, Maj. M. J. (Poole)

Pickthorn, K.

Steward, W. A. (Woolwich, W.)

White, Baker (Canterbury)

Pitman, I. J.

Stewart, Henderson (Fife, E.)

Williams, Charles (Torquay)

Powell, J. Enoch

Stoddart-Scott, Col. M.

Williams, Gerald (Tonbridge)

Price, Henry (Lewisham, W.)

Storey, S.

Williams, Sir Herbert (Croydon, E.)

Prior-Palmer, Brig. O

Strauss, Henry (Norwich, S.)

Wills, G.

Profumo, J. D.

Stuart, Rt. Hon. James (Moray)

Wilson, Geoffrey (Truro)

Raikes, H. V.

Studholme, H. G.

Winterton, Rt. Hon. Earl

Rayner, Brig. R.

Summers, G. S.

Wood, Hon. R.

Rodmayne, M.

Sutcliffe, H.

York, C.

Remnant, Hon. P.

Taylor, Charles (Eastbourne)

Renton, D. L. M.

Taylor, William (Bradford, N.)

TELLERS FOR THE NOES:

Roberts, Emrys (Merioneth)

Teeling, W.

Major Conant and Major Wheatley

To report Progress; and ask leave to sit again.—[Mr. Popplewell.]
Committee report Progress; to sit again Tomorrow.

UNMADE ROADS, HORNCHURCH
Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Popplewell.]
9.46 p.m.
Mr. Bing: For each hundred Members now leaving the Chamber 12, if they lived in Hornchurch, would have to wade through a mud-filled unmade street to reach home. The points which I am raising, although coming from my own constituency, are all of general interest to hon. Members as illustrations of the case I shall submit. In Hornchurch, an area which was for a long time under Tory rule, we have 142 miles of made-up streets maintained by the local authority, and 20 miles of unmade roads. That means that, after allowing for houses on roads maintained by the county and the roads nationally maintained, 12 persons out of every 100 living in Hornchurch live in an unmade street, and, worse than that, many of these unmade streets cut off many other people from reaching a maintained road without traversing an unmade street.
To give one example from my own constituency, in the Bennett Road area, only a short portion of Lee Gardens is unmade, but a whole lot of people are cut off by the unmade portion from reaching, dry shod, either the shops or their work. One out of five people when they go to work, to the shops or the amusements, when they go to the doctor or when their children go to school, have to traverse an unmade road.
In Hornchurch there are 133 unmade streets, three-quarters of which are totally unmade. As one would expect, they extend over the whole area of the constituency, but one finds them more and more in the working-class quarters. The total estimated cost, at present prices, of making up all the unmade roads in Hornchurch would amount to about £523,000. But in the working-class area of the constituency, Rainham and South Hornchurch, where only about one-fifth of the population live, the cost of making up the roads will be no less than £243,000.
A great part of this area is only a foot or so above sea level. Deep Thames clay is churned up at least ankle deep in winter, and in summer it is in ruts so heavy and high that no vehicle can get in.
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No hearse can go into these streets; no ambulance and no cars to carry out the sick or infirm can get in, no builder's vehicle, and, if there is a fire, no fire engine can get through. Frederick Road in South Hornchurch is crossed by a stream, and I ought to thank private enterprise for providing a small footbridge consisting of one plank. That is the only fruit of private enterprise in that particular area.
Major Hicks-Beach: Will the hon. and learned Member give way?
Mr. Bing: No, I will not. I have waited 31 hours to speak on behalf of my constituents, and I am not now going to give way to the hon. and gallant Gentleman who on the last occasion when we discussed Hornchurch tried to make my speech for me.
At the moment, there are three people actually in hospital in my constituency due to accidents they suffered falling in these unmade roads. Thirty-three of these 133 unmade roads have no sewers at all, only cesspool drainage and all that that entails, and all this within 15 miles of St. Pauls, or, as hon. Gentlemen opposite would prefer it, within 14½ miles of the Stock Exchange.
Major Hicks-Beach: How many streets are there?
Mr. Bing: There are 133 unmade streets, a list of which I will give the hon. and gallant Gentleman.
I do not want to go into details of how this came about. It is only fair to the council to say that 60 per cent. of these streets were in an area which they took over in 1934 from other authorities. Of course, the war interrupted work and prevented correcting the result of predatory builders who were determined to get the houses up, sell them and let the streets go hang. But what we are concerned with in this debate is how we can deal with this problem, not only in Hornchurch, but over the whole country, because what I say about my constituency is, unfortunately, only too typical of very many others.
As I understand the Government's plan, it is intended to spend about £1 million annually for unmade streets for the whole country. Hornchurch has a normal allocation so small that it would

2261
take almost 100 years, according to my mathematics, to make up the roads at present unmade in that area. Very often we cannot even begin with some of the worst roads at the moment. Let me give my hon. Friend the Parliamentary Secretary just one example of the sort of difficulties with which the council is faced. We cannot very often give priority to the worst roads because, in order to help other authorities—and it is right we should—we have to make up other roads under the Street Works Act and use our allocation for that purpose, even though it does not benefit a single frontage.
There is a great housing estate near Hornchurch which has been put up by the L.C.C., and it has fallen to my constituency to provide a secondary school to serve that estate. But that school cannot be used unless a road is built towards it. The land, which is hardly built on at all, is owned by the education authorities. They say that they will pay for the road but that the council must put it in. When the council puts in that road—it is called Wych Elm Road—it is charged against their allocation, and it used up a great part of their normal allocation to build a road which benefits only a very few frontagers in Hornchurch.
We are in this further difficulty, that we have some roads which cost almost as much as three years of our normal allocation and some even more than that. I will quote the name of one road again for the hon. and gallant Member for Cheltenham (Major Hicks-Beach), who is so keen on the names of these places. Perhaps he would like to visit them and see the effect of private enterprise. It is Parsonage Road, Rainham, and it would cost £22,000 to make that road up.
I want to ask my hon. Friend the Parliamentary Secretary one or two questions. The first is why there is this upper limit on the total sum which can be spent on making private streets under the Private Streets Works Acts. It is not a question of taxation. The people who are going to pay for this are not ratepayers and taxpayers, but the frontagers who are to contribute from their own pockets in respect of the costs. They want to pay and they put money on one side. But as each year goes by, with rising prices, it is not sufficient, so that
2262
by not making up roads now they are incurring a loss.
I think my hon. Friend will say that if these good people each pay out these small sums of money all over the country for making up unmade streets it will involve us in some general inflation, but this total of £1 million was fixed last year. It was said last year, as I understand it, that if we went above £1 million for unmade streets we should find ourselves in danger of inflation. But now we are increasing by £1,100 million over three years the allocation of the sum we are spending on armaments. If we can do that without causing inflation, as we are assured by the Parliamentary Secretary's friends on the Government Front Bench, surely it is not too much to say we could have another £500,000 towards unmade roads.
If we cannot have another £500,000 towards unmade roads, let us look again at the priorities we give to other jobs. There is nothing worse than someone who comes to this House and decries proper and legitimate activities elsewhere and says that that expenditure should be devoted instead to his own constituency. I have great pleasure and pride in British achievement. For instance, in St. James Street there is a new Conservative Club building which fills in that quarter a great social want, which I would not suggest in any way should be curtailed.
Mr. Geoffrey Hutchinson: Is the hon. and learned Gentleman aware that it is the Bath Club and not the Conservative Club?
Mr. Bing: I am inclined to think that Conservatives are admitted to that club. At any rate, it is a great edifice and, whatever the politics of its inhabitants, if it were not constructed it would enable us to have roads made up in Hornchurch for 10 years. However, I do not suggest for a moment that anybody in Hornchurch would wish that that sacrifice should be made.
I ask my hon. Friend the Parliamentary Secretary to consider the priorities. Let him look at the national interest at the moment. We are asking people to do shift-work in factories all the year round, and we are going to ask these people to come out in

2263
unlighted streets, full of deep pits into which they can fall and get injured, and into the mud and dirt. We ask them to leave their families at night when nobody can go out and fetch a doctor or anything of that sort. It is said we are making all these sacrifices for the purpose of defence and that we must put defence first.
Let us take defence on its narrowest possible ground. I do not think that the possible tragedy of a war should be taken into our considerations, but if it is by those people who think in that way, is it a good thing in regard to defence to have great areas through which a single fire engine cannot go, through which an ambulance could not penetrate, and through which no heavy rescue squad could be sent?
The worst features of our unmade roads lie along the London-Tilbury road. Further along, one comes to the happier constituency of my hon. Friend the Member for Thurrock (Mr. Delargy) where there is a labour council and therefore not quite the same problem. In Hornchurch, however, if that road were to be cut one would find it would be quite impossible to pass any vehicle through any of the side streets because they are all unmade.
I know this is a point upon which other hon. Members want to speak, so I will deal with only what I believe to be one of the most extraordinary features of this matter. There is no reason in law why if every frontager who had an unmade road in front of his house proceeded to spend £99 on paving his garden, they should not do that without incurring, according to the Government plan, any danger of inflation. They can all do it. Even if they have made their road up, they can do it. Anyone can spend up to £100 without a licence. But let them get together and put that £100 towards a communal service like a road, which is not only to their benefit but also to the benefit of the other inhabitants and they must be restrained because that will lead to inflation. I do not think that is a fair or proper way in which to look at the matter.
In Hornchurch, the cost that falls on the ordinary frontager is in the neighbourhood of £90 to £100. So in practically every case this matter could be attended to without the need of going beyond a £100 limit. Cannot my hon. Friend say
2264
that where a street can be made up by frontagers who are prepared to forgo their right to spend £100 on unlicensed building, and where the cost of making up a road does not exceed £100 for each frontage, they should be allowed to do it? It is an extraordinary proposition to say that to put in a sewer will lead to inflation, but to put in an ornamental pond, using exactly the same material only using the various functions in reverse, so to speak, and having a fountain, is not inflation but a normal expenditure which can be allowed without any effect on the community.
I know I have delayed not only you, Mr. Speaker, but the House and all those who have been kept up for practically as long as the House of Commons has ever been kept up, but I would have been wrong not to raise this problem. It affects not only my constituency. It is not some little question of a small local complaint. It is a really serious matter which affects production, which affects health, which affects defence, and which shows, as far as I can see, a failure to have any coordinated policy.
I will end with one last example. When an estate is made up through permits given by the Ministry of Works, there are all sorts of different views for deciding what allocation shall be given to the road. What we are asked, in fact, is this. If one is a workman, that is all right: one can walk dry shod into the factory, because there, where an estate is developed under a Ministry of Works licence it is necessary to have a road to take one dry shod to the factory; but when one gets back in the direction of one's home, then one can walk through the mud and slush which the Tory system of housebuilding has bequeathed to this country.
That is not, in my view, a Socialist approach to the question. I look to my hon. Friend in the hope that he will at any rate hold out some prospect of dealing with what is a grave injustice to a very great number of the people of this country.
The Parliamentary Secretary to the Ministry of Local Government and Planning (Mr. Lindgren): I feel that I ought to acknowledge that my hon. and learned Friend the Member for Hornchurch (Mr. Bing) has been pegging away at the problem of the unmade roads of his constituency ever since he has been a Member

2265
of this House. From Departmental files I have evidence of his endeavours—of his constant and persistent endeavours—in this matter since early 1946.
Since I have been at the Ministry of Local Government and Planning I have had personal experience of that pressure and persistence through the representations he has made to me and to the Ministry which I have the honour to serve—representations by way of correspondence, personal discussions, the bringing of deputations from the local authority, and also the speeches which he made on the New Streets Bill, the Measure which was recently introduced into, and has passed through, the House by my hon. Friend the Member for Bootle (Mr. Kinley).
I think I ought to say that his endeavours have been to good purpose, for his constituency has received—if not as the direct result of his endeavours, certainly his endeavours have helped to secure the result—allocations at a much higher rate than other urban districts. [HON. MEMBERS: "Why?"] Just a moment. I will say why—because the problem there is greater than that of many other parts of the country. We do appreciate the problem so far as Hornchurch is concerned.
My hon. and learned Friend gave some of the reasons for the condition which arose in Hornchurch. One was, as he suggested, the very rapid development in the area in the inter-war years. It is always very easy to be wise after the event, but no one expected that the war of 1939 would come along—or, perhaps, I should say most folk at least hoped it would not, even if they expected it. However, part of the problems of Hornchurch must be laid at the door of the Urban District Council of that time, for they were not as energetic as other local authorities were in their areas, in seeing that roads, sewers, and other services kept pace with the housing development of the area. I feel that it is a little unkind, perhaps, to penalise areas which were seeing that their street development kept in step with their house building—to penalise them now by giving a greater allocation to Hornchurch.
We have given Hornchurch more because the problem there has been greater. All we can do to help we certainly will. I want to make the point that my hon. and learned Friend generously did, that
2266
the problem which faces Hornchurch faces, to a smaller degree, most areas throughout the length and breadth of the land. There are very few urban, rural or borough authorities that have not unmade streets in their areas. They were streets in which development was lagging behind just prior to 1939. Therefore, other local authorities have wanted further allocations.
I am happy to give some hope, although I make no promise, to my hon. Friend in regard to the point raised concerning the road in which a school is being developed. He recently brought a deputation from his Council and both he and the members of the deputation made their case very fully. It is true that the making up of another road which had been agreed to by my Ministry had to be deferred to make up this road to provide an access to the school.
I think that the Council were right in providing a proper access for the children going to that school. I am prepared to look at the question of this road to see whether, in the circumstances, we can make a special allocation, but I cannot give a great deal of hope of additional allocations because I think that in relation to the grants made Hornchurch are fairly treated, having regard to the other authorities throughout the country. Perhaps one might say that they are favourably treated in relation to other areas.
My hon. Friend has asked why there has been a limitation on the private street works throughout the country. One of the problems that we have in dealing with a capital investment programme is to consider the use to which that investment is put. The group in which private street works come is a miscellaneous local government group which includes such things as sea-defence schemes, provision of civic centres, town halls, community centres and the building of libraries.
Major Hicks-Beach: When I spoke on this subject some nine months ago, the Minister of Transport answered and he made it clear that the roads in Hornchurch were his responsibility so far as licensing was concerned.
Mr. Lindgren: I think that the hon. and gallant Gentleman is referring to two different problems. There are roads for which the Minister of Transport is respon-

2267
sible and there are district roads for which the local authority is responsible. These are the district roads, the making up of which is, in some cases, the responsibility of the builders, and one for which they were paid. They are now the responsibility of the local district council on loan sanctions from my Department.
Mr. Hutchinson: I hope that the hon. Gentleman is not suggesting that in a large number of these cases the owners of the houses did pay the road charges.
Mr. Lindgren: Not in all cases, but in a number of cases. Where they have paid and now have to pay a second time, it makes it all the more difficult.
Let us forget this pre-war private enterprise development. My hon. Friend's own local authority is one of the best urban housing authorities in the country. They have done the right thing and we have encouraged them to do so. They have made up their roads, and the new estates managed by the Hornchurch Urban District are fully serviced. It is true that the people in the Hornchurch new council estates have an advantage over the people who have been there 10, 15 or 20 years. When private enterprise develops a housing estate the Ministry of Works come to us about an allocation for road making, and to prevent the problems arising which arose in pre-war years we generally agree that the licence shall be issued. So it is true that in Horn-church at the present time the roads are
2268
developed at the same time as the houses are built.
It is a big problem and to prevent what has happened in the past occurring again I believe that we are doing the right thing. We are doing as much as we can to pull up the arrears, but it will take a long time to do so. The international tension of the present day and the necessity to devote so much of our national income to defence will not last for ever. As we are able to reduce expenditure in that direction and, indeed, on other items, then we shall be able to devote a greater proportion of our national income towards the urgent problem of private street works. We hope this will be soon.
10.16 p.m.
Mr. Alport: In view of the attack that the hon. and learned Member for Hornchurch (Mr. Bing) has made upon the Government, I have considerable sympathy with the point of view which he has put forward. He has submitted, quite rightly, that the very backward conditions which exist in his constituency and which are, in a great degree, the responsibility of—
The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at Sixteen Minutes past Ten o'Clock p.m. 12th June.

ELECTRICITY SUPPLIES
  Margam Strip Mill
  Margam Strip Mill
  Severn Barrage
  Severn Barrage
COAL AND COKE SUPPLIES
  Summer Stocks
  Summer Stocks
  Allocation, Yarmouth Area
  Allocation, Yarmouth Area
  LEGAL AID AND ADVICE ACT
  LEGAL AID AND ADVICE ACT
FOOD SUPPLIES
  Confectionery
  Confectionery
  Feedingstuffs
  Feedingstuffs
  Meat
  Meat
  Cream
  Cream
  Forged Coupons
  Forged Coupons
  Sorghum Crops, Queensland
  Sorghum Crops, Queensland
  Eggs
  Eggs
  Diabetics
  Diabetics
  Potatoes
  Potatoes
  GERMANY (DEMOCRATIC PARTY)
  GERMANY (DEMOCRATIC PARTY)
  UNITED NATIONS (CHINESE REPRESENTATION)
  UNITED NATIONS (CHINESE REPRESENTATION)
  BRITISH COUNCIL PUBLICATION (SWEDISH PURCHASE)
  BRITISH COUNCIL PUBLICATION (SWEDISH PURCHASE)
  U.S. FORCES, GREAT BRITAIN (INJURY CLAIMS)
  U.S. FORCES, GREAT BRITAIN (INJURY CLAIMS)
  U.S. CONGRESSMEN (BRITISH NEWSPAPERS)
  U.S. CONGRESSMEN (BRITISH NEWSPAPERS)
  KOREA (BRUTALITY ALLEGATIONS)
  KOREA (BRUTALITY ALLEGATIONS)
  ANTARCTIC (BRITISH TERRITORY)
  ANTARCTIC (BRITISH TERRITORY)
  PRISONERS OF WAR, KOREA
  PRISONERS OF WAR, KOREA
  POLAND (BRITISH CLAIM)
  POLAND (BRITISH CLAIM)
TRANSPORT
  Shipping (Turn-Round)
  Shipping (Turn-Round)
  Passenger Fares, Leeds
  Passenger Fares, Leeds
  Road Works (Stone Supplies)
  Road Works (Stone Supplies)
  Merthyr Tydvil Slip Road
  Merthyr Tydvil Slip Road
  Petrol Stations (Report)
  Petrol Stations (Report)
  Public Service Vehicles (Licensing)
  Public Service Vehicles (Licensing)
  Speed Limit, Hendon
  Speed Limit, Hendon
  AIRCRAFT EJECTION SEATS
  AIRCRAFT EJECTION SEATS
NATIONAL INSURANCE
  Seasonal Workers
  Seasonal Workers
  Death Grant, Newport
  Death Grant, Newport
  SCOTLAND (CARAVAN DWELLERS)
  SCOTLAND (CARAVAN DWELLERS)
  COMMONWEALTH MINISTERS' CONFERENCE
  COMMONWEALTH MINISTERS' CONFERENCE
  FESTIVAL GARDENS (SAFETY PRECAUTIONS)
  FESTIVAL GARDENS (SAFETY PRECAUTIONS)
  BRITISH INVESTMENTS, UNITED STATES
  BRITISH INVESTMENTS, UNITED STATES
NATIONAL HEALTH SERVICE
  Mental Homes, East Anglia
  Mental Homes, East Anglia
  Smallpox (Vaccination)
  Smallpox (Vaccination)
  SOFTWOOD (PRICES)
  SOFTWOOD (PRICES)
  TELEPHONE KIOSKS, EAST RIDING
  TELEPHONE KIOSKS, EAST RIDING
BRITISH ARMY
  Supplementary Reserve (Training)
  Supplementary Reserve (Training)
  Property, Dovercourt (Purchase)
  Property, Dovercourt (Purchase)
  APPROVED SCHOOLS (ABSCONDERS)
  APPROVED SCHOOLS (ABSCONDERS)