Sitting of 27 May 1952

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  BRITISH ARMY

    Personal Cases
    Mr. W. J. Taylorasked the Secretary of State for War why Private Geoffrey Boot, 1st Battalion the Green Howards, was reported killed in Malaya and his parents informed by telegram and letter accordingly when, in fact, he was only slightly injured; and if he will take all possible steps to prevent unnecessary suffering to next-of-kin by errors of this kind in his Department.
    The Secretary of State for War (Mr. Antony Head): I very much regret this mistake, which was due to the ambiguity of the signal reporting this accident. A new instruction for the wording of such signals has been circulated to all concerned which will, I think, eliminate chance of recurrence.
    Mr. Hamiltonasked the Secretary of State for War what steps he intends to take to ensure that 4691891 War-substantive Staff-Sergeant G. Grimshaw, Royal Electrical and Mechanical Engineers, will return to his home in Fife from his training as a Z reservist at Lydd Town in sufficient time to obviate the loss of the bonus shifts payable to miners.
    Mr. Head: I am arranging that this soldier's time of reporting and return to his home shall not interfere with his bonus shifts in the weeks before and after his training period.
    Mr. Hamilton: While I thank the Minister for that reply, may I ask whether he is aware that this man is to take his colliery manager's certificate in November? Is it not ridiculous that this highly skilled man is to go from Fife to Kent—a matter of 600 miles—to engage in about
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    11 day's training, when in the event of an emergency he would obviously be in a reserved occupation?
    Mr. Head: This man is exceptionally qualified in so far as he is a radar technician, and the only place where such men are trained is in Kent. As regards his present course of studies, I think that in the event of war his services as a radar technician would be absolutely invaluable to the country.
    Mr. Hamilton: If he is a very highly skilled man, what advantage will he or the War Office get out of this 11 days' training at Lydd? Is it not a fact that valuable though he might be in an emergency, he would be infinitely more valuable as a colliery manager?
    Mr. Head: The hon. Member will agree that this man has not yet passed his examination to become a manager; I hope he will do so, but I would point out that there have been great changes in radar equipment and the techniques of radar, which have progressed very considerably since he left the Army.
    21. Lieut.-Colonel Liptonasked the Secretary of State for War whether leave to presume the death of Gunner J. O'Leary, missing on active service in Malaya since 2nd March, 1951, has now been granted by the Supreme Court at Pahang.
    Mr. Head: This case was due to be heard last week and I had hoped by to-day to know the outcome. I have, however, just heard that the civil court concerned will not accept the local affidavits and that an affidavit has now been sent for signature by a witness in this country. I much regret this further delay, but there is nothing I can do to avoid it.
    Lieut.-Colonel Lipton: If all the facts of this deplorable case were revealed, the public conscience would be outraged. Would the right hon. Gentleman now do his best to honour the undertaking which he gave last November, when he said that he hoped to get this matter cleared up in a week or two?
    Mr. Head:I share the hon. and gallant Gentleman's regret about this case. I am not trying to absolve myself, but it is now out of my hands. I have sent a great many telegrams and I was hoping that it would have been finally settled today.
    Mr. Yatesasked the Secretary of State for War if he is aware that 916925 Gunner C. D. Yates, Royal Artillery, has been missing for over 10 years from the Netherlands East Indies and that his wife has been unable to claim a widow's pension; on what grounds he assumes that this soldier originally absented himself without leave and is still absent without leave: and if he will now presume his death and pay a widow's pension to Mrs. Yates accordingly.
    Mr. Head: This man is recorded as being, not missing, but absent without leave. This is because he went absent from his unit on 21st February, 1942, and was seen in Java on several occasions in February and March, 1942. Since then he has not been heard of. I am going to re-examine the case to see whether something cannot be done to help Mrs. Yates, and I will write to the hon. Member.
    Mr. Yates: Is the Secretary of State aware that this man went through France with a machine gun unit and was wounded at Dunkirk, that he possesses all the attributes of a very brave soldier, and is not the sort who would absent himself without leave? In considering this case, will the right hon. Gentleman bear in mind that this man had been missing for four years before he was discovered absent without leave, and that since that time—for six years—his wife has had to exist on public assistance? It is most regrettable that the wife of a man who served his country in this way should be in such circumstances. Will the Secretary of State give his personal consideration to this case?
    Mr. Head: I have informed the hon. Gentleman that I am far from happy about the position of Mrs. Yates. It is difficult for me to say the man is dead since he was seen after he left his unit. I have given the hon. Gentleman the assurance that I will go into the case to see if there is anything that can be done for Mrs. Yates.
    Mr. Ian Harvey: Can my right hon. Friend give any indication of what consideration was given to this case by his predecessor?
    Mr. Shurmer: Regarding the question of a man who is seen after leaving his regiment, what is the position of a number of soldiers whose wives have not seen
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    them for years and whom no one else has seen? The right hon. Gentleman may remember the case that I raised some time ago of a man who had been missing. After a certain time, cannot his death be presumed?
    Mr. Head: In those circumstances a man is reported missing, or missing believed killed; but this man who was reported absent without leave was seen walking about Java. He may be doing some job in that far off country.

    Officers' Uniforms (Cost)
    Mr. Benceasked the Secretary of State for War the cost of supplying National Service men, holding commissions, with uniform; and what uniforms are provided.
    Mr. Head: The bulk of those commissioned have had service in the ranks and have, therefore, already some clothing which, when new, cost £18 2s. 9d. The clothing issued free on commissioning costs £7 7s. 6d. and an outfit allowance of £36 10s. is given to meet the remaining needs. The cost of fitting out a National Service man as an officer is, therefore, £43 17s. 6d. Only battle dress is provided.
    Mr. Bence: In view of the need for economy in the country, does not the Minister consider it would be just as well to stop the manufacture and issue of these dress uniforms to National Service officers and to put the uniforms in the clothes section of a museum?
    Mr. Head: No full dress whatever is issued. As I have stated, only battle dress is issued to National Service officers.

    Home Guard (Recruiting)
    Mr. Wyattasked the Secretary of State for War the number of men who have now enrolled in the Home Guard; and how many of these have enrolled east of a line from Flamborough Head to Selsey Bill, and west of that line, respectively.
    Sir I. Fraserasked the Secretary of State for War what progress has now been made with recruiting for the Home Guard.
    Mr. Head: The first monthly return showed that by 15th May 10,704 men had enrolled in the Home Guard. In

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    addition, about 18,000 are now earmarked for expansion of the cadre units. It would not be in the public interest to give the breakdown asked for in the first Question.
    Mr. Wyatt: Is not this a deliberate attempt to evade the Question because of the foolishness to which it would expose the Secretary of State for War, as a few weeks ago he gave county by county the exact number of men who had registered in the Home Guard? The purpose of my Question, as he knows, is to find out how many people have enrolled out of the 100,000 asked for east of a line from Flamborough Head to Selsey Bill and out of the 25,000 asked for west of that line.
    Mr. Head: It is not for any such purpose. Registration is a different matter from enrolment. It would be better if the hon. Member concentrated more upon the interests of the defence of the country than upon sniping at the Home Guard.
    Mr. Wyattasked the Secretary of State for War how long it is proposed to continue with the experiment of forming a Home Guard since a sufficient number of volunteers are not forthcoming to make the scheme effective.
    Mr. Head: The formation of the Home Guard will continue. The figures that I have given cover only two weeks' enrolment and I would suggest to the hon. Member that his conclusion is both premature and unhelpful.
    Mr. Wyatt: As this scheme, against the advice of the Opposition, was instituted in January, and as the rate of recruiting has only produced, I think, 28,000 of the 165,000 earmarked or allowed for in the Army Estimates, is it not quite clear that we are wasting the time of the country and of the War Office in proceeding with this recruiting scheme?
    Mr. Head: No, I do not think that is at all clear. Enrolment has only been going on for a fortnight and I have the highest hopes that the hon. Member's own hopes will be disappointed.
    Mr. Wyatt: Is it not clear that enrolment is not keeping pace even with registration?
    Mr. Head: Registration ceased some considerable time ago.
    Mr. Emrys Hughesasked the Secretary of State for War what expenses have been incurred in connection with publicity and advertising for the Home Guard in Scotland; and how many recruits have been obtained.
    Mr. Head: A sum of £194 has been spent centrally on advertisements. In addition, an allotment for unit expenditure of this kind in the first quarter of this year of £15 has been made to each battalion, but I do not yet know how much of this allotment has been spent. Up to 15th May, 647 men had enrolled and 1,660 had been earmarked for cadre units.
    Mr. Hughes: Is the I.C.I. expert operating north of the Border?
    Mr. Head: He is ubiquitous.
    Mr. Wyatt: What does the right hon. Gentleman mean by "earmarked for cadre"? Does he mean that these are people who originally registered but who did not want to enrol?
    Mr. Head: These men are those who registered and are to be interviewed for the cadre battalions, which cannot go above the cadre strength of 55 men per unit.
    Mr. Hughes: When the right hon. Gentleman says that the I.C.I. man is ubiquitous, does not he mean that he is superfluous?
    Mr. Head: No—the very reverse.

    Public Relations
    Mr. Anthony Greenwoodasked the Secretary of State for War (1) if he will make a statement about the resignation of Major-General Edgeworth-Johnson as Chief Public Relations Officer at the War Office;
    (2) under what conditions of service Mr. Sidney Rogerson has been appointed as publicity adviser to the Army Council.
    Mr. Head: At the present time Regular recruiting is perhaps the most important question which confronts the Army. Mr. Rogerson is on temporary loan from the Imperial Chemical Industries to advise on public relations policy in the broadest sense and with particular reference to those aspects which concern recruiting. Mr. Rogerson will continue in their payment and I am much indebted to the company for this generous help.

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    Major-General Edgeworth-Johnstone, who served as Director of Public Relations for some 5½ years, was for the last two holding a temporary civilian appointment. This has been terminated with effect from 1st July in accordance with the agreement under which he was serving.
    Mr. Greenwood: Does not the Secretary of State think that in principle it is better that these posts should be filled either by serving officers or by properly qualified public relations officers established in the Civil Service? Does he not think it is really undesirable that Government Departments should accept offers of this kind from private firms, especially in the case of a security Department like the War Office accepting help of this kind from the principal manufacturers of explosives?
    Mr. Head: There are many precedents of individuals on loan from various industries in the Ministry of Supply, in connection with munitions and weapons and so on, and I believe that the question of getting men into the Army is just as important as obtaining good weapons. Therefore, I think that the precedent is entirely justified. Mr. Rogerson's qualifications in this respect stand second to none.
    Mr. Strachey: Does the right hon. Gentleman's statement not mean that Mr. Rogerson—and we do not want to say anything about him personally—is now on the pay-roll of I.C.I. and remains on that pay-roll during the whole time that he occupies this extremely important and delicate post in the War Office? Does the Minister not think that an arrangement such as that with a great private firm is highly undesirable?
    Mr. Head: I should have thought that the right hon. Gentleman would have been aware that there were numerous precedents for this, both in the War Office and in the Ministry of Supply, to do with the whole question of armaments, with weapons and explosives and so forth. I cannot see the point of drawing a distinction between the vital question of manpower and that of weapons. It is no good having the best weapons if there is no one to fire them.
    Air Commodore Harvey: How long is it hoped to retain the services of this very able man?
    Mr. Head: I hope for 18 months to two years, subject to discussion with the company.
    Mr. Greenwood: Obviously, it is desirable that a Department like the War Office should have taken advice on explosives from representatives of this firm, but is the right hon. Gentleman really suggesting that among the very large band of qualified public relations officers in the public service there is none competent to give advice on the kind of publicity that he requires?
    Mr. Head: It would be invidious to make comparisons, but I went carefully into this matter when I took office and I was satisfied that the Army was not being put over sufficiently well to the general public.

    Prisoners of War, Korea (Parcels)
    Sir J. Lucasasked the Secretary of State for War if his attention has been drawn to advertisements from a private source of which he has been told, appealing for funds to send parcels to prisoners of war in Chinese hands; and in view of the fact that the British Red Cross have already large stocks of parcels available for this purpose in Japan, and that there are no means of forwarding them, if he will make a statement.
    Mr. Head: Yes, Sir. The British Red Cross Society has large stocks of parcels in Japan but, unfortunately, it is not possible for them to be sent on to our prisoners of war. In the circumstances, although this matter is outside my province, I doubt whether additional parcels are needed at this moment.
    Sir J. Lucas: While thanking my right hon. Friend for his answer, may I ask if he will make it quite clear that the British Red Cross will do everything that can possibly be done, and that appeals to charity and pity are quite out of place?
    Mr. Head: I am well aware of that fact and of the difficulties which are now being experienced by the International Red Cross Society.
    Mr. Shinwell: Has not the right hon. Gentleman in fact just accepted charity from the I.C.I.?
    Mr. Head: If the right hon. Gentleman had accepted a little charity I think that our recruiting figures might have been better in the past.
    Mr. Shinwell: Is the right hon. Gentleman aware that at the War Office, the Ministry of Defence and other Service Departments there are highly qualified officers of a much higher rank than the right hon. Gentleman ever earned or ever will earn?
    Mr. Head: I can only judge by results.

    Canal Zone (Barracks)
    Colonel J. H. Harrisonasked the Secretary of State for War how many permanent barracks, including married quarters, have been built for military personnel in the Suez Canal Zone during the last three years.
    Mr. Head: None, Sir.
    Colonel Harrison: Is my right hon. Friend aware that, whilst there are two good permanent R.A.F. camps, a lot of our Army men and officers and their wives are living in deplorable conditions in the Canal Zone? Will not the Government make up their minds whether or not, strategically, we are to hold the Canal Zone? If we are to hold it, could not better quarters be constructed for our troops and, if not, should we not evacuate the Zone?
    Mr. Head: It is not easy at the moment to arrive at a definite policy decision with regard to the Middle East. It was for that reason that no permanent buildings were put up.

    Regulars and Territorials (Recruiting)
    Sir I. Fraserasked the Secretary of State for War, whether he will give the latest figures for the progress of recruiting for the Regular Army and the Territorial Army, respectively, compared with the figures of the corresponding period of a year ago.
    Mr. Head: During the first four months of this year, 18,306 men undertook Regular engagements with the active Army, compared with 9,981 during the corresponding months of 1951. Of these, 14,821 and 7,613 respectively were recruited direct from civil life.
    In the same period this year voluntary enlistments by men into the Territorial Army numbered 11,094 compared with 6,568 in the corresponding months of
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    1951. Of these, 4,403 and 5,003 respectively were direct from civil life, the remainder being voluntary engagements by National Service men during their part-time service.
    Sir I. Fraser: Can the right hon. Gentleman say what proportion of the Territorial Army are volunteers and what proportion are National Service men?
    Mr. Head: I should prefer to have notice of that question.
    Mr. Shinwell: Is not that the crux of the matter? Why does the right hon. Gentleman boast about these figures when he well knows that a large intake to the Territorial Army comes from the Reservists—the men who have undergone their National Service and now undertake Territorial Service liability? Is not he also aware that of the 18,000 men who have been voluntarily recruited, a large number have been recruited under the short service engagement, which was not in operation last year?
    Mr. Head: I am not boasting about these figures. I am surprised that the right hon. Gentleman is not more pleased to hear them. They would have been even more satisfactory to the British Army had the short service engagement been brought in a year or so before. With regard to the Territorial Army, I would point out to the right hon. Gentleman that I stated that the total numbers in round figures were 11,000 compared with 6,000 before and, of those, 5,000 in 1951 and 4,000 in this year were from civil life, the remainder being voluntary engagements by National Service men during their part-time service. I think that answers the right hon. Gentleman's comment.
    Mrs. Mann: Is the right hon. Gentleman aware that the figures are likely to go up still further, because the wives are finding the cost of feeding their men an unmanageable problem and the only way that men can be fed is by going into the Army?
    Mr. Head: That is not a stimulation of recruiting which I favour.
    Mr. D. Brook: Can the right hon. Gentleman say what influence the unemployment figures have had on recruiting in the last few months?
    Mr. Head: So far as I know, none whatever.
    Sir H. Williams: Would my right hon. Friend ask the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) if she is aware that the cost of nylons has fallen heavily during the past few weeks?

    War-time Escapes (Foreign Assistance)
    Mr. Teelingasked the Secretary of State for War what sums have been paid to those foreigners on the Continent of Europe who helped our airmen and others to escape back to England during the war and who were out of pocket as a result; and what steps have been taken to find out the amount of these expenses.
    Mr. Head: Just under £2 million has been paid to those who gave such valuable help to our Service men in this way. There are no cases now outstanding.

    Korea and Malaya (Forces Entertainment)
    Mr. Dribergasked the Secretary of State for War why his Department rejected an offer by Mr. Donald Peers to spend three weeks in Korea giving concerts for the troops.
    Major Legge-Bourkeasked the Secretary of State for War to make a statement on Mr. Donald Peer's offer to entertain British troops in Korea; and whether this offer has been accepted.
    Mr. Head: The offer made to my Department was for Mr. Peers to go not to Korea but to Malaya for three weeks. This was not rejected, but it was suggested that, in view of the cost of the journey, it might be better if Mr. Peers went for five weeks. His agent said this might be possible in the autumn; however, it was later found impossible. Mr. Peers is now going to Malaya from 15th June to 11th July.
    Mr. Driberg: While welcoming that last assurance, might I ask the right hon. Gentleman whether there has, in fact, been a misunderstanding between his Department and Mr. Peers, who stated in a Press interview that he was willing to go to Korea but that the Department had said that it was too expensive for only three weeks? Is not the need in Korea even greater than in Malaya, and would it not still be possible to divert Mr. Peers to Korea?
    Mr. Head: I can assure the hon. Gentleman that the original offer was to go to Malaya. We have arranged for a considerably increased number of artists to go to Korea, but I will readily consider any other offers, including that of Mr. Peers, should he wish to change.
    Mr. Driberg: Will the right hon. Gentleman give an undertaking that the comparatively trivial cost of flying them to Korea—trivial in comparison with the pleasure and entertainment which these artists give the troops—will not weigh with his Department?
    Mr. Head: Our only object is to see that the flying out of anybody for that distance is justified by a reasonably long stay in the area.
    Lieut.-Colonel Lipton: With a view to clearing away whatever misunderstandings and difficulties might have arisen in the past, will the right hon. Gentleman do his best to receive the deputation of representatives of the acting profession and hon. Members of this House at the earliest possible moment, as a result of which I am quite sure that some improvement can be effected?
    Mr. Head: I have not yet received the invitation, and I am in the middle of discussions to ensure that a body exists to which all the artists will be welcome to come to offer their services. I do not want to get crossed lines, but I should never object to having a talk with the hon. and gallant Member about this.
    Mr. Driberg: Could this be done in collaboration with the Secretary of State for Air, in the hope that these artists could be flown to Malaya and Korea free?
    Mr. Head: The C.S.E.—Combined Services Entertainment—is run in conjunction with the Royal Air Force.

    Bofors Gun (Replacement Cost)
    Mr. Emrys Hughesasked the Secretary of State for War the cost of the new weapon of Swedish design which is intended to replace the Bofors gun.
    Mr. Head: The cost of this new gun is about £11,000.
    Mr. Hughes: Can the Minister give the total cost that is likely to be involved? Who is getting the money? Where do the Swedes come in?
    Mr. Head: It has been settled that we should re-equip with this gun, and it has been ordered in the normal way.
    Mr. Hughes: How does it compare with the previous gun that it replaces?
    Mr. Head: It is much better than the previous one.
    Sir H. Williams: Will my right hon. Friend make sure in connection with the new gun that the mistake will not be made as happened with the old Bofors gun, in that we do not have adequate drawings? Will he ensure that there are adequate drawings from Sweden before we go into production?
    Mr. Head: Yes, that has been ensured.

    Economies
    Mr. Emrys Hughesasked the Secretary of State for War what further economies he intends making at the War Office in response to the Chancellor of the Exchequer's circular on the need for reduced expenditure.
    Mr. Head: It is my aim constantly to seek the maximum economy possible without reducing the fighting efficiency of the Army.
    Mr. Hughes: How does that aim correspond with the right hon. Gentleman's achievements?
    Mr. Head: I leave that to the hon. Gentleman, who is always generous to me in such matters.
    Mr. Langford-Holt: Will my right hon. Friend point out to the hon. Gentleman the cost which is involved in answering Questions put down purely as vehicles for his shafts of wit?

    Compassionate Leave
    Mr. Swinglerasked the Secretary of State for War if he will make a full statement of the grounds on which compassionate leave is granted in the Army.
    Mr. Head: Compassionate leave may be granted on the death, imminent death or dangerous illness of a wife, husband,
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    child, parent or other next of kin. It may also be granted for urgent and exceptional reasons in order to mitigate domestic hardship.
    Mr. Swingler: The right hon. Gentleman made that statement last Thursday. Will he make perfectly clear that he himself has discretionary power in dealing with applications, and that he is not in any way attempting—I say this in order to correct any wrong impression that may have been given last Thursday—to narrow the use of the discretionary power which the Secretary of State possesses?
    Mr. Head: Of course, I have discretionary power, but what I should point out again is that there is a scheme which lays down definitely in respect of whom, as relatives, men can apply for compassionate leave. They apply within that scheme, and within the scheme I have discretionary powers. The point that I made last week was that if I widened that scheme immensely, I should be increasing very considerably the liability, which already is running at about the rate of over 20 cases a day of compassionate leave throughout the Army.
    Mr. Manuel: In connection with the scheme and the Minister's discretionary powers, can the right hon. Gentleman say whether it applies equally to all ranks and whether the discretionary powers are allowed to go outwith the scheme on occasion when circumstances of individual cases are such as to warrant doing so?
    Mr. Head: The scheme applies to all ranks. My point is that if I were to go outside the general principles as regards relationship which are laid down for the scheme, I should have to apply those powers to other similar cases of a similar kind of relationship, which would open up a very much larger and wider field of applications.
    Mr. Driberg: Has the right hon. Gentleman yet had the opportunity of considering, as he promised to do, the possibility of widening the scheme very slightly to use any surplus air space that there might be on aircraft returning from the Middle East?
    Mr. Head: Yes, I am making inquiries into that.

    W.D. Constabulary (Pay)
    Mr. Hylton-Fosterasked the Secretary of State for War what progress has been made with the claim for increased pay made on 3rd August, 1951, on behalf of the War Department Constabulary; and if he will make a statement.
    Mr. Head: I cannot yet make a statement, but I hope that I will shortly be able to do so.

    Officers' Servants
    Mr. Simmonsasked the Secretary of State for War how many soldiers, including National Service men are employed as officers' servants or batmen.
    Mr. Head: I would refer the hon. Member to the answer which I gave on 5th February to a Question on this subject by the hon. Member for Dudley (Mr. Wigg).
    Mr. Simmons: Am I to understand that the Minister is still unable to get the figures—that was the sense of his answer—and that he is incapable of counting the number of officers, or does this mean that some officers have no batmen, some have one, and others have a retinue of batmen, including nursemaids, housemaids and gardeners? We ought to know how these men are utilised, and whether they are really teeth or tail.
    Mr. Head: The reason I cannot give the answer to the hon. Gentleman's question is that although an establishment is laid down, the actual number employed is well under that establishment, which is not filled up. If I want the exact number, I have to circulate every unit in the British Army for a special return, and I do not feel justified in taking that course.
    Mr. Simmonsasked the Secretary of State for War what extra remuneration is received by officers' servants or batmen; and to what extent their employment in this capacity is governed by Queen's Regulations
    Mr. Head: A soldier employed as an officer's batman receives an extra 2s. 6d. a week: or, where he is serving more than one officer, 15s. a month in total. This employment is sanctioned by Queen's Regulations, paragraph 1617, and the remuneration is governed by paragraph 1623. The number of batmen allowed is laid down by Army Council Instructions.
    Mr. Simmons: Will the Secretary of State tell the House whether anyone other than an officer can give orders to an officer's batman—an officer's wife, for instance—and if so, and if the batman refuses to obey the orders of someone, not holding Her Majesty's commission, is he liable to punishment under Queen's Regulations? Will the right hon. Gentleman consider the abolition of this mediaeval retainer system which is so alien to our modernised Army? Would the right hon. Gentleman consider whether it would be appropriate, for instance, for Len Hutton to be butler to Freddie Brown?.
    Mr. Head: The first part of the question is somewhat hypothetical. I think the only basis is that there should be good relations between the individuals concerned. As regards abolishing batmen, I would remind the hon. Gentleman that batmen today number something like one or two to four officers, and that they also carry out the job of mess waiters. As to abolishing them, I think the hon. Gentleman will agree with me that we have a slight mote in our own eyes regarding the use of mess waiters in this House.

  TRADE AND COMMERCE

    Broccoli Imports
    Mr. G. R. Howardasked the President of the Board of Trade who supplies the figures to enable him to compile the total amounts of broccoli imported under the quota system.
    The Parliamentary Secretary to the Board of Trade (Mr. Henry Strauss): The figures are compiled from returns sent to the Ministry of Food by importers.
    Mr. Howard: Is it not a very unsatisfactory state of affairs that the very people who are allowed to flood in these imported cauliflowers and broccoli are supplying their own figures? Does it not show that the only efficient method is a tariff?
    Mr. Strauss: My hon. Friend was informed by my right hon. Friend the President of the Board of Trade that he is considering what improvements can be made in consultation with the Minister of

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    Agriculture and the Minister of Food. The matter was also the subject of a recent Adjournment debate.

    United States Tariffs
    Mr. Shepherdasked the President of the Board of Trade whether, in view of the vital need for the United Kingdom and Western Europe to balance their trading accounts by selling more goods in the North American markets, he will call a conference of the North Atlantic Treaty Organisation nations with a view to approaching the United States of America for substantial reductions in the present high tariffs.
    Mr. H. Strauss: No, Sir.
    Mr. Shepherd: Does not my hon. and learned Friend realise that it is quite impossible for the Eastern Hemisphere to balance its account with the Western Hemisphere unless some substantial steps are taken to secure a demand for goods from this country and Western Europe in the United States?.
    Mr. Strauss: I am not differing as to the importance of the object my hon. Friend has in mind, but this method would not be, in our opinion, the most effective means of achieving that object.
    Mr. Benceasked the President of the Board of Trade what steps he is taking to offset the effects of the proposed increase in American tariffs against British products.
    Mr. H. Strauss: The applications to the United States Tariff Commission for increases in certain duties which are of particular interest to the United Kingdom are still being investigated by the Commission. No recommendation has yet been made to the United States Government. The question of taking steps to offset the effects of increases in the duties, therefore, does not at present arise.
    Mr. Nabarro: Can my hon. and learned Friend say whether his Department has yet received any reply to the recent representations to Washington in connection with the proposed increase in American tariffs on British goods?
    Mr. Strauss: Yes, there was a reply, and it has been published in the OFFICIAL REPORT.

    Woodflour Imports
    Mr. P. Robertsasked the President of the Board of Trade whether he is aware that certain firms in the British Isles who are making woodflour at the moment are having to shut down owing to the continued importation of foreign woodflour; and whether he will take steps to prevent the importation of this product so long as there are supplies undisposed of in this country, thereby helping the balance of payments problem.
    Mr. H. Strauss: I am aware that certain firms in this country which produce wood-flour have recently had to close, but I do not think that this is attributable to imports. The foreign woodflour is of a quality essential for the manufacture of certain exports, and it would not be to the public interest to restrict our imports.
    Mr. Roberts: Is my hon. and learned Friend aware that we are spending over a third of £1 million a year on importing this material, which is really waste material, that this waste material is available in this country, and that the trade would be prepared to make it suitable for such uses as he mentions? Will he look into this matter and see whether we can get some help here to the solution of our dollar problem?
    Mr. Strauss: I will certainly consider what my hon. Friend says, but these imports are at present considered absolutely necessary for certain exports we are making.
    Mr. J. E. Crowder: is flour now the same thing as sawdust?
    Mr. Strauss: The industry making the most use of these imports is the plastics industry.

    Television and Radio Sets (Hire-Purchase)
    Mr. Rankinasked the President of the Board of Trade what steps he intends to take to protect purchasers of television and radio sets who take advantage of systems of deferred payments.
    Mr. H. Strauss: I assume that what the hon. Member has in mind is protection against abuses in hire-purchase and credit sale. Protection is given by the Hire-Purchase Act, 1938, which amended the law on the subject. Similar legislation is

    1141
    in force in Scotland and Northern Ireland. We have received no representations that the law is inadequate.
    Mr. Rankinasked the President of the Board of Trade if he is aware that hire-purchase agreements for the sale of television and radio sets are now being abandoned in favour of rental agreements which can be more onerous; and what steps he is taking to protect the public interest in the matter.
    Mr. H. Strauss: I am aware that there has been an increase in the number of rental agreements for television and radio sets. If any cases brought to notice prove on investigation to involve a breach of the Hire-Purchase and Credit Sale Agreements (Control) Order, action will be taken.
    Mr. Rankin: Is the hon. and learned Gentleman aware that under these rental agreements certain firms selling, for example, a Columbia television set at £69 guineas, are accepting an initial payment of £5 instead of the 23 guineas imposed under his Order of January this year, and that the total cost under the rental agreements, spread over two and a half years, is £124 5s. 6d. as compared with the cost under the hire-purchase agreement of £76 1s.? What steps does he propose to take to protect people against these extortionate charges?
    Mr. Strauss: The question is, is there or is there not a breach of the Order? If the hon. Gentleman has evidence of any practices which appear to be a breach, I should be most willing and anxious to investigate them with a view to taking action.

    Production Methods (Study)
    Mr. Shepherdasked the President of the Board of Trade how far, after the winding up of the activities of the Anglo-American Productivity Council, the continuing body will facilitate the study of the best production methods in British factories, by those who are less well placed.
    Mr. H. Strauss: I understand that the promoters of the British Productivity Council intend to include in the Council's activities the method of help to which my hon. Friend refers.
    Mr. Shepherd: Will my hon. and learned Friend give an assurance that, if some official assistance is needed, his Department will look favourably on this, since the real problem for British industry is to raise the lowest to the highest level at present existing?
    Mr. Strauss: I agree that the work of this body is very important. Since the supplementary question which my hon. Friend has asked is quite different from the Question on the Order Paper, perhaps he will put it down.

    Factory, East Kilbride (Cancellation)
    Mr. McNeilasked the President of the Board of Trade in view of the cancellation of equipment contracts for the proposed factory at East Kilbride, if he has inquired of Messrs. John Deere and Company what were their reasons for not proceeding with this project meantime; what was their reply; and what are the future prospects of this company undertaking production in Scotland.
    Mr. H. Strauss: I understand from the John Deere Company that their decision to suspend for the present their plans for manufacturing outside North America was made in the light of their commitments in the United States and that they cannot foretell when they might wish to reverse that decision.
    Mr. McNeil: Would the hon. and learned Gentleman tell us, if he thinks this firm is in difficulties, whether that is due to the vacillation and lack of cooperation of his own Department, and if he thinks that has any part in influencing the decision of this American firm?
    Mr. Strauss: I do not admit any of the allegations implied in the right hon. Gentleman's statement. The Question asks, "What are the reasons?" All the reasons are, of course, known only to the company, but I have given in my answer to the right hon. Member the reasons as we understand them.
    Mr. McNeil: Does the hon. and learned Gentleman deny that his Department had correspondence with this firm following on the vacillations of his Department? Does he deny further that he had representations from various Scottish interests stressing the need in terms of the

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    distressed areas to give facilities to this firm, which his Department found either undesirable or incapable of giving?
    Mr. Strauss: If the suggestion is that there has been a great deal of delay in this matter, I can tell him that the delay did not take place entirely in the lifetime of the present Government.

    War Damage (Businesses)
    Brigadier Clarkeasked the President of the Board of Trade on what date he anticipates being able to pay compensation under the War Damage Act, 1943 (Part II Business Scheme), with further reference to the case of Mr. John Price which has been submitted to him separately.
    Mr. H. Strauss: The general settlement of these claims must await the fixing of a date by the Treasury under Section 85 (1) of the War Damage Act, 1943. In the meantime claims are being paid in whole or in part where the Board of Trade are satisfied either that the replacement or repair of the goods is expedient in the public interest or that it is expedient to make payment in order to avoid undue hardship. I am writing to my hon. and gallant Friend about the claim of Mr. John Price.
    Brigadier Clarke: Does my hon. and learned Friend appreciate that his answer will cause great pleasure, provided he gives the money to this gentleman?

    Unemployment, Lancashire
    Mr. Boardmanasked the President of the Board of Trade what steps, apart from Government contracts for cotton textiles, have so far been taken to reduce unemployment in Lancashire.
    Mr. H. Strauss: Unemployment in Lancashire arises mainly from the worldwide recession in demand for cotton and rayon textiles, and it is on a revival of this demand that a reduction in unemployment and short-time working must mainly depend. Meanwhile, in addition to accelerating Government contracts for textiles, Her Majesty's Government in their trade and fiscal policies have sought to help the industry to take full advantage of a recovery in demand when it comes and, where possible, to encourage new industries to come into those areas
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    which are heavily dependent on the industry and are Most affected by the recession.
    Mr. Boardman: Is the Minister aware that this type of reply to Lancashire people will, I think, be most depressing? It certainly does not offer any hope to the people of Lancashire. Will he, with the President of the Board of Trade, look at this question again, in order to avoid the heavy leakage of the most skilled and conscientious workers from the Lancashire cotton textile trade?
    Mr. H. Hynd: Is the Minister aware that he is quite wrong when he says that improvement depends on reviving the export trade? Is he aware that three-quarters of the trade is for the home market, and it is the home market which is being depressed by the Government's policy of increasing food prices and other matters?
    Mr. Sutcliffe: My hon. and learned Friend has mentioned the conditions with regard to new industries, but will he, together with his right hon. Friend the Minister of Supply, do everything in his power to attract new industries to this area and find suitable accommodation for them?
    Mr. Strauss: The hon. Member for Accrington (Mr. H. Hynd) said that I referred to the export trade. I did not. I referred to the world-wide recession in demand, which includes demand at home as well as abroad. There is a world-wide recession in the demand for textile goods.
    Mr. Stokes: Can the hon. and learned Gentleman say whether the recession in the export trade may not be quite speedily overcome by a measure of lease-lend within the Commonwealth?
    Mr. Strauss: That is another question.
    Mrs. Castle: Is the hon. and learned Gentleman aware that unemployment in Lancashire is steadily rising, and are we to take it from his reply that he and the President of the Board of Trade have now become the Micawbers of Millbank, waiting for something to turn up.
    Lieut.-Colonel Lipton: How has it come about that at the present time large quantities of American made frocks imported from the U.S.A. are being sold in London? Is that the way in which the Government's fiscal policy is helping the textile trade?
    Mr. Strauss: That is quite a different question, and I think that the hon. and gallant Member will get the answer if he consults any of his hon. Friends who are familiar with the trade.
    Mr. Sutcliffe: Can the Minister give some assurance on the point I raised?
    Mr. Strauss: The possibility of persuading industries that are free to do so to enter some of these districts was explained by my right hon. Friend in a recent Adjournment debate. Certainly the Government have the object which my hon. Friend has mentioned well in mind.

    British Films Quota
    Mr. Swinglerasked the President of the Board of Trade to state his estimates of the numbers of first-feature and supporting British films which must be produced in the current year for the fulfilment of the present quota; and of the actual productive capacity of the British film industry at present.
    Mr. H. Strauss: Since the answer is lengthy, I will, with permission, circulate
    it in the OFFICIAL REPORT.
    Mr. Swingler: Is the hon. and learned Gentleman satisfied that a sufficient number of films are being produced to fulfil the quota, and, if he is satisfied, why is he taking no action to enforce the quota, and what action is he taking to encourage the maximum production of films at the present time?
    Mr. Strauss: The question of the quota is the subject of some later Questions on the Order Paper today. Perhaps the hon. Member will study the answer to his Question which will be circulated in the OFFICIAL REPORT.
    Following is the answer:
    Films produced in the current year will generally be available for the next exhibitors' quota year beginning on 1st October, 1952, when the statutory quotas will again be 30 per cent. for first features and 25 per cent. for supporting programmes.
    The number of films required for these quotas varies in different cinemas. The lowest estimates are generally based on the weekly releases by the three major circuits which require for a 30 per cent. quota between 48 and 57 British first feature films a year (the number depend-
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    ing on the allowance for Sunday showings). The supporting programme varies considerably in its composition and the quota is calculated in terms of the length of the films shown and not of the number of films. The annual requirement for a 25 per cent. quota is roughly 250,000 feet.
    The productive capacity of the British film industry cannot be stated precisely since it depends not only on studio space but on finance and on the resources of technical and artistic talent capable of making successful films.

    Government Textile Orders (Rayon)
    Mr. Dribergasked the President of the Board of Trade if he will state the result of his consultations with the Service Departments on the possibility of including more rayon in their textile orders.
    Mr. H. Strauss: The Board of Trade maintain close touch with the Service and Supply Departments on this matter. I would refer the hon. Member to the replies on this subject which my right hon. Friends the Minister of Supply, the Secretary of State for War, the First Lord of the Admiralty and my hon. Friend, the Under-Secretary of State for Air gave to the hon. Member for Flint, East (Mrs. White) on the 19th, 20th and 21st May respectively.
    Mr. Driberg: As it is a little difficult for me to carry all these replies at once in my head, would the hon. and learned Gentleman be good enough to give a straightforward answer, and say whether any progress has been made, seriously, in this matter?
    Mr. Strauss: I have referred the hon. Member to the answers which I thought would interest him, and which gave the information for which he asked. I must ask him to study those answers.
    Mr. Edelman: Is the Minister aware that certain Government Departments do not specify rayon, as rayon was not commercially developed when these specifications were originally drafted; and, in those circumstances, will he have the specifications amended in order to include rayon particularly in connection with the National Health Service?
    Mr. Strauss: I appreciate what is in the mind of the hon. Member on this subject. He fears that certain goods are still

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    ordered on particular specifications which are no longer valid. That is the reason why the matter is now being investigated by the Departments which place the contracts. I think that the hon. Member will agree that these Departments must be satisfied that the goods concerned will satisfy their requirements.
    Mr. G. Jeger: In view of the fact that this matter seems to be receiving the attention of a number of Ministries, would it not be advantageous to have a co-ordinating overlord to deal with it?

    Sugar Substitutes (Import)
    Mr. Profumoasked the President of the Board of Trade whether he will state the cost in sterling of fondant, sweetened fats and piping jelly imported into the United Kingdom from foreign countries during the last 12 months.
    Mr. H. Strauss: Imports of fondant have been separately recorded in the trade returns only since 1st January this year. In the three months January to March, 1952, imports from foreign countries were valued at £1,091,000. The corresponding figure for the year 1951 is estimated at just over £8 million. Imports of sugar-fat mixtures from foreign countries in the 12 months April, 1951, to March, 1952 were £7,598,000. No figures are available for piping jelly.
    Mr. Profumo: The figures which are available are very large indeed. Is my hon. and learned Friend aware that the cost of 100 tons of sugar substitute in this form is in the nature of £15,600, whereas the cost of 100 tons of real sugar is only about £6,000? Will he not cut down still further on the importation of these substitutes and use the money which is thereby saved so that the Ministry of Food can buy some real sugar?
    Mr. Strauss: My hon. Friend will be glad to know that imports of all these commodities from foreign sources are now subject to stringent import licensing control.
    Mr. Profumo: I am well aware of that. I am asking my hon. and learned Friend whether he will consider cutting down still further, because we could save a great deal of money if we went out into the Empire and bought real sugar instead. Could I have an answer?
    Mr. Nicholson: What is the piping jelly carried in—bagpipes or drainpipes or what?
    Mr. Profumo: Would my hon. and learned Friend consider giving me an assurance that this matter will be reconsidered, in view of the obvious saving which could be made?
    Mr. Strauss: I will look into any question which my hon. Friend raises, but I do not propose possibly to mislead the House by adding, at the moment, to the reply which I have given.
    Mr. Nicholson: On a point of order. Technical terms are used in Questions which the House does not understand, and piping jelly is a new one to us. Could we know what it is?
    Mr. Speaker: That is not a point of order. There are always dictionaries.

    Anglo-Argentine Trade Negotiations
    Mr. Teelingasked the President of the Board of Trade whether he has any statement to make concerning the Anglo-Argentine trade negotiations.
    Mr. H. Strauss: Not yet, Sir.
    Mr. Teeling: Could my hon. Friend give any idea of when we are likely to know?
    Mr. Strauss: No. I cannot give any indication, but I think that progress is, possibly, not very likely until the Argentine Presidential inauguration is over.
    Mr. Gaitskell: Would the hon. and learned Gentleman give some indication of what is holding up the progress of the negotiations?
    Mr. Strauss: The right hon. Gentleman himself has had great experience of these negotiations. They have started, and they are being conducted by Her Majesty's Ambassador there, but I do not think we can expect very rapid progress until after the inauguration to which I referred.

    Crafts (Tax Relief)
    Mr. Powellasked the President of the Board of Trade whether he will now further extend the scope of the tax relief scheme administered since 1948 by the Crafts Centre of Great Britain, to include pottery figurines.
    Mr. Strauss: No, Sir. The number of crafts which can be covered by the Assistance to Craftsmen Scheme is inevitably limited by the amount of funds available.
    Mr. Powell: Does my hon. and learned Friend recognise that, in its nature, this scheme applies only to very few craftsmen of outstanding merit, and that the loss to the Exchequer is therefore negligible? Will he accompany me to Wolverhampton to see very able work of this sort being done by craftsmen there?
    Mr. Strauss: I thank my hon. Friend for that offer. He may like to observe that this is not necessarily the only relief which can be obtained. There may be some relief under Section 23 of the Finance Act (No. 2) of 1940.

    B.I.F. (Floor Space)
    Mr. Hoyasked the President of the Board of Trade what was the total area of floor space available to exhibitors at the British Industries Fair; and how much was taken up.
    Mr. H. Strauss: It is estimated that the total space available at this year's British Industries Fair was about 1,050,000 square feet. The total space let to exhibitors was 921,500 square feet.
    Mr. Hoy: Could the Minister tell us how this compares with the position in the previous year? Are not these figures very different from the answer given by the hon. and learned Gentleman in reply to a Question last week?
    Mr. Strauss: I will deal with the second part of the question first. My impression is that in my answer last week I said
    I should like to have notice of the question. On the main supplementary, it is true that the figures are down on last year. As the hon. Gentleman may be aware, one of the main causes of that is that certain industries make their main effort in alternate years. This is one of the chief reasons for the fluctuation.
    Mr. Hoy: Since the figures are somewhat different from those which the Minister gave us last week, and in view of the fact that his right hon. Friend also misled the House over the number of people employed within the Board of Trade, could we have an assurance that the Board of Trade will be a little more clear and specific about the answers they are giving?
    Mr. Strauss: I think the hon. Gentleman is, contrary to his usual custom, being unfair in this. I gave no figures at all in my own answer to which he referred, but in response to his right hon. Friend I said that, while I should need notice of the question, I thought the space had substantially all been taken. I gave no inaccurate figures.

    Cotton Purchase, Brazil
    Mr. Sutcliffeasked the President of the Board of Trade if he will state the position as regards the purchase of raw cotton in Brazil; and what steps he is taking to arrange for a greater export of cotton goods to that market.
    Mr. H. Strauss: In answer to the first part of the Question, it is for the Raw Cotton Commission and for those spinners who decide to buy independently to determine, on commercial grounds and within the limits imposed on their expenditure of non-dollar currency, how much cotton they take from Brazil. In answer to the second part, we will naturally do all we can to facilitate entry of our textiles into overseas markets, but Brazil prohibits almost completely the importation of cotton piece goods from all countries.
    Mr. Sutcliffe: Could my hon. and learned Friend say whether the opportunity has been taken to meet the business representatives from Brazil who are now visiting Europe? Further, is there any opportunity of going back to barter trading, which came to an end last year?
    Mr. Strauss: I should like notice of the first part of the supplementary. I do not think it is proposed to go back to barter.

    International Trading Relations
    Mr. T. Brownasked the President of the Board of Trade if he will call an international conference to ensure a greater co-operative effort to establish more satisfactory and fairer trading relations between all nations.
    Mr. H. Strauss: No, Sir. While Her Majesty's Government constantly seek to improve trading relations with other countries, my right hon. Friend does not think that the calling of such a conference at present would promote this object effectively.
    Mr. Brown: May I ask the Parliamentary Secretary whether anything has been done since we interviewed him, together with his right hon. Friend the Minister of Labour, on 13th March? It is now 27th May, and it appears that nothing has been done since that date in March to encourage trade in the Lancashire textile industry.
    Mr. Strauss: Perhaps the hon. Gentleman did not hear the answers I gave to previous Questions. I assure him that what he says is not the case.
    Mr. Brown: But the answers to previous Questions did not indicate that anything had been done.
    Lieut.-Colonel Lipton: As a primary measure, would it not be very useful to have a Commonwealth Conference in order to overcome some of the difficulties which exist between the different Commonwealth countries?
    Mr. Gaitskell: Is the hon. and learned Gentleman aware that the tendency at present for country after country to restrict imports is having a most damaging effect upon our own exports and world trade generally? Are the Government taking any steps whatever on an international basis to put this matter right?
    Mr. Strauss: There is no basis for the right hon. Gentleman's deductions from my answer. This Question proposes the calling of an international conference now for this purpose. In the view of the Government, that would not be advantageous at the moment. That, of course, is not in conflict with any object which the right hon. Gentleman may have in mind.
    Mr. Gaitskell: Then perhaps the hon. and learned Gentleman will tell us what Her Majesty's Government are doing to deal with this matter.

CIVIL AIR TRANSPORT (GOVERNMENT POLICY)
The Minister of Civil Aviation (Mr. Alan Lennox-Boyd): I rise with your permission and that of the House to make a statement on the civil air transport policy of Her Majesty's Government.
The House will realise that most of the preliminary work which enables me to do this has been done by my predecessor, my right hon. Friend the Member for Renfrew, West (Mr. Maclay).
It is the policy of Her Majesty's Government, as has been stated, to combine the activities of the Airways Corporations and the independent companies in the way which will best serve the interests of British civil aviation and of all users of their services.
We recognise that the Airways Corporations have established themselves well in the international field. We shall do all we can to encourage this. They are important earners of foreign currency. They are up against intensive competition from foreign air lines, and we are determined that the competitive strength of the Corporations to operate both first and second or tourist class services on their present established networks will not be impaired.
On the other hand, we seek to improve the position of the independent companies, which with few exceptions lack long-term security and opportunities of expansion. They cannot establish their position if they cannot plan firmly ahead. We therefore intend to give them more scope and security, while, at the same time, not increasing the cost of civil aviation to the taxpayer.
We have therefore decided that the development of new overseas scheduled services shall be open to the Corporations and independent companies alike. Applications will be made to the Air Transport Advisory Council, which will administer a procedure on licensing lines. Associate agreements for new routes will normally be granted for seven-year periods with extension to 10 years in special cases. This should give private firms sufficient security for capital outlay and expansion.
In particular, we have hopes of independent companies developing the all-freight market, which is a growing field with great possibilities. There are also opportunities for special types of service

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such as seasonal inclusive tours and services at cheap fares not directly competitive with the Corporations to places within the Colonial Empire.
Charter operations are in the main the domain of the independent operator. The Corporations will keep the right to engage in charter work in those cases where they have special facilities. They will not, however, maintain aircraft specifically for charter work.
United Kingdom internal services present a special problem. Their cost to the taxpayer is considerable. We are still examining the best way of dealing with this. At the same time we are considering how best to meet the needs of Scotland. The Channel Islands and the Isle of Man also present their special problems. In the meantime, British European Airways will continue to operate their existing network. Internal services additional to those of British European Airways will be made available to private operators for long-term periods.
The Air Transport Advisory Council will be ready to receive during this summer applications not involving subsidy for these and for new overseas services in time for the policy to take effect in 1953. The companies will continue to operate scheduled services as associates of the Corporations, but under a modified form of agreement. Terms and conditions of service must be not less favourable than those reached through the machinery of the National Joint Council for Civil Air Transport.
Under this policy, which has been framed after consultation with the many interests affected, the public and private sectors of the industry can both make their best contributions to the development of British civil aviation.
Mr. Lindgren: May I ask the right hon. Gentleman three questions? Is it not a fact that the granting of additional powers to the Air Transport Advisory Council virtually means that we are taking away from the Minister and from Parliament the control of the development of civil aviation in this country, and is that in accordance with the generally conceived policy of the Government?
The second point concerns B.O.A.C. and B.E.A. Is it not a fact that they are now coming "out of the red" and
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are making a profit? As they are at present engaged in the development of new and revolutionary types of aircraft is this the time to create uncertainty by bringing confusion into the position through interpolating the charter companies, who will offer the Corporations competition?
The third point concerns the availability of aircraft. While the right hon. Gentleman extended the usual courtesy of providing me, beforehand, with a copy of his statement, I think he will agree that it was difficult to take it in in the short time available. Is it not a fact that the success or failure of the new policy of the Government will depend upon the availability of aircraft to charter companies? Do I understand that the availability of aircraft to the charter companies has not been discussed and is not involved in this policy?
Mr. Lennox-Boyd: I shall try briefly to answer those three points. If I answered them at length it would develop into a debate.
In the first case, this in no sense abandons the responsibility of Her Majesty's Government for the development of civil aviation as a whole, but it does appear to Her Majesty's Government to be best that the allocation of new services to those best qualified to run them, whether public or private enterprise, should be left to an independent authority. That is our intention so to do.
The second question asked by the hon. Gentleman referred to the question of the profit or loss of the existing Corporations. We are as anxious as anybody else to see that they make a profit, and the fact that B.O.A.C. is now doing so is a matter of the utmost satisfaction. My statement is designed so as to express the thanks of the Government and the people to the Corporations. B.E.A. have made very heavy losses on the internal services, and I know that many people associated with them would be glad to see whether these internal services could not be run on profitable lines.
On the third point, the availability of aircraft is of the utmost importance, and one of the reasons why we are now giving private companies long-term security is to enable them to raise the capital to get the aircraft required.
Mr. McNeil: Will the right hon. Gentleman assure us that in these discussions the present level of the services to the Scottish Islands and the less populous parts of Scotland will not be lessened in any effort to create more profitable operations than exist at present? Should not the present level of service be maintained?
Mr. Lennox-Boyd: I have been at pains to make it quite clear that no decision is announced today to the House about the internal B.E.A. services, but I should like the right hon. Gentleman and other Scotsmen to know that future Scottish internal services are of the utmost concern to us, and that no change will be made which will not give Scotland the same or better services than those which she has today.
Mr. Perkins: Will my right hon. Friend enter into discussions with the appropriate trade unions to ensure that any pilots transferred from either B.O.A.C. or B.E.A. will take with them their pension rights?
Mr. Lennox-Boyd: I will certainly enter into discussions. I have been at pains, in the short time I have been Minister, to consult trade unions on the National Joint Council on the proposed changes. I will at every stage endeavour to carry trade unions along with any decision the Government may make.
Mr. Woodburn: The right hon. Gentleman says that these services will be run without subsidy. Does that mean that they will not have the Post Office contracts? Have private enterprisers taken up the offers already made by the Corporation to give them services and have they operated the services already given to them?
Mr. Lennox-Boyd: I have been most careful, and I specifically did not refer to the future internal services of the B.E.A. It may well be that nobody, whether by public or private organisation, can operate certain Scottish air services without subsidy. That question must be left open for future discussion. I can assure the right hon. Gentleman that the future of Scotland and the need for the best service is very present to my mind. In regard to the other services, I am examining as a matter of
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urgency the question of Post Office contracts. From early experience in these matters I realise the importance that they have in this field.
Lieut.-Colonel Elliot: When does my right hon. Friend expect to be able to make a statement on the result of the examination now going on as to the internal services, and particularly the Scottish services?
Mr. Lennox-Boyd: I was very anxious to make a statement on the very limited field in which we were able to make a decision, in order that private operators and others should have confidence as to the future. I can assure my right hon. and gallant Friend that we shall do all we can to come to early decisions in the other field, the importance of which we fully recognise. Meanwhile, B.E.A.'s internal network will continue undisturbed.
Lieut.-Colonel Elliot: Would it be possible to make a statement before August?
Mr. Lennox-Boyd: I must, I think, have some reserve in that matter.
Mr. Grimond: When the right hon. Gentleman is considering the future of the Scottish services will he bear in mind that the crying need is for new types of aircraft, particularly helicopters? Secondly, can he say whether the future of his own Ministry is under consideration and, in particular, its relationship to B.E.A., both as regards aerodromes in this country and the development of new aircraft?
Mr. Lennox-Boyd: In regard to the second point, I am endeavouring as best I can to discharge the dual duty imposed upon me. In regard to the future of the helicopter service, it is our intention that in any contract entered into through the proposed new licensing agency the helicopter service shall not be included in that contract, so that there will be full freedom to develop helicopter services whether by national or private enterprise, as seems best in the light of modern knowledge and of the needs of the country.
Air Commodore Harvey: When my right hon. Friend arrived at this decision, did he take into account the subsidiary companies of the Corporations operating

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in the Commonwealth, which are consistently losing money? Would it not be better for the Corporations to concentrate on their main trunk routes against foreign competition and hand over those companies to other operators? Second, is my right hon. Friend aware that unless high priority is given to manufacture in civil aviation no aircraft will be available during the bulk of the seven years which he has mentioned?
Mr. Lennox-Boyd: I know the importance of these subsidiary companies in the Colonies, but other Governments are, of course, involved, apart from Her Majesty's Government in the United Kingdom. I know that my hon. and gallant Friend would not expect me to speak at this moment on behalf of the considerable number of Colonial Governments who are interested, but I assure him I shall not lose sight of the importance of what he has said. In regard to the need to give priority to civil aviation needs, that is part and parcel of the defence needs of the country as a whole. I assure my hon. and gallant Friend that I am ever conscious, and will be so, of the need for seeing that civil aviation interests are not subordinated unnecessarily to the wider interests of the nation as a whole.
Mr. Herbert Morrison: Will the right hon. Gentleman tell the House why, when British civil aviation services, which are public services, to the surprise of a good many of us, are showing real signs of paying their way, the Government have charged in for the purpose of messing up the whole situation and putting a spanner into the works almost with a view to preventing the public services being a success? I say nothing about the effect upon the employees of the undertakings, in which my hon. Friend the Member for Reading, South (Mr. Mikardo) has a direct interest of some importance.
Everybody expected in earlier years that the Air Corporations would be subsidy-carrying industries for a good time to come. When they are showing signs of paying their way, why do the Government want to come charging in with a view to jeopardising that situation, out of purely theoretical considerations?
Secondly—[HON. MEMBERS: "Speech."] You will have some more speeches about this matter before you are done. I would ask the Leader of the House whether,
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in view of this vital and important change of policy following upon the other transport changes of policy, I may presume that the Government will provide facilities for the House to debate this matter?
Mr. Lennox-Boyd: Perhaps I may answer, within the limited field which is my responsibility. The right hon. Gentleman referred to the Government barging in. If he takes the trouble and does me the credit of reading what I have said, he will see that there is no interference whatever in the existing network of the Corporations. It is our belief that in this field, as in the field of road transport, there is a very good opening for private enterprise to open up new opportunities for public service. [Interruption.] Perhaps the right hon. Gentleman, having asked me a question, will do me the courtesy of listening to my answer. I would remind him, when his hon. Friend talks about the Corporations being "out of the red" and making a profit, to consider that, despite the zeal of B.E.A. during the past year, their losses on the internal services to which I have referred more than exceeded their profits anywhere else. These amounted to a very considerable handicap, which many of B.E.A.'s best friends would like to see private enterprise try to solve.
Mr. Morrison: Is it because the internal services are financially difficult that the right hon. Gentleman is much less forthcoming about trying to get private enterprise there than he is with regard to the other field?
Mr. Lennox-Boyd: I will certainly answer that question. We are creating machinery, and we have every hope that there will be opportunities of service in this field. Meanwhile, we are anxious that in the new and expanding freight market and on other routes outside the existing network the race will go to the people who can give the best service to the public.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. There is no Question before the House. There was a question asked, and I do not know whether it is desired to give an answer to it.
Mr. Morrison: There is the point about a debate which the Leader of the House ought to answer, if I may say so.
Mr. Profumo: Why should he answer?
Mr. Morrison: Does the hon. Gentleman think this is the House of Commons or the Hitler Reichstag? I asked for a reply about a debate, Mr. Speaker. Also, I should have thought that my hon. Friend, who represents the trade unions in this industry, should be permitted to put a question.
The Lord Privy Seal (Mr. Harry Crookshank): It can be considered through the usual channels before tomorrow, when the right hon. Gentleman can repeat his question when we discuss the business for when we return.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. There is no Question before the House and judging by the interchange of questions which has taken place, there is material here for a debate. It cannot take place now.

PUBLIC SERVICES (EQUAL PAY)
The following Question stood upon the Order Paper:
60. Mrs. CASTLE 60. Mrs. CASTLE,—To ask the Chancellor of the Exchequer when he hopes to announce the date on which a beginning will be made with the introduction of equal pay in the public services.
Mrs. Castle: On a point of order. To give the Government an opportunity to make a statement which the House was told 10 days ago they were prepared to make, would you, Sir, allow the Chancellor to answer Question No. 60, in order that he can announce the early and definite date on which equal pay is to be introduced?
Mr. Speaker: That is not a matter for me.

ORDERS OF THE DAY

  FINANCE BILL
  Considered in Committee [Progress, 26th May].
  [Colonel Sir CHARLES MACANDREW in the Chair]

Clause 30.—(INCREASE, IN CERTAIN CASES, OF DEDUCTIONS ALLOWABLE FOR DIRECTORS' REMUNERATION.)
3.51 p.m.
Mr. Roy Jenkins: I beg to move, in page 33, line 38, to leave out "seven," and to insert "six."
For the convenience of the Committee perhaps I should explain the meaning of this Clause as it stands and what this Amendment and the three earlier Amendments on the Order Paper, which have not been called, propose to do. Clause 30 relates to the amount which a director-controlled company may deduct from its profits for the purpose of calculating the liability of that company to Profits Tax, and it seeks to increase considerably the deduction which may be made in the case of such companies.
If this Clause were to go through un-amended it would mean that, in future, director-controlled companies would be able to deduct from their profits for these purposes either 15 per cent. of their total profits or an amount varying according to the number of working directors up to four. It would be £4,000 for one or two working directors, £5,500 for three working directors and £7,000 for four or more working directors. There is an overriding provision that in no case shall the amount exceed a total of £15,000.
This Amendment, and our unselected three previous Amendments on the Order Paper would, between them, have the effect of reducing the amounts which may be deducted by such a company according to the number of working directors concerned. For a company with two or more working directors we would put the sum down from £4,000 to £3,000; for a company with three or more working directors, we would put the sum down from £5,500 to £4,500; for a company with four or more, we would put it down from £7,000 to £6,000.
It seems to us that the concessions granted, which will involve a considerable

1161
expense to the Revenue, are rather out of the way, particularly so because a substantial concession in this direction was granted in the Finance Bill last year. Before then the position was that a company could only deduct in this way a total of £2,500 no matter how many working directors it had. Last year it was put up to a maximum of £4,500 for three or more directors. This year the proposal is to extend that further to £7,000 for four or more directors. This seems to be a steep rate of increase.
I believe that the £2,500 was first fixed in 1947 and not changed until 1951. No doubt, owing to certain changes in the value of money, and one or two other considerations, there was a case last year for an extension of the concession. However, I should not have thought that there was a case for two successive extensions which would increase the maximum deduction from £2,500 to £7,000. Obviously, no conceivable change in the cost of living bears any relationship to the extent of the concession being granted today.
We would like to know the cost of the Clause. Judging from some figures given by my right hon. Friend the Member for Battersea, North (Mr. Jay), when he was replying to the debate last year, and when he said that the concession last year would cost £4 million, the cost this year may be more like £5 million. No doubt we shall hear from the Minister of State for Economic Affairs—and we are very pleased to see him on the opposite bench. From what the Chancellor of the Exchequer said, clearly this points to a great easing of the European financial situation, since he is able to tear himself away temporarily from those duties and come along here. We welcome the right hon. Gentleman and look forward to his intervention in this debate. I have no doubt that one of the first things he will do will be to tell us the cost of this proposal.
The fact that some hon. Friends and myself have put down a new Clause to increase the exemption limit to Profits Tax from £2,000 to £5,000 might seem to be in contradiction of this Amendment. I do not think that that is so. It is the case that in some small companies the directors' remuneration is not drawn out but is ploughed back into the business, thus escaping Profits Tax. If such a concession is to be granted to enable small companies to build themselves up free of Pro-
1162
fits Tax, we think it is better that it should be done in a straightforward way, as proposed in our new Clause, and not in this rather roundabout and haphazard way, depending, inconsequentially, on how many working proprietors there may happen to be.
For those reasons we feel unhappy about the Clause and we say that our Amendment, which would still give substantial concessions but would take us about half way back to the position as it was after last year's Finance Bill, is reasonable. It would prevent a concession granted recently from being extended too far. It would enable the Government to accept our new Clause, and thus give an advantage to those companies in a more straightforward and obvious way than is being done at present.
The Minister of State for Economic Affairs (Sir Arthur Salter): Perhaps I may disregard some of the remarks of the hon. Member for Stechford (Mr. Roy Jenkins) that are not very relevant to the intrinsic merits of this Amendment. The hon. Member has given a completely accurate account of the effect of the Clause as it stands and of the Amendments which were on the Order Paper but which have not been called. I think it will be for the convenience of everyone if I discuss the plan as a whole rather than the limited effect of this particular Amendment.
I think the hon. Member said £4,000 for three directors instead of £4,500, but with that exception his account was entirely correct.
Mr. Jenkins: I did say £4,500.
Sir A. Salter: The hon. Gentleman asked me first what would be the cost of the proposal in our Clause. It would be about £2 million in a full year. This is a limited question; it is not a question of principle.
4.0 p.m.
The hon. Member, like us, agrees that there should be some increase in the deductable allowances. He thinks that these increases should stop at a maximum of £6,000. We think that the maximum could reasonably be £7,000. We like our plan better than his, because, under our plan, after the £2,500 for the first director, which is common both to him and to us, we would go up by £1,500 for each additional director up to four.

1163
He, on the other hand, would, we think illogically and unjustly, reduce the allowance for the second director from the present sum of £3,500 to £3,000, so that while the first director got £2,500 the second would get only £500. Then it is suggested that we should revert to £1,500 for the third and the fourth. We think that, in its graduation, our plan is much more reasonable than his.
Is the total sum unreasonable? The Millard Tucker Committee said that while they recognised that the exact amount must be a matter of policy and of the cost which the Exchequer thought it reasonable to incur, they saw no reason, in principle, why each director should not get £2,500 a year up to a maximum of £15,000. That would have meant £15,000 as a maximum compared with our maximum of £7,000 and the hon. Member's maximum of £6,000.
Partly because we think that our gradation is more reasonable as against the uneven jumps of the hon. Member's, and partly because, in view of the Tucker Committee's recommendation, we think that our total maximum is more reasonable, we cannot accept this Amendment. However, what we propose is much nearer to the hon. Member's suggestion than what the Tucker Committee proposed, and for all these reasons we hope that the Committee will accept the Clause in its present form.
Mr. Hugh Gaitskell: I am afraid that I regard the right hon. Gentleman's reply as extremely disappointing. This is not a case of making a long overdue change or anything of that kind. Last year we increased substantially the amounts which might be paid to directors of this type, compared with what they had been before. We settled on the figures after long consideration. As far as I know, there has been no complaint from director-controlled companies that they were inadequate
The purpose of imposing limits is to prevent the evasion of Profits Tax. That must remain a matter for consideration by the Government. The almost casual way in which the Government throw away another £2 million here contrasts very oddly with the extremely niggardly attitude they adopt on questions connected with the social services. It is
1164
perhaps typical of them that, without any apparent argument at all, and merely because the Tucker Committee happens to propose something rather higher, they say that they must do something more for these people.
The Government have brought forward no evidence in support of this view. For my part, I should be disposed to advise my hon. Friend to press this matter to a Division.
Sir A. Salter: Might I ask the right hon. Gentleman for a clarification? Does he really mean, as I gathered from what was said and also from a study of the number of Amendments put down as part of the general plan, that while the first director should get £2,500 the second should get only £500, and that the amount in the case of the next two directors should be £3,000? Is that the proposal? On the question of the reference to the Tucker Committee, I would point out that their proposals would have meant £5 million as against our £2 million.
Mr. Gaitskell: Our position has been made clear by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and by the Amendments on the Order Paper. We could easily have discussed the Question, "That the Clause stand part of the Bill," and opposed the increase altogether. We thought that there might be some argument which we did not know about which justified the Government in putting up these sums substantially. In the circumstances, we decided on what might be called an half way house. In view of the right hon. Gentleman's statement, if we had known that there was absolutely nothing behind this change at all, we should probably have been inclined to recommend the Committee to stick to our original proposition.
I am aware of the proposals of the Tucker Committee, but I cannot agree that the right hon. Gentleman should ride off on the basis that the Government have not done quite so badly as the Tucker Committee in that they are spending only £2 million whereas the Tucker Committee suggested £5 million.
Sir A. Salter: Does the right hon. Gentleman seriously propose that the scale should be £2,500, £3,000, which is a jump of only £500, £4,500 and £6,000?
Mr. Austen Albu: The right hon. Gentleman appears to have overlooked the fact that all these Clauses are really Clauses to prevent tax evasion and that the limits fixed are those considered reasonable for that purpose. My view is that especially under subsection (2, c), where the total amount allowed to directors is put up to £7,000 and the number of directors increased to four or more, that seems to take the exemption out of the field of the type of small company which has been mainly considered in this kind of Clause.
I should have thought that we had taken the matter much beyond the stage for which the Clauses were originally designed, which was to allow for the pro-
tection of small companies with working directors. I am not sure how easy the Commissioners find it to define directors who are working in a managerial or technical capacity and devoting substantially the whole of their time to the service of the company. Once one has extended this provision beyond the limit of three directors, and extended the sum to a total of £7,000, one begins to leave the field of genuine exemption and to enter the field where there is a serious danger of tax evasion.
Question put, "That 'seven,' stand part of the Clause."
The Committee divided: Ayes, 239; Noes, 204.

Division No. 147.]

AYES

[4.7 p.m.

Aitken, W. T.

Davidson, Viscountess

Hudson, Sir Austin (Lewisham, N.)

Allan, R. A. (Paddington, S.)

De la Bère, R.

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

Alport, C. J. M.

Deedes, W. F.

Hulbert, Wing Cmdr. N. J.

Amory, Heathcoat (Tiverton)

Digby, S. Wingfield

Hurd, A. R.

Arbuthnot, John

Dodds-Parker, A. D.

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

Ashton, H. (Chelmsford)

Donaldson, Cmdr. C. E. McA

Hylton-Foster, H. B. H.

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

Donner, P. W.

Jenkins, F. C. D. (Dulwich)

Astor, Hon. J. J. (Plymouth, Sutton)

Doughty, C. J. A.

Jennings, R.

Baldock, Lt.-Cmdr. J. M.

Douglas-Hamilton, Lord Malcolm

Johnson, Eric (Blackley)

Baldwin, A. E.

Drayson, G. B.

Johnson, Howard (Kemptown)

Banks, Col. C.

Drewe, G.

Jones, A. (Hall Green)

Barber, A. P. L.

Dugdale, Maj. Rt. Hn. Sir T. (Richmond)

Joynson-Hicks, Hon. L. W.

Barlow, Sir John

Duncan, Capt. J. A. L.

Kaberry, D

Baxter, A. B.

Duthie, W. S.

Keeling, Sir Edward

Beach, Maj. Hicks

Eccles, Rt. Hon. D. M.

Lambert, Hon. G.

Bell, Ronald (Bucks, S.)

Elliot, Rt. Hon. W. E.

Lambton, Viscount

Bennett, F. M. (Reading, N.)

Fell, A.

Lancaster, Col. C. G

Bennett, Dr. Reginald (Gosport)

Finlay, Graeme

Langford-Holt, J. A

Bevins, J. R. (Toxteth)

Fleetwood-Hesketh, R F

Law, Rt. Hon. Rt. K.

Birch, Nigel

Fletcher-Cooke, C.

Legge-Bourke, Maj. E. A. H

Bishop, F. P.

Foot, M. M.

Legh, P. R. (Petersfield)

Black, C. W

Fraser, Hon. Hugh (Stone)

Lindsay, Martin

Bossom, A. C

Fraser, Sir Ian (Morecambe & Lonsdale)

Linstead, H. N.

Bowen, E. R.

Galbraith, Cmdr. T. D. (Pollok)

Lloyd, Maj. Guy (Renfrew, E.)

Boyd-Carpenter, J. A

Gammons, L. D.

Lloyd, Rt. Hon. Selwyn (Wirral)

Boyle, Sir Edward

Garner-Evans, E. H.

Longden, Gilbert (Herts, S.W.)

Brains, B. R.

George, Rt. Hon. Maj. G. Lloyd

Lucas, P. B. (Brentford)

Braithwaite, Ll.-Cdr. G. (Bristol, N.W.)

Glyn, Sir Ralph

Lucas-Tooth, Sir Hugh

Bromley-Davenport, Lt.-Col. W. H.

Godber, J. B.

Mackeson, Brig. H. R.

Brooman-White, F. C.

Gough, C. F. H.

McKibbin, A. J.

Buchan-Hepburn, Rt. Hon. P. G. T

Gower, H. R.

McKie, J. H. (Galloway)

Bullard, D. G.

Graham, Sir Fergus

Maclean, Fitzroy

Bullock, Capt. M

Gridley, Sir Arnold

Macmillan, Rt. Hon. Harold (Bromley)

Bullus, Wing Commander E. E

Grimond, J.

Macpherson, Maj. Niall (Dumfries)

Burden, F. F. A

Grimston, Hon. John (St. Albans)

Maitland, Comdr. J. F. W. (Horncastle)

Butcher, H. W.

Harden, J. R. E.

Maitland, Patrick (Lanark)

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

Hare, Hon. J. H.

Manningham-Buller, Sir R. E.

Carr, Robert (Mitcham)

Harris, Frederic (Croydon, N.)

Markham, Major S. F.

Carson, Hon. E.

Harrison, Col. J. H. (Eye)

Marples, A. E.

Cary, Sir Robert

Harvey, Air Cdre A. V. (Macclesfield)

Marshall, Douglas (Bodmin)

Channon, H.

Harvey, Ian (Harrow, E.)

Maude, Angus

Churchill, Rt. Hon. W. S.

Head, Rt. Hon. A. H.

Maudling, R.

Clarke, Col. Ralph (East Grinstead)

Heath, Edward

Maydon, Lt.-Comdr S. L C

Clarke, Brig. Terence (Portsmouth, W.)

Higgs, J. M. C.

Medlicott, Brig. F.

Cole, Norman

Hill, Dr. Charles (Luton)

Mellor, Sir John

Colegate, W. A.

Hill, Mrs. E. (Wythenshawe)

Molson, A. H. E.

Conant, Maj. R. J E.

Hinchingbrooke Viscount

Monckton, Rt. Hon. Sir Walter

Cooper-Key, E. M

Holland-Martin, C J

Nabarro, G. D. N.

Cranborne, Viscount

Hollis, M. C

Nicholls, Harmar

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

Holmes, Sir Stanley (Harwich)

Nicholson, Godfrey (Farnham)

Crosthwaite-Eyre, Col. O. E.

Holt, A. F.

Nicolson, Nigel (Bournemouth, E.)

Crouch, R. F.

Hopkinson, Henry

Noble, Cmdr. A. H. P

Crowder, John E. (Finchley)

Hornsby-Smith, Miss M. P.

Nugent, G. R H.

Crowder, Petra (Ruislip—Northwood)

Horobin, I M

Oakshott, H. D.

Cuthbert, W. N.

Horsbrugh, Rt. Hon. Florence

Odey, G. W.

Darling, Sir William (Edinburgh, S.)

Howard, Greville (St. Ives)

O'Neill, RI. Hon. Sir H. (Antrim, N.)

Ormsby-Gore, Hon. W. D.

Ropner, Col. Sir Leonard

Thornton-Kemsley, Col. C. N

Orr, Capt. L. P. S.

Russell, R. S.

Tilney, John

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

Ryder, Capt. R. E. D.

Turner, H. F. L

Osborne, C.

Salter, Rt. Hon. Sir Arthur

Turton, R. H.

Partridge, E.

Savory, Prot. Sir Douglas

Vane, W. M. F.

Peake, Rt. Hon. O.

Schofield, Lt.-Col. W. (Rochdale)

Vosper, D. F.

Perkins, W. R. D

Scott, R. Donald

Wakefield, Edward (Derbyshire, W.)

Peto, Brig. C. H. M.

Smyth, Brig. J. G. (Norwood)

Wakefield, Sir Wavell (Marylebone)

Peyton, J. W. W.

Snadden, W. McN.

Ward, Miss I. (Tynemouth)

Pickthom, K. W. M.

Soames, Capt. C.

Watkinson, H. A.

Pilkington, Capt. R. A

Spearman, A. C. M.

Webbe, Sir H. (London & Westminster)

Pitman, I. J.

Spens, Sir Patrick (Kensington, S.)

Wellwood, W.

Powell, J. Enoch

Stanley, Capt. Hon. Richard

White, Baker (Canterbury)

Price, Henry (Lewisham, W.)

Stevens, G. P.

Williams, Rt. Hon. Charles (Torquay)

Prior-Palmer, Brig. O. L.

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

Williams, Gerald (Tonbridge)

Profumo, J. D.

Stoddart-Scott, Col, M

Williams, Sir Herbert (Croydon, E.)

Raikes, H. V.

Storey, S.

Williams, R. Dudley (Exeter)

Rayner, Brig. R.

Strauss, Henry (Norwich, S.)

Wills, G.

Redmayne, E.

Stuart, Rt. Hon. James (Moray)

Wilson, Geoffrey (Truro)

Remnant, Hon. P.

Sutcliffe, H.

Wood, Hon. R.

Roberts, Peter (Heeley)

Taylor, Charles (Eastbourne)

York, C.

Robertson, Sir David

Taylor, William (Bradford, N.)

Robinson, Roland (Blackpool, S.)

Teeling, W.

TELLERS FOR THE NOES:

Rodgers, John (Sevenoaks)

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

Mr. Studholme and

Roper, Sir Harold

Thorneycrott, Rt. Hn. Peter (Monmouth)

Mr. T. G. D. Galbraith.

NOES

Acland, Sir Richard

Evans, Stanley (Wednesbury)

McGhee, H. G.

Albu, A. H

Ewart, R.

McInnes, J.

Allen, Arthur (Bosworth)

Field, W. J.

McKay, John (Wallsend)

Anderson, Alexander (Motherwell)

Fienburgh, W.

McLeavy, F.

Anderson, Frank (Whitehaven)

Finch, H. J.

MacMillan, M. K. (Western Isles)

Attlee, Rt. Hon. C. R.

Fletcher, Eric (Islington, E.)

MacPherson, Malcolm (Stirling)

Awbery, S S.

Follick, M.

Mainwaring, W. H.

Baird, J.

Forman, J. C.

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

Balfour, A.

Fraser, Thomas (Hamilton)

Mann, Mrs. Jean

Barnes, Rt Hon. A. J.

Freeman, Peter (Newport)

Manuel, A. C.

Bartley, P.

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

Marquand, Rt. Hon. H A

Bence, C. R.

Glanville, James

Mellish, R. J.

Berm, Wedgwood

Grenfell, Rt. Hon. D. R.

Mikardo, Ian

Benson, G.

Grey, C. F.

Mitchison, G. R

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

Griffiths, David (Rather Valley)

Monslow, W.

Blackburn, F.

Griffiths, Rt. Hon. James (Lianelly)

Moody, A. S.

Blenkinsop, A.

Hall, John (Gateshead, W.)

Morley, R.

Blyton, W. R.

Hannan, W.

Morris, Percy (Swansea, W.)

Boardman, H.

Hardy, E. A.

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

Bowles, F. G.

Hargreaves, A.

Moyle, A.

Braddock, Mrs. Elizabeth

Harrison, J. (Nottingham, E.)

Mulley, F. W.

Brockway, A. F.

Hastings, S.

Murray, J. D.

Brook, Dryden (Halifax)

Hayman, F. H.

Noel-Baker, Rt. Hon P. J

Broughton, Dr. A. D. D.

Henderson, Rt. Hon.A (Rowley Regis)

Orbach, M

Brown, Thomas (Ince)

Herbison, Miss M.

Oswald, T.

Burke, W. A.

Hewitson, Capt. M

Padley, W. E.

Butler, Herbert (Hackney, S.)

Holman, P.

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

Callaghan, L. J.

Holmes, Horace (Hemsworth)

Pannell, Charles

Carmichael, J.

Houghton, Douglas

Pargiter, G. A.

Castle, Mrs. B. A.

Hoy, J. H.

Parker, J.

Champion, A. J.

Hudson, James (Ealing, N.)

Paton, J.

Chapman, W. D

Hughes, Emrys (S. Ayrshire)

Pearson, A.

Chetwynd, G. R.

Hynd, H. (Accrington)

Plummer, Sir Leslie

Clunie, J.

Irvine, A. J (Edge Hill)

Porter, G.

Cocks, F. S.

Irving, W. J. (Wood Green)

Price, Joseph T. (Westhoughton)

Coldrick, W.

Isaacs, Rt. Hon. G. A.

Price, Philips (Gloucestershire, W.)

Collick, P. H.

Janner, B.

Proctor, W. T.

Craddock, George (Bradford, S.)

Jay, Rt. Hon. D. P. T.

Pryde, D. J.

Crosland, C. A. R.

Jeger, George (Goole)

Reeves, J.

Cullen, Mrs. A.

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

Reid, Thomas (Swindon)

Daines, P.

Jenkins, R. H. (Steehford)

Reid, William (Camlachie)

Dalton, Rt. Hon. H.

Johnson, James (Rugby)

Rhodes, H.

Davies, A. Edward (Stoke, N.)

Jones, David (Hartlepool)

Richards, R.

Davies, Ernest (Enfield, E.)

Jones, Jack (Rotherham)

Rogers, George (Kensington, N.)

Davies, Harold (Leek)

Jones, T. W. (Merioneth)

Schofield, S. (Barnsley)

Davies, Stephen (Merthyr)

Keenan, W

Shinwell, Rt. Hon E.

Deer, G.

Kenyon, C

Short, E. W.

Dodds, N. N.

Key, Rt. Hon. C. W.

Shurmer, P. L. E

Donnelly, D. L.

Kinley, J.

Silverman, Julius (Erdington)

Driberg, T. E. N.

Lee, Frederick (Newton)

Silverman, Sydney (Nelson)

Edelman, M.

Lever, Harold (Cheetham)

Simmons, C. J. (Briertey Hill)

Edwards, John (Brighouse)

Lever, Leslie (Ardwick)

Slater, J.

Edwards, Rt. Hon. Nest (Caerphilly)

Lewis, Arthur

Smith, Norman (Nottingham, S.)

Edwards, W. J. (Stepney)

Lindgren, G. S.c

Snow, J. W

Evans, Albert (Islington, S.W.)

Lipton, Lt.-Col. M

Sorensen, R. W.

Evans, Edward (Lowestoft)

Logan, D. G.

Sparks, J. A.

1168

1169

Steele, T.

Timmons, J.

Willey, Octavius (Cleveland)

Stewart, Michael (Fulham, E.)

Tomney, F.

Williams, David (Neath)

Stokes, Rt. Hon. R. R.

Turner-Samuels, M.

Williams, Rt. Hon. Thomas (Don V'll'y)

Strachey, Rt. Hon. J.

Wallace, H. W.

Williams, W. F. (Droylsden)

Strauss, Rt. Hon. George (Vauxhall)

Watkins, T. E.

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

Summerskill, Rt. Hon. E.

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

Winterbottom, tan (Nottingham, C.)

Sylvester, G. O.

Wells, Percy (Faversham)

Winterbottom, Richard (Brightside)

Taylor, Bernard (Mansfield)

West, D. G

Woodburn, Rt. Hon. A.

Taylor, John (West Lothian)

Wheatley, Rt. Hon. John

Wyatt, W. L.

Taylor, Rt. Hon. Robert (Morpeth)

White, Mrs. Eirene (E. Flint)

Yates, V. F.

Thomas, David (Aberdare)

White, Henry (Derbyshire, N. E.)

Thorneycroft, Harry (Clayton)

Whiteley, Rt. Hon. W.

TELLERS FOR THE NOES:

Thurtle, Ernest

Wilkins, W. A.

Mr. Royle and Mr. Kenneth Robinson.

Willey, Frederick (Sunderland, N.)

Question put, and agreed to.

Clause ordered to stand part of the Bill.
Clause 58 ordered to stand part of the Bill.

Clause 59.—(AMENDMENT, AND EXTENSION TO EXCESS PROFITS LEVY, OF PROVISIONS AS TO AVOIDANCE OF LIABILITY TO TAX.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Eric Fletcher: I am a little troubled about this Clause. As I understand, its whole object is to make applicable to the Excess Profits Levy the provisions as to the avoidance of liability to tax which are enshrined in Section 32 of the Finance Act, 1951. I hope that the Financial Secretary will correct me if I am wrong. Section 32 contains provisions relating to transactions designed to avoid liability to Purchase Tax.
When the Committee considered Section 32 of the Finance Act, 1951, last year we had a long debate on that Section. I supported it, and I think I am right in saying it was supported by all my hon. Friends. Had it not been for certain observations from hon. Members opposite I should have thought it right for the Committee to have agreed this Clause at this stage, but in view of what was said about Section 32 last year, which we are now being asked to extend from the Profits Tax to the Excess Profits Levy, I wish to ask certain questions of the Financial Secretary to the Treasury. It is no use the Financial Secretary to the Treasury nodding his head. I want to ask him one or two questions.
The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): I am sorry. I was trying to indicate to the hon. Gentleman that my hon. and learned Friend the Solicitor-General was dealing with the Amendment.
Mr. Fletcher: I wish to ask the hon. and learned Gentleman some questions as well. Section 32 was one of the most contentious Clauses in the whole of the hotly contested Finance Act last year. Numerous speeches were made on it by the present Financial Secretary to the Treasury, the present Solicitor-General, the Minister of Works and various other Members of Her Majesty's present Government. The Committee is entitled to know what their real views are.
The Committee ought to be reminded of the words used by right hon. and hon. and learned Gentlemen opposite about Section 32. The Section was designed to prevent tax evasion in relation to Profits Tax. It is now proposed to extend it to tax evasion in relation to Excess Profits Levy. At that time the Financial Secretary said:
"That is constitutionally a monstrous thing to do."
Does he still think Section 32 a monstrous thing? Is it a monstrous thing in relation to Profits Tax but not a monstrous thing in relation to the Excess Profits Levy?
The Financial Secretary said that nobody wanted to assist tax evasion, and went on:
"… 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." —[OFFICIAL REPORT, 12th June, 1951; Vol. 488, c. 1924.]
Are we to assume that the Financial Secretary is now a Fascist or a Communist?
Sir Herbert Williams: Is the hon. Gentleman talking about the illegality of tax evasion or of something which is different—tax avoidance?
Mr. Fletcher: I am trying to understand the Clause which the Committee is now asked to pass and it relates to tax evasion. A year ago the Financial Secretary and his hon. Friends said that the Section was a symptom of totalitarianism. Are we to assume that the Financial Secretary has now become a Fascist or a Communist or was he merely speaking a year ago from the virtuosity of his own verbosity and using language which nobody was intended to take seriously?
But what he said was repeated in almost identical words by the present Solicitor-General. It is no use the Solicitor-General shaking his head, for I have here what he said according to columns 1259–60 of the OFFICIAL REPORT at that time. The Solicitor-General then followed the Financial Secretary to the Treasury, and his complaint seemed to be that the Financial Secretary had not gone far enough. He said that the situation was even worse than the Financial Secretary had said it was.
What does the Solicitor-General say now? Is this totalitarian legislation? Are we now to take it that the "high falutin'" speeches of hon. and right hon. Gentlemen opposite had no meaning at all, but were made with complete insincerity and were merely a low attempt to embarrass the Government of the day? How dare they come along within 12 months and ask the Committee to repeat in identical language the terms of a Section which they condemned so violently. Is this serious government? They all stand condemned out of their own mouths by the arguments which they addressed to the Committee a year ago.
There was also the hon. and learned Member for York (Mr. Hylton-Foster). He has not dared face the Committee this afternoon. There was also the Parliamentary Secretary to the Board of Trade, who was here at Question time but has now left the Committee. He and others adopted equally scurrilous language about Section 32.
I hesitate to believe that, unless some of their hon. Friends had drawn attention to this matter, the Commitee would have been invited without a word of explanation to re-adopt in its application to the Excess Profits Levy the Section against tax evasion which was condemned so wholeheartedly and unanimously by hon.
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Gentlemen opposite. Several Divisions took place in relation to it. What has happened to induce the Financial Secretary and the Minister of State for Economic Affairs to change their minds? I hope that we shall have some explanation of this extraordinary conduct.
The Solicitor-General (Sir Reginald Manningham-Buller): The hon. Gentleman asked what the Solicitor-General would say now. I shall do my best to answer all his charges, but he has not really been very frank with the Committee. He invited the Committee to assume that Section 32 of the Finance Act, 1951, was similar in form to the Clause in the present Bill when it was introduced by the late Government. He said there were a number of Divisions on the section. There were, and he must be aware that as a result of the efforts made by my hon. Friends and myself many Amendments were made to the section during its passage through the House.
I would remind him—he has seen it, but he did not remind the Committee about it—that throughout our discussions on that section we made it absolutely clear that we were no more prepared to countenance tax avoidance than anyone else, but that what we sought to do was to ensure that the section could not operate to cause injustices. I think our efforts improved the section, and I believe that that was recognised at the time. Just as we were then not prepared to countenance tax avoidance, so now we are not prepared to countenance tax avoidance. It is for that reason that we seek to apply Section 32, which is different from the Clause as originally introduced, to the Excess Profits Levy.
Sir Patrick Spens: I want to draw the attention of my hon. and learned Friend to the last part of subsection (1). While I entirely agree that the Clause ought to be applied in the way in which it is proposed to apply it, I do not think the last part of subsection (1) can be right. The first part indicates that the same provision of Section 32 shall apply to attempts to avoid Excess Profits Levy or the Profits Tax and the Excess Profits Levy in the same way as it applied to the avoidance of Profits Tax under the 1951 Act.

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Then, it goes on to make a provision which I have never seen in a Bill, and which I think is utterly wrong in principle and most dangerous. It goes on to refer to subsection (3) of Section 32, and states:
"the provisions of the Bill for this Act and any amendments made therein before the passing threof, shall be deemed to have been in force as from the introduction of the said Bill into the Commons House of Parliament or the making of the said amendments, as the case may be."
4.30 p.m.
The effect of that is that, if an avoidance transaction was started the moment when this Bill was printed, if it was carried out before the Bill came into Committee of this House, the court would have to consider, not what are the effects of this Bill when it becomes an Act of Parliament, but what were the effects of the Bill as originally introduced. If another transaction is effected after an Amendment has been moved, the court would have to consider when the Amendment was moved and when it became effective, as well as whether the transaction was carried out before or after it actually became effective.
Moreover, this Bill has still to go through Report stage, and, if further Amendments are made, inquiries will have to be made as to when those Amendments became effective. This means that, if this Clause goes through in this form, the procedure in the House may have to be inquired into, and it may be necessary in the court to find out what were the original terms of the Bill, what Amendments were made, when they were made, when those Amendments became effective, and at what stage.
I have never seen a Clause like this before, and I cannot believe that it can possibly be right in principle. I think it is a most dangerous innovation, and I am greatly surprised to find that it comes from this Government. Of course, the fact that it has been introduced now may be because there may have been instances, when the Bill was printed, of people trying to enter into transactions for avoiding tax, but I think those transactions have to be highly complicated transactions. They will not go through quickly, and, surely, the right form ought to be the ordinary form that this Clause will become effective as from the time when the Bill becomes an Act of Parliament.
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We cannot have inquiries being made into what form Bills are introduced in this House and Amendments made to them, and whether transactions take place before or after those Amendments are made. It is an invitation to conflict between the courts and Parliament, and I want to make this very strong protest, in the hope that, before the Report stage, these words will be excluded. If not, I propose to put down an Amendment to remove them, and I hope to have the support of the Committee in doing so.
Mr. Douglas Houghton: Notwithstanding the legal difficulties to which the hon. and learned Member for Kensington, South (Sir P. Spens) has just drawn attention, I think the Committee will agree that there is justification behind the words in subsection (1), which stand as a warning against those who may wish to act quickly against the intentions of the law. After all, they had Section 32 of the Finance Act, 1951, to guide them—
Mr. Raymond Gower: Is the hon. Gentleman contending that something that has not been passed is the law?
Mr. Houghton: The intentions of the Bill are more accurate.
Mr. Gower: Is that the law?
Mr. Houghton: No, but it has more moral force behind it when introduced by H.M. Government as a means of taxing the fortuitous profits of re-armament. We have been told time and again from the benches opposite that the whole of the Excess Protfis Levy is a moral symbol rather than a means of collecting revenue. It is something which the people of Britain wish to see as a corrective to what might otherwise be excessive profits out of re-armament, which would be an offence against the public conscience.
I fully understand the legal difficulties to which the hon. and learned Gentleman has drawn attention, but, when I was interrupted, I was saying that, although there is reference to the provisions of the Bill and to any Amendments thereto, the broad principles which lie behind subsection (1) of Clause 59 are already written into Section 32 of the Finance Act, 1951, so that no one need be under any real misapprehension as to the sort of preventive measures which this Bill will ultimately contain.

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The main point raised by my hon. Friend the Member for Islington, East (Mr. E. Fletcher), to which the Solicitor-General has replied, is one on which we are naturally sensitive on this side of the Committee. Had the hon. and learned Gentleman waited a moment or two, I think I could have given him a better defence than the one he used. He pleads that the Clause, as it found its way into the Bill last year—that is Clause 28, which became Section 32—was amended as a result of the criticism of hon. and right hon. Gentlemen opposite, and that it was a different Section from the original Clause as introduced. That, however, did not prevent hon. and right hon. Gentlemen opposite dividing against the Clause, so that, evidently, it did not satisfy them, even when some Amendments had been made to meet their point of view.
The hon. and learned Gentleman will remember that he and I had a little brush on this matter quite early in the morning, when he accused me, first of all, of not being present. 'When I insisted that I was, he said that I was otherwise engaged; when I insisted that I was not otherwise engaged, he then accused me of being asleep. I resented all these unfounded criticisms, because what I was pointing out to him was that, despite all the fuss and excitement and hotted-up indignation on the part of the then Opposition, the principle of the Clause which my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was introducing into the Bill last year was, in fact, an almost exact copy of what had already been written into the Finance Act, 1941, and the Finance Act, 1944, with regard to Profits Tax.
Last year, the hon. and learned Gentleman will remember, I tried to impress upon him and his hon. Friends that what a Coalition Government had thought to be a necessary deterrent against tax avoidance, at the time of the introduction of the Excess Profits Tax in 1941 and the further legislation in 1944, could not really be objected to when my right hon. Friend was proposing to introduce similar measures as a corrective against the avoidance of Excess Profits Tax.
The hon. and learned Gentleman will appreciate that the higher the level of taxation upon company profits, the
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greater the temptation to indulge in various devices for tax avoidance, and the hon. and learned Gentleman surely has the defence that what was good for Excess Profits Tax at the time of the Coalition Government in 1941 and 1944 is good enough for the Excess Profits Levy in 1952.
The hon. and learned Gentleman could have distinguished between the Excess Profits Levy in this connection and the Profits Tax. However, I make him a present of that if it is any good to him. But, bearing in mind the intemperate language used by hon. and right hon. Members opposite at the time of the discussion on this Clause in last year's Bill, it really makes one wonder how they have found it possible, not only to reaffirm that same Clause in this Bill, but to extend it to the Excess Profits Levy.
We on this side of the Committee are anxious to bring the penitent to book. What did the right hon. Member for Chippenham (Mr. Eccles), the present Minister of Works, say on 12th June, 1951? He said:
"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."
That is scarcely in keeping with the genial personality, as we have now come to regard the right hon. Gentleman, when dealing with such matters as the Festival Gardens and his desire that the people of Britain shall still continue to enjoy themselves. In the same debate, the Financial Secretary said:
"To provide that the whole thing can be shovelled over"—
notice the language, "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."—[OFFICIAL REPORT, 12th June, 1951; Vol. 488, c. 1921–24.]
I do not know that the hour of the day necessarily connotes the degree of astonishment with which we may be debating various matters in this Committee, but I think we would like to have something more wholehearted from hon. and right hon. Members opposite before

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we part with this Clause. Let them say quite honestly and fairly that what they were doing last year was to harry the Government and to indulge in a lot of synthetic indignation about this, and that they now truly believe that it was a necessary part of the equipment of the Inland Revenue for checking tax avoidance. Let them be honest with the Committee and say that they regret what they did last year, that they ask for the forgiveness of hon. Members on this side of the Committee, and that they promise not to indulge in such tactics again.
The Solicitor-General: I thought that at one time the hon. Member for Sowerby (Mr. Houghton) was offering to enter into a Coalition, but his concluding remarks were of a rather different character. I see no reason to add anything to what I said to my hon. and learned Friend on that particular subject. The Clause in that Bill was a bad Clause, but it was considerably improved, and, indeed, could have been improved still further. However, I rise to deal with the point raised by my hon. and learned Friend. I may say that I was not in the least surprised to find one of my hon. Friends making this point with regard to retrospective legislation, and it is certainly right that there should be inquiry before we make any legislation retrospective.
There is a real problem here. A considerable interval of time is bound to elapse between the publication of this Bill and its becoming law. That frequently happens. With regard to the Profits Tax, for instance, the avoidance provisions in last year's Bill were backdated to the date of the Budget. The retrospective effect here is very limited. It only applies to Section 32 (3) of the Finance Act, 1951, and the content of this Bill when it becomes an Act will only be looked at for the purpose of interpreting that subsection.
4.45 p.m.
Section 32 (3) deals with the ascertainment of the main benefit of the transaction, whether it was to secure tax avoidance or not, and I am sure the Committee will agree that unless we have some retrospective provision in this Bill dealing with tax avoidance we shall be leaving a rather wide gap between the introduction of the Bill, when people can see the scheme, and its passage into law,
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a gap through which a good deal of tax avoidance could take place.
The Committee will remember the whisky transactions which took place during the war, and, therefore, it is really necessary in our view that there should be a retrospective effect of this tax avoidance Clause which, as drafted, is limited to subsection (3). I think that must be so, although I must confess I am not entirely happy about the particular wording of the retrospective provision and especially of the Amendments made in the Bill. It seems to me one thing to say that the Bill as printed shall apply, and another to say that the Act itself shall have a retrospective effect.
Without committing myself, because I must be careful not to do that, I can assure the right hon. Gentleman that we will consider the drafting of this between now and the Report stage to see whether we can improve it, but it is our view that we must retain the retrospective effect back to the date of the introduction of the Bill.
Mr. J. Grimond: Apart from the undesirability of retrospective legislation, does the Solicitor-General accept his hon. and learned Friend's interpretation of the wording as it stands? I understood that his hon. and learned Friend was contending that the effect of this Clause would be that the date of Amendments would have to be looked at. Is it not the case that all Amendments are backdated to the date of the Bill?
Sir P. Spens: The subsection refers to a transaction which takes place at a certain time according to the provisions of the law at that time in force. Of course, if this provision is made retrospective merely to the date when the Bill was first published, that would be simple enough, because the law would cover the whole time. But with the introduction of this question of Amendments, we find that the Bill as printed is law until an Amendment is made and until that Amendment is re-amended so that if the transaction takes place between the printing of the Bill and the making of an Amendment one has to look at the Bill, but if it takes place after the Amendment one has to look at the Amendment, and, likewise, if it takes place after the re-amendment one has to look at that.
Mr. Grimond: Is that the view of the Government?
The Solicitor-General: I think that my hon. and learned Friend is substantially correct if we bear in mind that the application of that provision regarding Amendments relates only to Section 32 (3) and nothing else. I might save a lot of time if I read the material part of subsection (3). It says:
"If it appears in the case of any transaction or transactions, being a transaction which involves, or transactions one or more of which involves—(a) the transfer or acquisition of shares in or debentures of a company;"—
or other things of that sort—
"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 which might have been expected to accrue from the transaction or transactions in the three years immediately following the completion thereof was the avoidance or reduction of liability to the tax, the avoidance or reduction of that liability to the profits tax shall be deemed for purposes of this section to have been the main purpose or one of the main purposes of the transaction or transactions."
So, in determining the main purpose of the transaction under that Act one is looking through the provisions of the law at that time. This Clause gives a wider interpretation to the phrase "provisions of the law" by saying one can look at the Bill and any Amendments made to it before the Bill becomes an Act. I think the position with regard to Amendments and the date at which Amendments are made can create difficulties and it is for that reason that, while I want to make it clear that the Bill in this connection must have a retrospective effect, I say that I will certainly have another look at the wording.
Sir Frank Soskice: I do not want to make a long contribution to the debate. I could have understood the Solicitor-General and the Financial Secretary saying frankly to the Committee that they have revised the views they expressed last year when Clause 28, as it then was, was introduced to the Committee as part of what is now the Finance Act, 1951. If they had said that I am quite sure the Committee would have been perfectly sympathetic with them.
It is perfectly proper on further consideration that we should change our
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minds, but what I think any side of the Committee would not like is that the Solicitor-General should try to pretend that he and his hon. Friend the Financial Secretary have not changed their minds and should try to ride off on the excuse that they introduced Amendments to the Clause which we introduced last year which removed its objectionable features from their point of view.
That is very far from the case. They certainly introduced Amendments which we were ready to accept, and we were, indeed, grateful to them for the advice that they gave; but what they did not do was to persuade us to change those features in the Bill which they themselves most violently attacked. Yet this year they adopt those very features as part of their own Bill. The Financial Secretary is looking very distant because he may know what I am going to quote from his own utterances, and I hope he will accord me the kindness of listening to what I say.
He said with a great deal of warmth and conviction, which I am quite sure was at that time perfectly sincere, that we acted very wrongly, most improperly indeed, almost as totalitarians in a totalitarian State might act in investing in the Commissioners the power to determine in respect of which transactions a contribution should be made. I have in front of me the hon. Gentleman's speech. I do not want to read it at length, but I am sure he will recognise that I am giving the purport of what he said.
He said that it was disgraceful, that it was monstrous that we should not invest these powers in a Minister of the Crown, but should give those powers to a body of officials outside Parliament who were to be given power, in substance, to amend the Revenue legislation passed by the House of Commons. Then he went on to say:
"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."—OFFICIAL REPORT, 12th June, 1951, Vol. 488, c. 1924.]
That was the burden of his complaint.
The Solicitor-General spoke next. He spoke in equally sombre tones. He did not attempt for a second to dissociate himself from what the present Financial Secretary then said or say that what the Financial Secretary said was rather extravagant and

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absurd. On the contrary, by his speech he wholly associated himself with the Financial Secretary. He went further and said that he had an objection which was something much deeper than hitting at tax dodgers.
He argued that the Clause seemed to hit at transactions which were honest and dishonest. He was clearly implying that he, as a legal Member of the House of Commons, as is also his hon. Friend the Financial Secretary, was deeply moved at the outrage that was being done to principles that underlay our whole financial structure. It was upon that that they spoke, and it was that view that they tried hard to persuade the Committee to adopt.
That was when they were in Opposition and when they were criticising the then Government for doing precisely what they are doing today. Then, today, the Solicitor-General, reading from a brief, or trying to make the best of a difficult case, says that this Clause is all right because the party opposite had removed the objectionable features. The most objectionable feature that the present Solicitor-General and the Financial Secretary both so much disliked last year was the vesting of these powers in the Commissioners. But that is in the Clause as it now stands.
The original Clause in the 1951 Bill, which subsequently became Section 32 of the Act when it became an enactment, is taken lock stock and barrel with the powers vested in the Commissioners and put in this Bill which the Government now place before the Committee. I do not want to accuse either the hon. and learned Gentleman or his hon. Friend of disingenuous conduct. Their standards are far too high for that. One of them is, after all, a Balliol man and that is a very high commendation; and I certainly have the highest regard for the sterling qualities of character of both. But here they have bemused and deceived themselves into a wholly inconsistent attitude which certainly does not do credit to their intelligence.
They have turned the tables completely round and accepted what they condemned outright last year with all those very features in it which they condemned. I think they should come before the Committee in a white sheet. They ought to have said quite frankly to their col-
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leagues, who certainly would have accepted it from them, that they felt, on reflection, that they had been talking nonsense last year.
They still have a perfectly good opportunity for making amends. We on this side of the Committee have put down a Clause this year dealing with entertainment expenses. We take the view—as demonstrated in that Clause which I certainly cannot discuss now, as you would rule me out of order, Sir Charles —that it is perfectly right and proper that those whose duty it is to collect tax should be furnished with ample powers to possess themselves with the necessary information to enable them to assess it. That is just what hon. Gentlemen opposite are giving to the Commissioners in the Clause now under discussion.
I hope they will maintain this time a consistent attitude when we come to discuss the later Clause to which I have referred. I think they are perfectly right in putting this Clause in this Bill, though I do not say that they are right in every word of it. The hon. and learned Member for Kensington, South (Sir P. Spens), has made criticisms, and the Solicitor-General has said that he will consider the matter further. I do not want to take sides about that. I am sure that the consideration the Solicitor-General will give will yield valuable results in the future. It has hitherto, and we wish him well.
5.0 p.m.
The Government are right in taking these powers, but they are wrong—and they will always be perfectly wrong—when they indulge, for purely party purposes, in criticism in which they do not believe of Measures which they know are absolutely necessary. This is such a Measure. This particular Clause is designed to prevent people being able to avoid paying their just share of the taxes. We can differ as to the rate at which taxes should be imposed but let us have no mealy-mouthed talking about this question. If it is necessary that the taxes should be exacted from people who are doing their best to get out of paying them, the necessary powers should be given to those whose duty it is to assess and exact them.
I agree with this Clause, although it may be that certain changes will be made after further consideration; but I do pro-

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test at this half-sincere way of criticising a Measure simply because it emanates from the other side of the Committee. I support the Government in this Clause, but I do not support the utterances which we have had from the two speakers who represent them today, who do not seem to have done credit either to those with whom they are associated or to themselves.
Mr. Ian Horobin: I shall not detain the Committee for more than a moment or two; but this is obviously a sham battle between the two Front Benches. The Solicitor-General may have made a debating point in defence of himself when he said that he had succeeded in amending the Clause as originally introduced last year, but everybody knows that that is not the real defence. Both Front Benches know in their heart of hearts—and that is why they both introduced these foolish industrial provisions when in office—that the present grinding standard of taxation is impossible to enforce without some such undesirable provisions in the law.
No business man in his office, by making things and providing services, can earn half as much money in a month as he can earn in 24 hours with a clever accountant. We are talking not about tax evasion, but perfectly legal tax avoidance. The real moral of all this bogus interchange is that the sooner taxation is reduced the better it will be not only for British industry's profits but for British industry's probity. That is the long and short of it, and everybody knows it. These dialectical interchanges do no service whatever to British industry.
The Solicitor-General: We have had an interesting and entertaining discussion on this Clause. I should like to make it quite clear that I should be the last person to suggest that the right hon. and learned Gentleman opposite has engaged, in any sense, in a bogus discussion. We have had a long and, I think, useful discussion, particularly in regard to the observations of my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) which drew attention to what I regard as a fairly important point. I suggest that we could now continue, because we have a lot of
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work to do on these new Clauses and I think we have covered this Clause rather fully.
Question put, and agreed to.
Clause ordered to stand part of the Bill.

Clause 60.—(AMENDMENTS AS TO RELIEF FOR DOUBLE TAXATION OF PROFITS OR INCOME.)
The Solicitor-General: I beg to move, in page 63, line 36, to leave out "the standard period," and to insert "a standard year."
This Amendment is purely consequential on the Chancellor's proposal to allow concerns to select an Excess Profits Levy standard based on half the profits of any two years from 1947 to 1949 instead of the average of the three years.
Amendment agreed to.
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
Mr. E. Fletcher: Surely the Committee will not part with this Clause without a further explanation. I assumed that one or other of the hon. Members who had put down an Amendment in page 64, line 27—the hon. Member for Altrincham and Sale (Mr. Erroll), the hon. Member for Langstone (Mr. Stevens) or the hon. and gallant Member for Down, North (Sir W. Smiles)—would have risen in his place to move that Amendment. It came as a complete surprise to me to find that what I regard as an important Amendment, put down by three Government back bench supporters, was allowed to go by default.
This is an entirely novel and, I think, discourteous way to treat the Committee. It means that any discussion of this Clause will have to take place on the Question that it stand part of the Bill. It is an important and complicated Clause, which takes up three pages of printing, and I am particularly anxious to hear what the Financial Secretary has to say about it.
When we were discussing this matter yesterday, in answer to the hon. Member for Darwen (Mr. Fletcher-Cooke)—who is not in his place—on Clause 45 of the Bill the Financial Secretary, as reported in yesterday's HANSARD, said that that was a matter which would be considered when

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we came to Clause 60. Now we have arrived at Clause 60 and, therefore, this question, which was postponed from Clause 45, ought to be considered now.
This Clause has attracted a great deal of attention in today's Press. It deals with the whole question of relief which should be given from double taxation of profits or income. As the Financial Secretary is aware, this arises both on Clause 45 and on Clause 60. I am sure it would be the general wish of the Committee that they should understand this Clause before they part with it. After all, these provisions to avoid double taxation are designed to promote international trade. They are for the benefit not only of their own particular community but of all foreign companies who are trading here and all English companies who are trading abroad. Therefore, it is very important that we should make quite sure that the provisions designed to protect companies from double taxation—both British taxation and taxation in the country where they carry on operations—should be sensible and efficient.
I hope we shall get an explanation of what is intended by this Clause. I can understand that the taxation laws of different countries vary to a considerable extent. I can understand that if an English company pays taxes in France, Italy, the United States of America, South America or anywhere else, there must be carefully designed provisions to see how that taxation should be set off against the liability to taxation in this country.
As I understand, it was formerly set off against the liability, first, to Profits Tax and then to Income Tax. Now we have this grotesque three-tier system of taxation—the Excess Profits Levy, Profits Tax and Income Tax—and we have this complete change from last year's taxation, whereby Profits Tax is not allowed as a deduction from Income Tax. As a layman, I should think that it is necessary to introduce some complicated changes in the law.
I should like to ask the Financial Secretary whether I am right in assuming that the simple explanation of the intention of this very long Clause is somewhat as follows—that a double credit available against United Kingdom Tax shall be applied, first, in reducing the amount of the Excess Profits Levy chargeable in
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respect of the double-taxed income and, secondly, in reducing the Profits Tax attributable to the foreign income; the balance to be applied in reducing the Income Tax so attributable.
Am I right in assuming that the amount of the credit to be allowed against the Excess Profits Levy in respect of any income liable to foreign tax cannot exceed the amount of levy attributable to that income? Since this Clause can only be understood by a careful analysis of paragraph 8 of the Sixteenth Schedule of the Income Tax Act, 1952—which is the consolidated Measure to which everyone will have to refer to try to understand this complicated subject—am I right in assuming that that will now have to be changed so that what were previously references to Profits Tax shall in future be deemed to include references to the Excess Profits Levy?
I have done my best to try to state the position as I understand it, but I am sure that it would be for the general convenience of the Committee, and of the community who have to understand these things, if the Solicitor-General or the Financial Secretary, who have no doubt studied it much more than I have, would be good enough to try to explain in quite simple terms what the Clause is designed to secure.
Mr. Gerald Nabarro: Before my hon. and learned Friend replies, would he also deal with one point of principle which I conceive to be of considerable importance in connection with this Clause? If the amount of benefit derived by a company operating in the United Kingdom as a result of double taxation relief under former or current provisions in any future chargeable accounting period should exceed the amount of benefit so derived in a period which fell within the standard years for purposes of assessment of Excess Profits Levy, will the amount of the increase in double taxation benefit be assessed to Excess Profits Levy? If that be so, surely the bulk of the increased benefit so derived will be taken in Excess Profits Levy and little ultimate benefit will be derived by the English company.
The Solicitor-General: If my hon. Friend thinks that I can answer the very long question which he has put to me, I am sorry that I must disappoint him. Per-

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haps I may later be able to give him the answer which he requires. The hon. Member for Islington, East (Mr. E. Fletcher) asked for an explanation of the object and the effect of this extremely complicated Clause. I shall do my best to satisfy him in as short a space of time as I can. I entirely agree with him that it is extremely complicated.
The first thing that the Clause seeks to do—and this is a minor point—is to make the necessary adjustments because no longer is Profits Tax a deduction for Income Tax purposes. I think that is quite clearly stated in subsection (1) and I do not need to spend any more time upon it. Double Taxation relief takes two forms. One form may be the setting against the United Kingdom Tax bill, subject to appropriate limitations, of the amount of the overseas tax paid on income chargeable to the United Kingdom tax. That is an operation which is known as giving credit for overseas tax. The full overseas tax is set against United Kingdom tax and—
Mr. E. Fletcher: Against Income Tax or Profits Tax?
The Solicitor-General: I shall deal with that later. The full overseas tax is set against United Kingdom tax on the doubly taxed income where a double taxation agreement has been concluded with the country imposing a tax. Where there has been no such agreement, there is what is called a unilateral relief, and that varies in amount; if the territory concerned is within the Commonwealth it is, I think, limited to three-quarters of the United Kingdom tax and otherwise to one-half of the United Kingdom tax.
5.15 p.m.
Subsection (2) applies the existing provisions of the law which now cover Profits Tax and Income Tax to the Excess Profits Levy, subject to the adaptation set out in that Clause. The general effect is that a given amount of overseas tax will for the future be available for credit not merely against the Profits Tax and the Income Tax, but also against the Excess Profits Levy.
Subsection (2, a) lays down the order in which that credit shall be given—and this is the answer to the specific question which the hon. Member for Islington, East put. He will see that credit is first
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of all to be given against the Excess Profits Levy. If there is a balance of credit remaining it goes against the Profits Tax, and if there is still a balance of credit, it goes against the Income Tax, until presumably by that time it may well be exhausted. That is the order. That is the question which the hon. Gentleman asked, and the reason why that order has been selected is merely for administrative convenience. That answers the specific question which he put to me.
Subsection (3), which again is a complicated question, deals with the adjustments necessary for the profits of the standard period as a consequence of allowing double taxation relief in respect of the chargeable accounting period. To arrive at the precise mathematical figure would be an extremely involved computation. I do not think I need take up the time of the Committee in trying to make it clear, but it is a most involved calculation which would put everyone to a great deal of work.
In dealing with that by subsection (3, b) we have sought to take a short cut and the short cut will, we think, result to the advantage of the taxpayer in that his standard profits will be slightly greater than those which would have emerged from an academically correct computation. The same difficulty of very complicated mathematical complications arises under subsection (4), which deals with the adaptation and computation of the chargeable profits necessary as a result of allowing double taxation relief. There, again, we have sought to take a short cut to arrive at somewhere near the right result, but in this case it may be that the result of taking that short cut, while relieving the taxpayer of a great deal of complicated work, will be slightly to his disadvantage.
On the other hand, the slight disadvantage under that subsection will be offset by the slight advantage under the previous subsection to which I have referred, so that, on balance, we think we have drawn a fair line and gained the advantage of making this complicated Clause considerably easier to understand than if effect had been given in statutory language to the mathematical calculations which it would have been necessary to make. I have tried to compress my remarks within a narrow compass because we have so much to do, but I hope

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that at the same time I have been able to help the hon. Member in some of the points which he raised.
Mr. Nabarro: I hope the Solicitor-General will reply to my point at a later stage of the Bill. It is a valid point and one of considerable substance. In particular, it must have a direct bearing on the interpretation of this Clause by hundreds of accountants who are concerned with the accounts of companies operating overseas.
The Solicitor-General: I do not know that there will be an opportunity of replying to my hon. Friend on that very technical point in the course of the debates on the Bill, but I will say this to him: I am not sure that I have fully grasped the complications of his extremely involved question, but if he will try to put it on paper I will certainly consider it and seek to give him an answer.
Mr. Nabarro: Thank you.
Clause, as amended, ordered to stand part of the Bill.

Clause 61.—EXEMPTION FROM ESTATE DUTY FOR MEMBERS OF ARMED FORCES, ETC.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Donald Chapman: The Solicitor-General was rather generous earlier, when the hon. and learned Member for Kensington, South (Sir P. Spens) pointed out to him some flaws and possible disadvantages in Clause 59. I want to point out to him this afternoon, or to the Financial Secretary, some similar disadvantages which exist in Clause 61. They are, in my view, radical disadvantages, and I think the Financial Secretary will probably find, on reflection, that some Amendments ought to be introduced into the Clause at a later stage.
I am not speaking of a Clause which has any significance in the contest between the two parties in the House. This is a completely non-contentious Clause, and we ought to do our very best to get it into the best possible form for those people it is trying to help.
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The Clause has quite a simple aim. It aims to exempt from Estate Duty the estates of soldiers, or members of certain auxiliary Services listed in the Twelfth Schedule—Members of the Women's Royal Naval Service, and dental practitioners working with the Forces, and so on—in the case of their death as the result of wounds or disease incurred on active service or on work of a warlike nature. It has, in other words, a very simple aim indeed, and I am sure that the whole of the Committee supports the principle which this Clause lays down.
However, there are some enormous disadvantages in the drafting. At the very beginning it states:
"Estate duty shall not be chargeable by reason of the death … of a person in whose case it is certified by the Admiralty, the Army Council, the Air Council or the Secretary of State that the deceased died from a wound…"
Let us see what that really involves. Here we are putting the clock back to a time beyond 1943 when legislation was specifically introduced to remedy a very real evil. As the Clause stands now it is entirely in the hands of the Secretary of State for War, in the case of a soldier, to make an absolutely final determination about the man's wound or as to whether the operation in which he received it was of a warlike nature. There is no check on his decision whatsoever. That is an entire reversal of the practice applied since 1943.
Since 1943 the decisions of the Minister can be challenged under provisions of the Pensions Appeal Tribunals Act of that year. That was provided in Section 1 (1). Subsection (3) of the same Section states,
"Where any claim in respect of the death of any person … is rejected by the Minister…"
as it can be, under this Clause of the Finance Bill—
"…the Minister shall notify the claimant of his decision,—"
in this case, of course, it would be the administrators of the estate—
"—specifying that it is made on that ground, and—"
and here are the main operative words—
"—thereupon an appeal shall lie to the Tribunal.…"
In other words, Parliament, in 1943, definitely laid it down that, in the case of pensions and of compensation arising from death or injury during war, the

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Minister's decision should not be binding. Under the present Clause the decision of the Secretary of State is to be final, and, as far as I can see, this Clause puts our procedure back to what it was before the 1943 Act.
I should imagine that the Financial Secretary would be willing to give an assurance that the possibility of appeals will be considered between now and the Report stage. It seems to me quite wrong, and that it would merely lead to endless difficulties, if the Secretary of State has to justify in the House of Commons every decision which he makes and which an hon. Member can challenge on behalf of a constituent. That seems to me quite wrong—and quite unjust, in the sense that a proper appeal procedure is not being complied with.
But that is not the total of the objections to the Clause as it stands. I refer the Financial Secretary to subsection (1, b), which says that exemption from Estate Duty will be allowed in respect of any of the specified persons on service
"…which in the opinion of the Treasury involved the same risks as service of a warlike nature."
What does the Treasury know about this matter? We are leaving the Treasury, the most tight-fisted and mean Department of the Government, to make a decision involving the spending of money in compensation for wounds or death in war. That seems to me entirely wrong. In the first part of the Clause, it is the Secretary of State; and then the Treasury has to be brought in in cases of doubt; and again there is no appeal procedure. The Treasury, notorious in these matters, is being left with both the first word and the last word in the whole matter.
Let me go a little further, because the matter does not end even there. Throughout the whole of the pensions legislation that Parliament has passed there is specific provision in all comparable cases for compensation in some form for accidents occurring or disease being contracted during active service and also for diseases aggravated by such service. Now, however, aggravation is being excluded for the first time. Let us consider some examples of what can occur. Let us suppose that a man in the Forces contracts on service—active service—because of the privations of war an intestinal disorder
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—a stomach disorder—and dies of it. In that case, as the Clause stands, his estate will not pay duty.
Let us suppose that a man has some intestinal complaint with which he would have lived happily enough for the rest of his life and would not have died of, but for being called up, and suppose the privations of war aggravate that disease, and suppose he dies. Then this Clause, as it stands, specifically withdraws compensation from him, because the Secretary of State can say, "Oh, no, we cannot exempt this man's estate from Estate Duty because he had that disease before he joined the Army. He did not contract it on active service. That only aggravated a disease which existed before."
This will lead to an enormous amount of trouble for the Secretary of State, for, under this Clause, he will have to adopt a parsimonious attitude. So we shall get unfair comparisons as between man and man. We shall have a considerable amount of injustice because of the considerable difficulties of this Clause as it stands. I do not believe that we can do away with proper appeals procedure and I do not think that the Treasury should come into the matter at all. Neither do I believe that aggravation should be specifically excluded.
5.30 p.m.
I did not put down any Amendment on this matter because it is extremely difficult to do so—in the sense that if we are to provide some appeal machinery, just what could we do? Could we use the present appeals tribunal to go into the matter. I do not know. It would be asking a pensions body to deal with exemptions from Estate Duty. But at least they are qualified to judge similar matters and I should have thought that it might have been possible for them to deal with this matter.
In case the Financial Secretary has a a better system to appeals machinery I have not put down an Amendment, but I think that it is something which he should consider. In view of all that I have said about the very real drawbacks of the present Clause I think he should do something about them between now and the Report stage of the Bill.
Mr. E. Fletcher: I rise only for a moment because I entirely agree with what my hon. Friend the Member for

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Northfield (Mr. Chapman) has said. I would go further. Surely it is time the Government reconsidered the whole question of exemption of various people in time of war from liability to Estate Duty. The existing exemptions date from 1894, and perhaps much earlier. At any rate, they date from a time when there was a clear line of demarcation between sailors and soldiers serving overseas in time of war, and liable to death as a result of military operations, and others, and the principle was then introduced that they should be exempted from Estate Duty.
We are living in totally different conditions. If, unhappily, we become involved in war again, the risk to the civilians will be at least as great from warlike operations as will be the risk to people in the Army, Navy or Air Force. What, therefore, should be the basis today on which a line of demarcation can be drawn as between those who will be exempt from Estate Duty and those who will not?
I think the line drawn in this Clause is entirely unsatisfactory. It preserves the present exemptions for those in the Armed Forces of the Crown, and includes the W.R.N.S. and other women's Services Then there is a further class which is defined as those
"… subject to the law governing any of those forces by reason of association with or of accompanying any body of those forces …"
if, in the opinion of the Treasury, their service
"involved the same risks as service of a warlike nature."
That is quite unsatisfactory. What about those in the Home Guard? What about those who are in all the other Civil Defence services? What about civilians who are not in any of the Civil Defence services but who are engaged in some kind of patriotic duty, exposing them to the same kind of risks to which those serving in the Armed Forces are exposed? Is it really satisfactory, under modern conditions, that the question of whether one person or another should have exemption from Estate Duty should depend upon some decision by the Treasury, based upon vague words in this Clause?
This does not seem to me to be satisfactory, and I think that it is also unsatisfactory, as my hon. Friend has said, that the final decisions on any such question should be left to the Treasury without any opportunity for appeal. I think
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that an even greater objection is that the class of exemption should be so narrowly confined as it is now. I do not propose to put down an Amendment on this matter at a later stage, but I think that this whole question should be reexamined. If it is right, as I think it is, that in time of war those who serve in the Armed Forces of the Crown should not have to pay Estate Duty, then, I think, for precisely the same reasons which govern that principle, that those who lose their lives in time of war, whether in civilian service or even as civilians exposed to warlike risks, should have the same exemption.
I find it difficult to see any logical basis on which this distinction should be still maintained. I agree that people who die in war-time from natural causes should, of course, still be subject to Estate Duty as if they died in peace-time. But suppose they are killed in an air-raid. On what basis should they be discriminated against in comparison with other people? I hope, therefore, that this question will be looked into at a later stage of the Bill.
Sir H. Williams: I have been very much impressed by what has been said and I see no reason why the Clause should not be made comprehensive. As it is, it is quite absurd. I think that if people are killed by enemy action their estates should all be treated alike with regard to exemption from Estate Duty. In the part of Croydon which I represent, I think that we had 3,000 civilian casualties under warlike conditions, as compared with some 60,000 in the whole of the country.
I do not suppose that any of those people would have exemption unless they were serving in the Forces in a noncommissioned rank, and I think that a case for making this comprehensive could be strongly made out. I hope that the Financial Secretary will look into this matter between now and Report stage, with a view to making, if not this year, at some time in the not too distant future, a concession.
Captain Charles Waterhouse: I want to emphasise the plea already made by hon. Members for this matter to be looked at again. After all, the incidence of Estate Duty is such that it may mean ruin for a family. If a member of a family gives his life

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for his country and, at the same time, his dependants lose his family estates, maybe, or his family possessions, or his family business, surely that ought not to be done merely at the decision of a Minister. Surely there ought to be an appeal to someone to adjudicate the rights and wrongs in a particular case.
My second point, which has been clearly put by the hon. Member for Northfield (Mr. Chapman), is that of the aggravation of a disease. What he said was very true. We all know friends of ours who had some complaint but who would have lived long lives had that complaint not been aggravated because of warlike conditions. Surely the exclusion from exemption of Estate Duty because of a complaint which had its origin before the war is completely wrong. One could mention many diseases which are aggravated in times of war and which lead to death.
We have to remember that before anyone joins one of the Services he has a medical examination. The doctors examine him, and say, "Yes, you are fit for service; your organs and your physical set-up are adequate for the strains of war." If those strains are so abnormal as to cause death, then, in my view, it is only right and proper that the person's estate should have the relief which the Clause proposes to give in the case of those whose death is directly the result of war risk.
Mr. James Hudson: Perhaps the Chancellor will have noted the human character of the appeal which has been made from all sides of the Committee. Leaving to the Treasury judgment on what is a more human question than usual is most unsatisfactory, especially when the Treasury will have to take into account the highly debateable issues which have been mentioned this afternoon, such as air-raids and death and damage in war. This will leave it open to the Treasury to give judgments in many things in which we should not wish them to do so if all human considerations were taken into account
In the Ministry of Pensions, their medical beds and the special appeals tribunals, the nation has a great body of experience to guide and assist it. I am not saying that this should be done purely by the Ministry of Pensions, but there is a method of helping the nation. It should
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not be left to the Treasury to make a final judgment upon these matters, and I hope the Government Front Bench will indicate that we shall be met upon this point.
Mr. Boyd-Carpenter: As the hon. Member for Northfield (Mr. Chapman) said, this is a non-contentious Clause. Indeed, in another place the representative of the party opposite went out of his way to welcome it. I ought perhaps to make clear to begin with its comparatively limited character. That limitation does not involve an unwillingness to consider the broader matters, with which I will deal in a moment, but it may bring the Committee back to appreciation of exactly what the Clause is if I say what it is aimed at doing.
It is aimed simply at removing the very old anomaly—in answer to the hon. Member for Islington, East (Mr. E. Fletcher), I think it dates from the Stamp Act, 1815—under which a discrimination was made inside the Armed Forces depending on the rank the man held at the time of his death. Speaking from memory, anyone below the rank of full sergeant or equivalent rank in the other Armed Forces of the Crown obtained complete exemption from Estate Duty if he died on active service, whereas those who held higher rank, such as senior N.C.O.s, warrant officers and commissioned officers, all paid duty, though on a modified scale. The purpose of the Clause is simply to remove that anomaly and to apply the same treatment to all members of the Armed Forces, regardless of rank, who die in action. That principle receives the general support of the Committee.
Before I deal with the precise points of the hon. Member for Northfield, I should like just to say a word in reply to the more general issue raised by my right hon. and gallant Friend the Member for Leicester, South-East (Captain Waterhouse), and the hon. Member for Islington, East. The question of Estate Duty with respect to civilians killed in wartime is a somewhat different question from this. To some extent it was dealt with during the last war under emergency legislation, and, no doubt, if a similar situation were to come upon us, it would be necessary to make some such provision. The urgency of this limited Clause is very closely connected with the fact that our Armed Forces in Korea

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and Malaya are in action and that people affected by it may be killed at any time.
I do not think that the broader question can be properly considered before the Report stage. I think I should be misleading the Committee if I gave any such undertaking. But from the point of view of consideration of what arrangements would have to be made in war in future, I think I can say we appreciate that it would be necessary to take some action in connection with civilians in time of war. I should like to correct the hon. Member for Islington, East on a small point of fact. The Home Guard are covered if death or injury arises in the course of duty.
Mr. Chapman: Why is that?
5.45 p.m.
Mr. Boyd-Carpenter: They are part of Armed Forces of the Crown when on duty.
With regard to the specific point by the hon. Member for Northfield about the grant of the certificate, that procedure has been followed since 1924 with respect to the limited exemption given to the higher ranks, and I understand that it has worked without any difficulty. I concede that there is some force on grounds of general principle in what has been said about this, and, although I cannot make a firm commitment, I can undertake on behalf of my right hon. Friend that we will look further at this aspect of the matter.
On principle, there is a good deal in what has been said, whereas against that in respect of the higher ranks it has apparently operated for the best part of 30 years without difficulty. Nevertheless, we are anxious—that is why we are bringing forward the Clause—to see that those who are killed in the service of the country do not have their estates exposed to the duty and it is in that spirit that we will look at that aspect of the matter.
The hon. Member for Northfield also criticised the provisions under subsection (1, b). I think he misapprehended their effect. The only case in which the opinion of the Treasury, which he appeared to hold very low, comes into the matter is as a further alternative opportunity of obtaining exemption, as it were. The exemption follows if the man is killed on active service against an enemy. As hon.
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Members are aware our Forces generally are at present on active service, and, therefore, the general exemption operates at the moment.
Paragraph (b) deals with the situation when we are in a state of normal peace, that is, where the Armed Forces are not generally on active service, but none the less they are covered by this exemption if they are on service of a warlike nature, such as frontier expeditions and other expeditions where hostilities of a kind are going on in remote quarters of the world or—this is a further alternative chance of exemption—where in the opinion of the Treasury some risks are involved on service of a warlike nature.
What is contemplated—it is very difficult to define it precisely in a statute—is a sort of situation where forces are in occupation of a territory where civil subversive activities, murder and that kind of thing, are going on. The real difficulty is to define that kind of situation in a statute. If we were to omit these words we should be depriving ourselves of the opportunity of giving this exemption in that rather difficult to define class of case.
Mr. Chapman: I appreciate the way in which the hon. Gentleman approaches this and everything he has said, but why the Treasury?
Mr. Boyd-Carpenter: It is a little difficult to put it into the hands of any other Department. If we put it into the hands of the Service Departments there is the risk of conflicting decisions in respect of the same area. This must come into the hands of a central Department.
Mr. Houghton: Could this not appropriately be dealt with by the Lord Privy Seal?
Mr. Boyd-Carpenter: All suggestions will be listened to, but on the whole I think this is reasonable. I can give an assurance that it is not our intention to administer this in an ungenerous spirit. If it were, we should not have brought the Clause forward at this time. I think this is the most practical way of doing it.
The point about aggravation which was raised is a very difficult one. Any hon. Member with experience of pensions procedure will know how difficult are the questions of aggravation. The pen-

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sions appeals tribunals have done wonderful work on that subject. However, most hon. Members are aware of the difficulties which arise. I cannot give a firm answer on that difficult question at this moment. I can say that what has been said this afternoon will be borne in mind and will be considered in the same sympathetic spirit as we intend approaching the whole question.
Sir H. Williams: I should like to refer to the question of people being killed in air-raids. My hon. Friend indicated that they would be dealt with by statutory instrument under the Defence Regulations, but the next time the bomb may come before the statutory instrument, and it might not be a bad idea to put the matter into legislative form before the bomb drops.
Mr. Boyd-Carpenter: That is a rather different matter, which will be dealt with under the emergency arrangements which have to be taken in the event of war. We are dealing here specifically with the Armed Forces who are engaged in various kinds of warfare in different parts of the world, while the civilian population here mercifully are not.
Mr. Chapman: I should like to express the thanks of the Committee to the hon. Gentleman for the way in which he has spoken on the various points which I raised. I accept what he said about the appeals system, and I am grateful that he is going to look into it. I am a little puzzled about the Treasury point. I should have thought it was a duty which would go to the Secretary of State for War. He is being given a lot of duties throughout this Clause, and this one seemed suitable to add to the others.
I must say the Financial Secretary was not very helpful on the question of aggravation. If he takes some of the specific cases that I have mentioned, can he tell us how he is going to differentiate between a man who would have had a long life with a disease if it had not been aggravated by active service, and a man who actually contracts the same disease during his period of active service? If there are to be grave abuses of this kind he is going to offend the feeling of the people of this country. They will feel that a real injustice is being done and that this minor concession should have
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been made. I again urge the hon. Gentleman to consider the examples that I have given and see if he cannot be more helpful on this point.
Clause ordered to stand part of the Bill.

Clause 62.—(ESTATE DUTY (AMENDMENTS OF FINANCE ACT, 1940, PART IV).)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Sir F. Soskice: I should be glad if the Solicitor-General would give us a short explanation of the purport of this Clause. I have assumed that the object of the Clause is to deal with certain matters which arise from a certain case known as the St. Aubyn's case which went to the House of Lords, and that the provision in subsection (2) is to deal with the opinion formed by their Lordships that the payment to a company in return for shares does not constitute a transfer within the meaning of Section 46 of the Finance Act, 1940. I assume that the other subsections are to make certain amendments to prevent double taxation which might otherwise ensue, but perhaps the Solicitor-General will explain the matter to us.
The Solicitor-General: The right hon. and learned Gentleman is quite right about the first part of this Clause. It does refer to the decision in the St. Aubyn's case. The right hon. and learned Gentleman will remember that it was there stated that a gift of money did not come within the meaning of a transfer of property, and that, of course, left a loophole in the operations of the Act. The first part of this Clause is inserted to correct that defect.
Subsection (3) is more complicated and is intended to be a relief provision. Great difficulty has been experienced, I understand, in the acquisition of businesses, because prospective purchasers of private companies have not been able to find out whether they would be taking on a contingent liability under Section 46 of the Finance Act, 1940, and the Revenue could not give them any information or guidance on that point. It is hoped, if this Clause passes, that the Revenue may be able to give some forecast which will be of use in facilitating legitimate transactions. The effect of subsection (3) is

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to allow the deduction of the actual consideration paid for the shares sold or the value of the shares sold at the date of death, whichever is the greater, and that gives a certain amount of precision to the calculations, which should be of general assistance and should not result in any appreciable effect upon the Revenue.
Clause ordered to stand part of the Bill.

Clause 63.—(STAMP DUTY ON CONVEYANCES (EXTENSION OF RELIEF).)
Mr. Ronald Russell: I beg to move, in page 69, line 8, to leave out from "the," to the end of line, and to add
"day following that on which this Act is passed."
The object of this Amendment is quite plain and I shall not detain the Committee for more than a few moments. It is designed to bring forward from 1st August to the day after that on which this Act is passed the very welcome relief in Stamp Duty on conveyances which this Bill will eventually bring into operation. In a normal year it would not be possible to bring this date any further forward, but we are fortunate this year in having had the Budget about a month earlier, and, therefore, there is every prospect of this Bill being passed by the end of next month.
I think it is a good idea that the public should be given the benefit of the reduction in Stamp Duty at the earliest possible moment. I understand that some of my legal friends do not like this proposed arrangement, because 1st August has always been the day on which any change in Stamp Duty takes place. I hope that the Government will accept this Amendment, in which event the public will get the benefit at the earliest possible moment.
Mr. Michael Higgs: One hesitates to suggest that what may be a concession might be inadvisable, but the amount of the concession suggested is very small indeed. The proposal is that the concession which was to have been given to transactions after 1st August should now be brought forward to the end of June or the beginning of July. I would say, first of all, that there is some value in certainty. Those who are now negoti-
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ating to purchase property at a price which will get the benefit of this concession should the Bill remain as it stands, will have completed their transaction for on or after 1st August, and they will make their arrangements according to that proposal. If the Amendment passes they will be left in a state of uncertainty. They will not know what date to suggest for the completion of the purchase, and what date to make their arrangements for moving and so on. I suggest that it is a point worth considering that there may be some advantage in giving a certain date.
My hon. Friend also mentioned another matter, about which those who practise in the law must be a little cautious. For some 30 years it will be necessary for those who look at the titles to property to remember the exact date on which this change took place. Solicitors and others who have to refer back to see whether deeds have been properly stamped must know the date on which any change of Stamp Duty takes place. We now know that for many years past all such changes have taken place on 1st August, and all we have to do is to remember the year. It might help those who have to do this routine duty many times a day in going through deeds to maintain that practice, which has been uniform from time immemorial. It will create difficulties for them, as well as for people who are making plans to buy property, if we depart from the old custom
6.0 p.m.
Mr. E. Fletcher: Some of us think that this is a bad and unnecessary Amendment. I hope it will be resisted, partly for the reasons given by the hon. Gentleman who has just spoken. It proposes to introduce a date which would be uncertain, as distinct from one which would be certain
The only possible justification for the Amendment is the assumption that it would bring the concession forward to an earlier date. That would only be so on the assumption that the Bill is passed into law before 1st August. We know that the Government are fairly incompetent and that the whole of their timetable is completely out of gear. We do not know whether the Bill will pass before 1st August. Nobody can tell, with this Government. We did not know for

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a long time when the Budget would be introduced. Then the date was changed, and the Budget itself has been changed as we went along. I do not assume that the Bill will be passed on 1st August or on any other date. I make no assumptions about this Government and their Parliamentary time-table, or anything else
The hon. Gentleman should not assume that any Bill introduced by the Government will be passed by any particular date, or will be passed at all. It may, or may not. The Government are wise to make a provision stipulating a particular date, and not date the concession from the day after which the Bill is passed. For these if for no other reasons, I hope that the Amendment will be rejected.
Mr. Boyd-Carpenter: The Amendment deals with a comparatively small point relating to the date on which the concession on Stamp Duty on conveyances shall come into effect. The Bill lays down "1st August." The reason that was put into the Bill was, first of all, because some weight was given to the value of certainty, to which reference has just been made by my hon. Friend the Member for Bromsgrove (Mr. Higgs). Also, it was the anniversary of the date when, five years previously, the right hon. Member for Bishop Auckland (Mr. Dalton) raised the duty. There was a certain tidiness in making the alteration five years afterwards.
I do not think that the hon. Member for Islington, East (Mr. E. Fletcher) made out a very good case for the Clause as it stands. If he is right, and the Bill is not law by 1st August, very great inconvenience will arise, if that date remains in the Bill. The reason why a specific date has to be laid down is that Stamp Duties are not covered by the Provisional Collection of Taxes Act, which is known as the "Bowles Act." Therefore, we cannot bring them into force under the authority of the Budget Resolutions. We need the Finance Act, and that is why it is done in this way.
We have had some reason to believe that it is desirable to bring this concession into effect as soon as possible. There is evidence that there has been delay in people going through with conveyances. In some small degree, perhaps,
1204
inconvenience is being caused to the public by way of delay in the provision of accommodation. Nobody wants to increase difficulties for any of his fellow-citizens in regard to accommodation. We are all agreed about that.
Though it is not a very great matter, it seems, on balance, that my hon. Friend the Member for Wembley, South (Mr. Russell) has made out his case. There would be some advantage in bringing this concession into force at the earliest date possible, which is obviously the day after the coming into effect of the Bill. That would enable people to get ahead with the completion of conveyances as soon as possible. The doubts that have been voiced from both sides of the Committee by members of the legal profession are based on the fact that the change would affect lawyers more than the rest of the community. The inconvenience to them, as to me, might be a very formidable matter, but it is for the Committee to decide. We certainly see no objection to my hon. Friend's Amendment going into the Bill.
Mr. E. Fletcher: This is an entirely new situation. When I spoke previously I had no idea that the Financial Secretary was going to accept what I regard as a thoroughly bad Amendment, he having, day after day, refused to accept a whole series of Amendments which we regard as very good. I should like, therefore, to pursue the matter a little further.
The Financial Secretary said that the first day on which this concession could take effect was the day after that on which the Bill is passed. I do not know why that is the case. I can think of a number of alternatives. We could put in "1st July" or we could put a reference to the day on which the Gibson Bowles resolutions cease to have effect.
The argument against making an indefinite date, such as the day after the day on which the Bill takes effect, is that it produces great delay and inconvenience to the legal profession and to people entering into contracts for sale and purchase of houses, who would like to know the date on which there is to be a reduction in the Stamp Duty. If they know that it is to be 1st August, they can fix the date of completion for then, so that they can get the benefit of the relief. Nobody wants to prevent people from getting possession

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of houses. We all sympathise with that idea. It may be much more convenient to have a definite date in the Bill.
The Financial Secretary has presumably some timetable in his mind when the Bill will pass. Under our financial arrangements, if the Financial Resolutions under the Gibson Bowles Act of 1913 are to have full effect, the Bill must be passed by 11th July, according to my calculations. The Budget was presented on 11th March, and four months have been provided for them by that Act. The efficacy of our Resolutions will cease on 11th July. Therefore, the latest date on which the Finance Bill can pass into law will be 11th July.
Therefore, it would be possible for us to state "12th July" or some other such date. I do not know whether the Royal Assent will be given on 11th or 12th July, or some date earlier in July. It may depend upon whether or not Mr. Speaker certifies the Finance Bill to be a Money Bill, which is not automatic. It may depend on what happens in another place. If the Financial Secretary is making any alteration to bring the date forward from 1st August, he might consider bringing it forward to a definite date like 12th July.
Mr. Boyd-Carpenter: The difficulty about meeting the hon. Gentleman's point and the convenience of the legal profession—which I conceive in some degree to be important—is that if we say that it is desirable to bring the concession into effect at the earliest possible day, then the form of words used by the mover of the Amendment achieves that result. The hon. Member for Islington, East is not appreciating the fact that the date on which the Bill will become law is uncertain.
We are all concerned in this matter with the rights of another place. Therefore, if a particular date is named, such as the one suggested by the hon. Gentleman, which is the relative date under which the Gibson Bowles Act, it may well be the case that the Bill will become law at any rate a few days before that. If one names that date, then one is naming a date which is not the earliest date. If, on the other hand, one names a date considerably earlier than that, great inconvenience will arise if the Bill is not law by that date.
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As I explained to the Committee, the Gibson Bowles Act does not apply to the Stamp Duties. Therefore, until this Bill is law, the Stamp Duties remain as at present, so that whatever may be in this Bill, those responsible for the collection of duty will have to go on collecting it until, at the very earliest, the day this Bill becomes law. If we put into the Bill 15th June and the Bill is not law by then, it will have no effect at all except retrospectively, with all the complication of repayment.
I am sure the Committee does not want to occupy much time over this comparatively small matter. The balance of argument seems to me to come down on the side of making it the earliest date and there is no doubt that it is the day after the coming into effect of this Bill. I know, Sir Charles, that you and the hon. Member for Islington, East will acquit me of doing anything to inconvenience the legal profession, and the balance of public advantage is in getting on with this as quickly as possible.
Mr. Fletcher: I hesitate to pursue the matter, but the Financial Secretary will defeat his own object if he does that. The legal profession are anxious to have a definite date. If this Amendment is accepted in its present form, although we know that the latest date for giving the Royal Assent is 12th July, it is not generally known, and therefore the profession and the public will not know when the Bill will become law.
Therefore, all these contracts will be held up because the parties will not be able to enter into them and fix a date of completion until they know whether the Bill has been passed or not. It is a real point and it is essential that a definite date should be put in the Bill.
Amendment agreed to.
Clause, as amended, ordered to stand part of the Bill.

Clause 64.—(PROVISIONS AS TO PERMANENT ANNUAL CHARGE FOR THE NATIONAL DEBT AND AS TO THE OLD SINKING FUND.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Douglas Jay: We should not let this Clause pass without some discussion of the question of the amount of Government expenditure on the

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Debt interest. We do not get many opportunities of discussing Government interest rate policy. Indeed, this is the only Clause in this Bill where we can strictly look at the subject of Government expenditure at all. As, in addition, the Government have made important changes in interest rate policy this year, it is worth trying to examine the position. The Clause says:
"The permanent annual charge for the National Debt for the financial year ending with the thirty-first day of March, nineteen hundred and fifty-three, shall be the sum of five hundred and seventy-five million pounds instead of the sum of three hundred and fifty-five million pounds."
I think the Financial Secretary will confirm later on that this is strictly a legal enactment which arises out of a pre-war Act. The statement that the permanent annual charge shall be £575 million is not exactly equivalent to saying that Government expenditure on the Debt service will be £575 million this year. Nevertheless there is a relation between the two, and it is that relation which I want to ask the hon. Gentleman to elucidate.
6.15 p.m.
I notice in the Financial Statement issued with the Budget that on page 38. under the heading of "Estimated Expenditure" the Debt service is set down at the same figure of £575 million. I take that to be not a coincidence but the same figure. It also appears from page 36 of the White Paper that this £575 million is made up (under the heading of "Estimated Expenditure" for the present Year) of £540 million interest on the debt and £35 million on Sinking Fund.
I want first to direct the attention of the Committee to the fact that this figure compares with a corresponding figure for the Debt charge as a whole of £535 million in the previous financial year. Therefore, on the evidence of such information as we have before us at present, we are confronted apparently with a rise of £40 million at least in the Debt charge this year, and I think it is likely to be more. My first question is how that increase of £40 million arises. Secondly, is this likely to be the whole increase in Government expenditure under this head this year?
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Again referring to the Financial Statement of this April and that of April, 1951. I notice that the figure given for interest on the Debt rose from £515 million last year to an estimate of £540 million in the present year. That increase of £25 million is precisely the same figure as the right hon. Gentleman gave us in his first speech as Chancellor on 7th November for the increase in the expenditure on Treasury bill interest resulting from the first increase in the Bank rate. Whether that is a coincidence or not, I do not know. If it is not a coincidence, and that is how that £25 million arose, it follows that there must be a further considerable increase in prospect from the second rise in the Bank rate made in the spring.
I take it that there is also a liability this year for the interest on the American Loan on which I think we paid the first instalment either on 31st December or 1st January. I presume that is included in the figure and perhaps it explains some of the increase. I hope that the Financial Secretary will tell us. It would appear, however, from the information we have on this side—and we have not had a great deal from the Government—that the actual increase in Government expenditure on Debt interest this year must he something much in excess of the £40 million which at present one finds in the relevant documents.
The first rise in the Bank rate in November resulted in a rise in the Treasury bill rate of about half per cent., and that, the Chancellor told us, would mean an increase of £25 million gross in the total. I use gross figures because they are the relevant ones. There was a further and steeper rise of the Bank rate to 4 per cent. at the time of the Budget, and since then the Treasury bill rate has settled down around 2¼ per cent.
I know that none of these things is as simple as it looks, but on rough arithmetic, if an extra half per cent. meant an addition of £25 million to Government expenditure, presumably an extra 1¾per cent. would mean something rather over £75 million gross—say, £80 million, perhaps, with some qualifications which the Financial Secretary may be able to explain.
We have not had many opportunities, but on several occasions we have asked the Chancellor what is the figure, since the second rise in the Bank rate, which he

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expects the country to be faced with for Debt interest this year He has never given an answer, partly, perhaps, because he anticipates further changes in the Bank rate one way or another. However, on the assumption that the Bank rate and the Treasury bill rate remain at the present figure, the Committee are entitled to know what the increased expenditure would be. Am I right in thinking that it would be something like £75, £80 or £85 million?
It is quite clear, if that is anything like true, that this is a very substantial extra burden of expenditure on the taxpayer. When listening, for instance, to the right hon. Member for Blackburn, West (Mr. Assheton) last night, talking about substantial decreases in Government expenditure next year, which, he said, if we did not have he would be voting against the Government, one wonders whether the Government have given any thought to the possibility of making a reduction in this item, or, alternatively, if, as some of their supporters in the Press are advising them, they intend further to increase the Bank rate, whether we may not be faced by even further increases in expenditure on the Debt interest.
This £80 million is a remarkable figure when compared with other items of expenditure and of revenue with which we have been concerned in recent debates. For instance—I use these figures only by way of illustration—when we were discussing the Purchase Tax, I think that it would have been possible to remit Purchase Tax entirely from textiles, which would have had very important effects on industry and employment for the loss of something like, perhaps, a further £60 million to the revenue. That in itself would have been a smaller sum than that with which we are concerned now as an addition to expenditure.
Furthermore, following our discussions on the National Health Service Bill, I think I am right in saying that the total which the Government are to raise in revenue by all the additional health charges, to which we take exception, is now something a good deal less than £20 million—that is, not more than one-seventh or one-eighth of what is under discussion here. In our view, this £80 million was a totally unnecessary increase in expenditure. It is an example of a wasteful and quite unjustifiable increase
1210
where a big saving could have been made for the benefit of the taxpayer.
We are entirely at one with the Government in thinking that a general policy of credit restraint and credit restriction is necessary. Indeed, we enforced and encouraged a policy of that kind ourselves. I should not be dogmatic in objecting even to an increase in the Bank rate if it was shown that that was necessary to achieve restrictions in credit and to help with the balance of payments and the exchanges. It would be carrying the discussion too far to say now whether that case could be made out, but if it was I do not think that there need be any necessary objection. What we do object to is the increased burden on the taxpayer. In our view, it would have been perfectly possible to have achieved this restriction in credit and even, if necessary, to have raised the Bank rate, without any change in the Treasury bill rate which the Government have to pay.
Mr. A. C. M. Spearman: Can the right hon. Member suggest any way by which money could be made what is technically called "tighter" without making it dearer?
Mr. Jay: That is just the point with which I was going to deal. We cannot go too far into this argument this afternoon, but I should have thought that it was not necessary for the Government or, indeed, for local authorities to pay a higher rate of interest in order to induce the banks to limit their general lending to whatever figure is necessary in the national interest.
Mr. Nabarro: Is the right hon. Member suggesting a duality of rates, one for local authorities and another for the remainder of the borrowing community?
Mr. Norman Smith: Why not?
Mr. Jay: Certainly. I am suggesting that the money required by the Government should be lent to the Government at a rate determined by the cost of the operation to the banks, and not by the supposed operation of the free market. That, after all, is the principle that we follow in the case of housing and in munitions manufacture, and all sorts of other instances could be given.

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This is the essential point which I should like to make clear in reply to the hon. Gentleman. If it is possible for the banking system, as a result of these changes in rates and of the workings of their various conventional ratios, with which the hon. Gentleman is familiar, to limit their advances and their general lending to a certain figure, then, clearly, it is possible, as far as practicability is concerned, to do so in response to requests for such limitation in the national interest. That is the essential point on which we would rest our case. Therefore, in our view, no sufficient case has been made out for this enormous extra burden of expenditure which has been laid upon the taxpayer by this change in interest rate policy.
One of the disturbing things about this change is this. Quite apart from the burden that the taxpayer has to pay, it was mainly justified at the time of the Budget, when we had the second increase in the Bank rate, by supposed psychological influence on the exchange markets, the value of the £, and so on. But we now see that that psychological influence, though it may have some force for some weeks, tends after a time to wear off, and other influences begin to operate.
I ask the hon. Gentleman: is it proposed when that happens to proceed further in this direction? Are we, perhaps, to see this £80 million rising to £120 million, or even further? Can the hon. Gentleman give some estimate of what he expects the total burden on the taxpayer will be this year?
Mr. Horobin: Surely the logical conclusion of the right hon. Member's argument is that the Government ought to pay off the entire National Debt by borrowing on ways and means advances to the Bank of England, and paying no interest whatever?
Mr. Norman Smith: Why not?
Mr. Horobin: Exactly. Let the hon. Member fight it out with his right hon. Friend.
Mr. Jay: The hon. Member could not have listened to what I said. Of course, it is reasonable that the cost of borrowing should be covered. That was the policy which the Coalition Government followed throughout the war, when the
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rate remained at a level very much lower than it is now, and as a result, the cost of Government borrowing, as the hon. Gentleman knows, was far lower than during the previous war.
It may well be asked: if the taxpayer is having to find this additional £80 million, where will the money go and who is getting this very large increase in income at a time when the community as a whole is being asked to make sacrifices? Of course, it is an addition to the gross revenue of the banks and the various financial and lending institutions. It is often said, quite rightly, that those institutions have had to meet many increasing costs and many increased expenses at the same time. That, no doubt, is true, and with the level of gilt-edged prices to which Government policy has at present reduced the markets in the City, no doubt those institutions have anxieties as well as increased revenue.
6.30 p.m.
Nevertheless, the fact remains that this money is being paid out by the Treasury and it is being received by these various lending institutions. Furthermore, quite a proportion—the hon. Gentleman will correct me if I am wrong—of the Treasury bills outstanding are held, not by United Kingdom firms, but by overseas Governments, overseas firms, banks, and so forth, particularly, I think, in the sterling area. They are indeed these sterling balances of which we have heard so much in recent years.
By increasing the rate from ½ per cent. to 2¼ per cent. the Government have not only put a further load on the Budget, but also they have added quite appreciably to the strain on the United Kingdom balance of payments. I remember that the hon. and gallant Member for the New Forest (Colonel Crosthwaite-Eyre) used to question and criticise the previous Government a great deal about the sterling balances. He has fallen remarkably silent since his own party came to power, although the party opposite is, with one important difference, following precisely the policy we followed in the matter of the sterling balances.
They called on us continually to repudiate or to scale down those balances. They are now doing nothing of the kind. What they have done is to increase the

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rate of interest from ½ per cent., which we successfully maintained over something like £2,000 million or £3,000 million in those years, to a rate which presumably, at the moment, is three, or three-and-a-half, times as high. Although we permitted a certain flow of exports to pay off those balances, at least we kept the current interest payment at a very low level indeed, and therefore we achieved a great saving on the balance of payments as well as on the Budget.
I think we ought to have some more information about this. We ought to know what the full load will be on the taxpayer this year. We want to make it perfectly plain that in our view this is a real example of a very high and quite unnecessary addition to Government expenditure which the Government ought to have been able to keep under control.
Mr. Boyd-Carpenter: As I understand, both from the Clause and from the tone and substance of the speech by the right hon. Member for Battersea, North (Mr. Jay), we are on the comparatively narrow point of the figure of £575 million in Clause 64. As the right hon. Gentleman said, that is a figure which has to be placed in the Bill by reason of the somewhat archaic procedure which we and previous Governments have followed of keeping in effect the Act of 1928, which fixed the permanent Debt charge at £355 million, and then put in a different figure in lieu each year. It is a procedure which is not without its inconveniences, as I think the right hon. Gentleman knows.
As he pointed out, last year the figure was placed at £535 million, and as he may not be aware, that figure did, in point of fact, prove to be too low an estimate, falling short of the amount actually expended by very nearly £6 million. Consequently, the £575 million which we put into the Bill takes account of a number of factors. If I may answer the direct question which he put, it does take into account the provision for interest on the United States and Canadian credits of 1945, but does not include provision for the repayment of the capital of these credits.
Mr. Jay: Could the hon. Gentleman give us the figure of interest? Would it be £30 million?
Mr. Boyd-Carpenter: It is of that order at a very rough figure. We take into the total figure a number of variations up and down, individual items, with which I do not think I need trouble the Committee, except the specific one to which the right hon. Gentleman referred. As he pointed out, the funding operation of last November, and the rise in the bill rate which took place at the same time, increased the charge by a net figure of the order of £25 million. That was the figure which the right hon. Gentleman quoted from my right hon. Friend; and it is with those factors taken into account that the figure of £575 million has been inserted in the Bill.
I think I should be putting the matter as clearly as I can if I said that what is taken into account here are the changes of last November and any other changes up or down in various items which have taken place in the normal way; but what is not taken into account are changes from the time of the Budget, or onwards. In fact, the figure represents the best estimate that could be made on the basis before the Budget. That is the substance of the matter.
As the right hon. Gentleman pointed out, these figures have to be assessed on some basis. They have very rarely proved to be wholly accurate in the past, but they have to be assessed for the purpose of the procedure laid down under the 1928 Act on the type of basis that has been adopted. I cannot answer his question as to what figure can be put as the result of the changes announced in the Budget. The right hon. Gentleman will appreciate that it is of the essence of a monetary policy such as we are pursuing that it is flexible. There may be changes up or down, and at this stage there is is no figure which it is possible to give to the Committee which would be of the slightest assistance in the discussion of the Bill. Indeed, were we to give an additional figure the calculations which could be based on it might be of considerable interest to a number of people outside this Committee.
Therefore it is not possible, taking into account the developments over the year, and taking into account the changes which events may make it wise to make upwards or downwards, to carry the matter beyond the point to which I have carried it that is to say, the position at which it was at the time when the Budget was introduced.
Mr. Jay: If it is possible for the Chancellor, on 7th November, to give the House a figure of £25 million, which was gross and not net, why is not it possible to make a similar estimate now? Why has the Government become so cagey? Would it be right to estimate that if the Treasury bill rate remains at the present level—we do not know whether it will—but if it does, that the figure must be something like three times that £25 million?
Mr. Boyd-Carpenter: It is one thing to give figures for one series of transactions at one particular time, but what I understood the right hon. Gentleman was asking was for a forecast of the result over the whole year, and that is a very different matter.
The second question he put is hypothetical, depending on what is the Treasury bill rate. I do not dissent from the basis of the calculations he gave in his speech. In round figures I think his mathematics were correct, but the inference to be drawn from them is another matter. I cannot say, and nobody can say, precisely what the figures will be during the year. Therefore, while as a mathematical exercise, what the right hon. Gentleman has said is perfectly valid, it would be a great mistake for hon. Members on either side of the Committee to base any very clear inference upon it.
I pass from the purely factual part of the right hon. Gentleman's speech to the comments which he made. Here I am in some amount of difficulty. It is really part of the accident of procedure which we follow that the purely budgetary side of monetary policy arises on this Clause. I have no doubt that I shall have to follow the example of the right hon. Gentleman and not go too far into the wider aspects of the matter. As I understand, the only point strictly material at this stage is the £575 million figure.
The right hon. Gentleman said, however, that he thought that this figure would go to swell the gross revenues of certain institutions. Indeed, in somewhat combative form he has made that assertion on previous occasions. Again, we are in the difficulty that we are touching only the fringe of the main problem of policy when we discuss this £575 million. It is true that, whatever the figure may be, there will be a gross increase in the
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revenues of certain institutions. It will be far from being a net increase because, not only in the case of banks is there the question of the rate that they will have to pay to their depositors, but there is the point of what may happen to the capital value of their holdings and stock.
Therefore, it would give a false impression to suggest that this is a measure which necessarily will be of special benefit to certain institutions. Its purpose is very different. It is part of the general monetary policy of the Government. This is not the occasion—neither the rules of order nor the circumstances make it the occasion—for a further argument on that general line. But perhaps I may be allowed to say, without incurring the displeasure of the Chair, that it is of the essence of this policy, by the disinflationary effect of it and by the way the monetary instrument is used, to strengthen the economy generally.
By its effect on our economy not only is it our view that it will, both from the balance of payments and other points of view, work beneficially, but even from the narrow budgetary point of view, with which strictly at this moment we are concerned, the effect on prices will affect even the budgetary problems. Therefore, it would be wrong to consider whatever the gross figure of increased interest charges may be in isolation from the effect which the policy of which that is an essential part will have on the general budgetary position and, still more, on the general economic position of the country, with its repercussions upon the narrow budgetary questions with which we are concerned.
I know that I shall not convince the right hon. Gentleman that I am right any more than he will convince me that he is right on the question of the broad policy, on which there is sincere and open disagreement between the two sides of the Committee. But I ask him when we are considering, as we are in this Clause, the narrow, isolated fact that the annual charge for Debt service will no doubt be somewhat higher than it has been, to bear in mind that this is part of the price which must be paid for a policy which on balance we believe to be right and which we believe to be helpful to the economy of the country.
Finally, I ask him to bear this in mind. I do not want to follow the example of

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some hon. Members and drag in the Budget surplus, but it is of the essence of a Budget surplus of this magnitude that it should have a disinflationary effect. That is the purpose which the late Sir Stafford Cripps advocated for his own substantial Budget surpluses. These interest charges are part of the same disinflationary process.
Therefore, I suggest to the Committee that, in the narrow sense, this is a proper form of budgetary expenditure which is not, for that reason, comparable with the other matters to which the right hon. Gentleman referred relating to direct Governmental expenditure. Within the rather narrow limits with which we are faced on this issue, I have put to the Committee to the best of my ability the fact that we simply cannot look at this figure in isolation. It is part of the general economic policy which the Government are pursuing and which I am sure hon. Members on both sides of the Committee have been pleased to note has had a steadying effect on world confidence and the economy of this country.
6.45 p.m.
Mr. Norman Smith: The Committee have listened to what I am sure most of us will have appreciated was a thoroughly unsatisfactory statement by the Financial Secretary. I believe that he is, in his own mind, in a complete muddle as to the whole business of this Clause. I listened most carefully to what he had to say. I am sure that I am not being unfair if I put it in this way: he led the Committee to understand that a sum of money of the order of £40 million per annum was a reasonable measure of the increased interest charges in respect of the National Debt arising from the policy of Her Majesty's Government.
The bare idea is quite fantastic. Demonstrably, the figure exceeds £100 million, as I shall show the Committee, but the Financial Secretary, in making his reply to my right hon. Friend the Member for Battersea, North (Mr. Jay), betrayed that in his own mind this provision of £575 million allows for increased interest in respect of Floating Debt, mainly Treasury Bills. Really, it does no such thing, nor can it do any such thing.
Let us look at the facts. I am sure that the Financial Secretary was hopelessly wrong, too, when he said that the
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funding operation last November involved a charge of £25 million. It could not do that. What happened was that £1,000 million of Floating Debt was funded, and the increase in the rate of increase was of the order of from ½ per cent. to 1¾ per cent. or less. If one multiplies 1.25 by 1,000, one does not get anything like £25 million a year. I have a fairly good memory. If I remember rightly, the Chancellor told the House at the time that the cost of that funding operation was £16 million per annum. The funding of £1,000 million of Floating Debt last November cost £16 million and not £25 million.
Mr. Boyd-Carpenter: The cost of the total operation was £25 million—the funding plus the increased bill rate.
Mr. Smith: Let us examine that statement. Over what period was that alleged figure of £25 million supposed to apply? There were last November outstanding some £5,500 million of Treasury bills, £1,000 million of which were funded and £200 million or £300 million have since been paid off, leaving a residue of about £4,200 million of these bills. My right hon. Friend the Member for Battersea, North said that the Treasury bill rate was now 2¼ per cent.
That is the sort of studied meiosis in which he likes to indulge—not a bad thing. Actually, the rate is now 2 5/16 per cent. It has touched 2⅜ per cent., and no doubt it will again. The difference between one-half and 2 5/16 is roughly 1.81, and if that is multiplied by £4,200 million—because the higher interest rate will have taken effect by the summer over the whole body of the Treasury bills, all of which are short term—elementary arithmetic shows that the increase is something approaching £80 million a year plus the £16 million to which the Chancellor referred.
That makes a total of more than £90 million in a full year once the higher rate has become fully operative over the whole field. If I take the figure at £78 million and add the £16 million, that comes to £94 million. It is not less than £90 million, and that is quite apart from the American Loan or anything of that sort.
I suggest that we have had a gross under-statement from the Financial Secretary. It is a thoroughly unsatisfactory statement, which reveals not merely that he cannot explain the matter, but that he

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is not even capable of working out most elementary arithmetical calculations or of using a sliderule. This £575 million surely applies to the funded Debt, and does not bring in the floating Debt to which my right hon. Friend referred. I think that the hon. Gentleman had better look at it again, and have it explained to him by his permament officials.
I am very glad indeed that this Clause has not been allowed to go through unchallenged. After all, it is a very important Clause, the proof of which is that, of all the 65 Clauses in this Bill, this is the only one which is mentioned in the four lines of big type at the beginning of the Bill defining the Bill's purpose—"to amend the law relating to the National Debt." We are being asked to accept that the permanent charge for the National Debt is to be £575 million a year, which is increased by £40 million. If that includes the interest on the American Loan, surely, we have a case for pleading that our circumstances are such that we could rightly ask for a waiver of interest in the next financial year. This may not be the time to ask for it, but it is certainly the time to raise it.
The Government cannot have it both ways. If they say that the country is in a serious financial position, that we have to do this and that, that the trade unions must exercise restraint and all the rest of it, if it is all that serious, we have fulfilled the qualification in the Washington Agreement about waiver of interest. There is no disgrace in doing that in a situation of this sort. It ought to be done, and it should be done to save £40 million for the taxpayers of this country, and I hope it will be done.
After all, £575 million is a large sum for this Committee to consider. I can remember when the annual charge for the National Debt was of the order of £20 million a year, and my father used to grumble because the Income Tax was 4d. in the £. In between the wars, the annual charge rose to £355 million, and now it is £575 million. The very vicious part of it is that the Sinking Fund, at a time when the National Debt is of the order of £25,000 million, has no impact on the capital value of that debt. When the permanent annual charge was £20 million, the Sinking Fund had a very perceptible impact and, indeed, during the
1220
100 years following the Battle of Waterloo, one quarter of the National Debt was paid off merely out of the operation of the Sinking Fund.
It was convenient to rentiers to have this National Debt, which is about the one solid permanent benefit to them arising from the putatively glorious revolution of 1689, and it is convenient to the party opposite to have it. When I look round the Committee, what do I see? I am a grandfather. It looks to me as if a considerable number of my colleagues on both sides of the Committee are not merely grandfathers, but something even more venerable, great-grandfathers, and I put it to them whether it is fair to posterity to take it for granted that we are going on for years in Finance Bills making provision for permanent annual charges of this order in order to find the interest for the rentier class owning a National Debt of this size.
In one respect, the Financial Secretary was right. He said that nobody could foretell what would be the total increase in interest charges in this financial year arising out of the Government's policy. I have already shown that it is not less than £90 plus £40 million, which makes some £130 million a year and it may be more. It may be necessary to raise the Bank rate again, and then the whole structure of gilt-edged may be undermined. If the Government remains in power for a few years, it certainly will be necessary, and we shall have an annual charge of a considerably higher sum, and my right hon. Friend was quite correct to remind the Committee that this increase is going into somebody's pocket.
The Financial Secretary's statement was most unsatisfactory, and, because of its unsatisfactory nature, and because he under-estimated the increase in the Budgetary charge, which he under-estimated to the tune of something like £70 million a year, I suggest that it would be a good thing to divide the Committee on this Clause and thus place our objection to it on record.
Mr. Chapman: The Financial Secretary was fairly generous towards a proposition which I put forward earlier, but I suspect that he will not be generous any more.
It is more than surprising that, when this Bill increases the amount to be paid in interest on the National Debt by some £200 million, there is no comment at any

1221
length from the benches opposite, except the defence of the figure by the Financial Secretary. It is even more surprising, in view of the fact that we have heard for many days throughout the whole of the debate on the Budget and the earlier stages of the Finance Bill, impassioned pleas from the other side for a reduction in the amount of money to be raised by the Government in taxation.
Throughout, we have had this moan, this carping criticism and this pressing of points on Ministers—and then running away from them—on the whole problem of reducing the size of the national expenditure. Yet, when these hon. Members come to the Clause on which they could voice their protests with some effect, we find them silent, and, I suppose, cowed by the bludgeons of the Chancellor exerted on them in a private committee.
Finally, we get the position which we have reached this afternoon, when we have an impassioned plea from the hon. Member for Oldham, East (Mr. Horobin) about the difficulties of raising money from people when the national expenditure is so high. Here, again, when the hon. Member has a chance to get at a couple of hundred million pounds which the Chancellor is extorting from unwilling taxpayers, he is not in his place to make a protest.
This Clause embodies all that is evil in this Bill, and I certainly hope that we shall vote against it. It embodies it to such an extent that it is the kind of Clause which has been picked out, not by some Socialist organisation, but by the Economic Commission for Europe, a body set up by United Nations, and which has said that this Budget in its total effect, and particularly through Clauses like this, is—and I quote the words of the Economic Commission—"generally regressive."
Here we have an impartial international body— [Interruption.] Certainly, it is an impartial international body, which has looked over the whole field of the Budget and the kind of proposal made in this Clause, and which, with no direct interest at all in what is happening in Britain, comes to the conclusion that this Bill is "generally regressive." I should have thought that, at this stage we should have had more support from hon. Members opposite.
1222
What is to happen later this year? We have now reached the situation in which, although the Financial Secretary is quite correct in saying that certain effects of the Chancellor's raising of interest rates were partly good, we can now see difficulties ahead in the balance of payments position and similar matters. Are we to have another twist of this screw? Shall we be faced later in the year with the position that because this present figure has not done all that was expected of it, it is to be even further increased? If we once start on that sort of thing, goodness knows where it will end.
7.0 p.m.
We on this side of the Committee certainly view this Clause with some alarm, and I now come to its effect on wage negotiations in this country. It is rather ironical that at the present stage, when the Chancellor is appealing for restraint in wage demands, we should have a Clause before the Committee which does more to incite wage demands than almost any other Clause in the Bill.
Mr. E. Partridge: Rubbish. Propaganda.
Mr. Chapman: The trouble with the hon. Gentleman is that he regards a pure statement of fact as propaganda. The fact is that a couple of hundred of million pounds will be voluntarily given to the rentier class, and this is a direct incitement to wage claims in this country.
Mr. Ralph Assheton: The hon. Gentleman is surely aware that he is entirely wrong in suggesting that £200 million extra is going to be put on the National Debt this year. If he thinks that, he does not understand in the slightest what he is talking about.
Mr. Chapman: I know that the right hon. Gentleman is referring to the fact that a considerable proportion will be returned in taxation and that the net cost of the raising of interest rates will not, in the end, be as much as £200 million; but he has to face the fact that this is only the expression of the total view taken in the Budget about the increase in incomes and allowances which will have the effect of making the rich richer and the poor poorer. That is the general underlying factor of this Budget.
Mr. Assheton: I wish to draw the hon. Gentleman's attention to the facts. He is suggesting that there is an additional charge in this year's Budget of £200 million in respect of interest on the National Debt. He must know, if he has studied the financial statement put forward by the Government, that that is quite incorrect. It is nowhere near that figure at all.
Mr. Chapman: The right hon. Gentleman is correct in challenging the exact total figure, but I am merely stating that the full effect of raising interest rates from 2½ to 4 per cent. will in the end be this kind of figure. The hon. Gentleman says that it is deflationary. Certainly, and that at a time when we can least afford to be more deflationary than we are at the moment.
In view of the fact that this Clause is a direct incitement to demands for increased wages, I think it is about time there was some plain speaking on the question. I personally believe that the full effect of the Budget is so strong in inciting wage increases that those increases are now justified, and that it is nothing less than hypocrisy for this Committee as a whole to express a view against wage increases when passing a Clause of this kind.
Mr. Frederic Harris: On a point of order. Is it in order, Colonel Gomme-Duncan, for the word "hypocrisy" to be used by one hon. Member about another? When the word was used the other day, the hon. Member using it had to withdraw it.
The Temporary Chairman (Colonel Alan Gomme-Duncan): I think the case in point was a complaint against an individual Member. This is a more general statement, but exaggerated statements of all kinds are undesirable.
Mr. Chapman: I was only saying that it would be hyprocrisy on my part as well on that of others to pass without protest a Clause which will do such untold harm to the economic situation of this country. Therefore, I hope we shall show our disapproval of it by voting against it.
I believe that in the next six months we shall have to face a considerable amount of industrial difficulty following demands for wage increases which the
1224
Government will try to prevent. It is opportune on this Clause to say that there are many people on this side of the Committee who believe that those wage demands will be justified and that the unions will be quite right to press them as hard as they can.
Mr. John Strachey: If a layman may intervene in this discussion, there is a question I should like to press upon the Financial Secretary. It is the question put to him very clearly by my right hon. Friend which he did not seem to deal with one way or another. That seemed to reveal an attitude of mind on the part of hon. Members opposite which I want to probe for a moment. As I understood, the most important thing which my right hon. Friend said was this. He agreed, and we on this side of the Committee agree, that there was need for some method or other of the restriction of credit, but we pressed strongly the view that one could have a quantitative restriction of credit without an increase in the price of money.
Mr. Spearman indicated dissent.
Mr. Strachey: I see that the hon. Member is shaking his head. When my right hon. Friend was speaking, the hon. Gentleman intervened and made it quite clear that in his view it was literally inconceivable that there could be a quantitative restriction of credit without an increase in the price of money.
Mr. Spearman: That is not something which could be done in a democratic society, but if the right hon. Gentleman is prepared to adopt totalitarian methods that is another thing.
Mr. Strachey: But were we not a democratic society after the last war, when we certainly had a quantitative restriction of trade? What we want is conscious decision and planning. If the hon. Gentleman thinks that physical controls are anti-democratic, then I do not agree with him in his definition.
I think it is an extremely important point because future Governments may well want to make restriction of credits at any time, and may want to employ a deflationary policy. Is it the view of hon. Members opposite that that can only be done by increasing the price, because we on this side of the Committee deeply dissent from that view owing to the very

1225
great liability and very great disadvantages which the increase in the price of money obviously entails?
I think that the outlook for future Chancellors of the Exchequer and for the country generally is a bad one if we really take the view that we cannot use quantitative methods without using the price mechanism. We are not sworn enemies of the price mechanism, although at times some of my hon. Friends do, I think, criticise it unduly in some fields. But, surely, it is fairly common ground that most contemporary opinion takes the view that where price mechanism works really badly is in the monetary field.
To try to regulate the monetary field, above all others, by the price mechanism seems to me an archaic point of view, if the hon. Member for Scarborough and Whitby (Mr. Spearman) will forgive me for saying so. Therefore, I was distressed by the failure of the Financial Secretary to deal with that issue. If he takes the same view as does the hon. Member for Scarborough and Whitby I think we ought to hear it.
This involves a deep issue of economic principle and, before we come to a decision upon it, it would be interesting to hear from him whether he thinks quantitative restrictions, on balance, are undesirable. I can understand that view. of course. They have disadvantages, but they are much lesser disadvantages than the disadvantage entailed in putting up the price of money. We should like to know whether, on the other hand, the Financial Secretary takes the view of the hon. Member for Scarborough and Whitby that it is inconceivable that one can reduce credit without putting up the price of money. That brings us up against the important difference of principle which divides us.
Mr. Boyd-Carpenter: Before I reply to the right hon. Gentleman the Member for Dundee, West (Mr. Strachey) perhaps, in order to prevent any misunderstanding remaining, I might deal with one matter raised by the hon. Member for Northfield (Mr. Chapman). He suggested that the increased charge on the Debt was of the order of £200 million. I suspect, though I may be wrong, that all he did was to look at Clause 64 and subtract one figure in that Clause from another. If he did that, of course, he was in rather agreeable
1226
innocence of the fact that the figure in Clause 64 is the figure for 1928, the figure fixed by the 1928 Act. The figure last year was £535 million, which I have already given to the Committee. Therefore, the increase, as far as this Clause is concerned, is an increase of £40 million. Whether it is an increase that ought to take place is another matter.
Mr. Chapman: I assumed that if the interest on the National Debt is about £500 million and a great deal of that was based on a 2½ per cent. rate, then by the time the full complex of the interest rate has reacted to the increased Bank rate of 4 per cent. the increase will be of the order to which I referred.
Mr. Boyd-Carpenter: The hon. Member is entitled to his opinion, as we all are, but I understood him to make a statement of fact on the Clause, and I still have a lingering suspicion that he arrived at that figure in the way I suggested.
I very much disagree with the description the right hon. Member for Dundee, West gave of himself as an amateur in these matters. I am sure we would all agree that he has fully acquired professional status. The point he raised was interesting, and I think it is quite right to say that it is here that there is a fundamental difference between the two sides of the Committee. The right hon. Gentleman's view and that of many of his hon. and right hon. Friends is that one should use quantitative restrictions anyway. I was glad to hear him say that the objective of restriction of credit was accepted by him and his right hon. Friends, and therefore we are concerned not so much with the objective as the means.
Our view, of course, is not, as he sought to suggest, that one should only use interest rates and not quantitative restrictions. Our view is that one should use both, and that the one will assist the other. The late Administration relied almost entirely on quantitative restrictions; and it is not unconnected with that view of theirs, if one looks at what was set out year after year in the Economic Survey as to what they thought should be invested, that when the year ended the amount in every case—I think I am right in saying—was substantially exceeded. I think that was because of their reliance solely on quantitative control.

1227
In our view it is easy to use quantitative control if by increasing the price one diminishes the demand, but one should back physical controls with the general influence of monetary policy. If one opposes physical controls to the whole flow, push and surge of economic forces, one makes them work much less effectively than they would work if both the forces were working on the same side. That is really the difference between us.
I do not know how far all this comes within discussion of this Clause, but you, Colonel Gomme-Duncan, in your tolerance, have allowed me to put that view. I think the Clause has now been fully discussed, and I hope that in view of the fact that a great deal of work is still before us, including a large number of new Clauses put down by hon. Members from both sides of the Committee, we shall be able, in whatever way the Committee thinks fit, to get on with this Clause.
7.15 p.m.
Mr. Jay: I think the discussion has served two purposes. First, it has elicited from the Financial Secretary an agreement, or an admission, with my calculation that if the present Treasury bill rates continue to prevail throughout this year the additional Government expenditure under this head will be something in the order of £80 million or thereabouts.
Mr. Boyd-Carpenter: All I accepted was the right hon. Gentleman's mathematics.
Mr. Jay: I think that is precisely the same point.
Mr. Boyd-Carpenter: Not quite
Mr. Jay: When the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) was talking about this somewhat mythical figure of £200 million, I do not think he had been in the Chamber or knew that we reached agreement—or whatever precise interpretation the Financial Secretary gives toit—on a figure of something like £80 million. Secondly, we are agreed that what really divides us is not the question whether some reasonable disinflationary restraint is necessary, but whether, in order to have that restraint, it is really necessary to have this very large increase in Government borrowing.
We are convinced that in order to obtain this extra disinflation this enormous sum—in relation to the kind of items we have discussed—is not really necessary, and that no case has been made out for it. It is because we do not think that case has been made out that I shall advise my hon. and right hon. Friends to divide against the Clause.
Question put, "That the Clause stand part of the Bill."
The Committee divided: Ayes, 241; Noes, 199.

Division No. 148.]

AYES

[7.20 p.m.

Aitken, W. T.

Bowen, E. R.

Crouch, R. F.

Allan, R. A. (Paddington, S.)

Boyd-Carpenter, J. A

Crowder, John E. (Finchley)

Alport, C. J. M.

Boyle, Sir Edward

Crowder, Petre (Ruislip—Northwood)

Amory, Heathcoat (Tiverton)

Braine, B. R.

Cuthbert, W. N.

Anstruther-Gray, Major W. J

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

Darling, Sir William (Edinburgh, S.)

Arbuthnot, John

Bromley-Davenport, Lt.-Col. W. H.

Davidson, Viscountess

Ashton, H. (Chelmsford)

Buchan-Hepburn. Rt. Hon P G. T

Deedes, W F.

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

Bullard, D. G

Digby, S. Wingfield

Astor, Hon. J. J. (Plymouth, Sutton)

Bullock, Capt. M.

Dodds-Parker, A. D

Astor, Hon. W. W. (Bucks, Wycombe)

Bullus, Wing Commander E. E

Donaldson, Cmdr. C E McA

Baldock, Lt.-Cmdr J. M.

Burden, F. F. A

Donner, P. W.

Baldwin, A. E.

Butcher, H. W.

Doughty, C. J. A.

Banks, Col. C.

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

Douglas-Hamilton, Lord Malcolm

Barber, A. P. L.

Carr, Robert (Mitcham)

Drayson, G. B.

Barlow, Sir John

Carson, Hon. E.

Drewe, G.

Baxter, A. B.

Cary, Sir Robert

Dugdale, Maj. Rt. Hn. Sir T.'(Richmond)

Beach, Maj. Hicks

Channon, H.

Duncan, Capt. J. A. L

Bell, Ronald (Bucks, S.)

Clarke, Col. Ralph (East Grinstead)

Duthie, W. S.

Bennett, F. M. (Reading, N.)

Clarke, Brig. Terence (Portsmouth, W.)

Eccles, Rt. Hon. D. M

Bennett, Dr. Reginald (Gosport)

Cole, Norman

Elliot, Rt. Hon. W. E

Bennett, William (Woodside)

Colegate, W. A.

Fell, A.

Bevins, J. R. (Toxteth)

Conant, Maj. R. J. E.

Finlay, Graeme

Birch, Nigel

Cooper-Key, E. M.

Fisher, Nigel

Bishop, F. P.

Craddock, Beresford (Spelthorne)

Fletcher-Cooke, C

Black, C. W.

Cranborne, Viscount

Fort, R.

Boothby, R. J. G.

Crookshank, Capt Rt. Hon. H. F C

Fraser, Hon. Hugh (Stone)

Bossom, A. C.

Crosthwaite-Eyre, Col. O. E.

Gage, C. H.

Galbraith, T. G. D. (Hillhead)

Linstead, H. N.

Robinson, Rowland (Blackpool, S.)

Gammons, L. D.

Lloyd, Maj. Guy (Renfrew, E.)

Robson-Brown, W.

Garner-Evans, E. H.

Lloyd, Rt. Hon. Selwyn (Wirral)

Rodgers, John (Sevenoaks)

Glyn, Sir Ralph

Lockwood, Lt.-Col. J. C.

Roper, Sir Harold

Godber, J. B.

Longden, Gilbert (Herts, S.W)

Ropner, Col. Sir Leonard

Gough, C. F. H.

Low, A. R. W.

Russell, R. S.

Gower, H. R.

Lucas, P. B. (Brentford)

Ryder, Capt. R. E. D

Graham, Sir Fergus

McAdden, S. J.

Salter, Rt. Hon. Sir Arthur

Gridley, Sir Arnold

McCorquodale, Rt. Hon. M. S.

Savory, Prof. Sir Douglas

Grimand, J.

Macdonald, Sir Peter (I. of Wight)

Schofield, Lt.-Col. W. (Rochdale)

Grimston, Hon. John (St. Albans)

Mackeson, Brig. H R.

Scott, R. Donald

Grimston, Sir Robert (Westbury)

McKibbin, A. J.

Simon, J. E. S. (Middlesbrough, W.)

Harden, J. R. E.

McKie, J. H. (Galloway)

Smyth, Brig. J. G. (Norwood)

Hare, Hon. J. H.

MacLeod, Rt. Hon. Iain (Enfield, W.)

Snadden, W. McN.

Harris, Frederic (Croydon, N.)

Macpherson, Maj. Niall (Dumfries)

Soames, Capt. C.

Harrison, Col. Harwood (Eye)

Maitland, Comdr J. F. W. (Horncastle)

Spearman, A. C. M

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

Maitland, Patrick (Lanark)

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

Harvey, Ian (Harrow, E.)

Manningham-Buller, Sir R. E.

Stanley, Capt. Hon. Richard

Harvie-Watt, Sir George

Markham, Major S. F.

Stevens, G. P.

Heald, Sir Lionel

Marshall, Douglas (Bodmin)

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

Heath, Edward

Marshall, Sidney (Sutton)

Stewart, Henderson (Fife, E.)

Higgs, J. M. C.

Maudling, R.

Stoddart-Scott, Col. M.

Hill, Dr. Charles (Luton)

Maydon, Lt.-Cmdr. S. L

Storey, S.

Hill, Mrs. E. (Wythenshawe)

Medlicott, Brig. F

Strauss, Henry (Norwich, S.)

Hinchingbrooke, Viscount

Mellor, Sir John

Stuart, Rt. Hon. James (Moray)

Holland-Martin, C. J.

Molson, A. H. E

Sutcliffe, H.

Hollis, M. C.

Nabarro, G. D. N.

Taylor, Charles (Eastbourne)

Holt, A. F.

Nicholls, Harmer

Teeling, W.

Hopkinson, Henry

Nicholson, Godfrey (Farnham)

Thompson, Kenneth (Walton)

Hornsby-Smith, Miss M. P.

Nicolson, Nigel (Bournemouth. E.)

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

Horobin, I. M.

Nield, Basil (Chester)

Thornton-Kemsley, Col. C. N

Horsbrugh, Rt. Hon. Florence

Noble, Cmdr. A. H. P.

Tilney, John

Howard, Gerald (Cambridgeshire)

Nugent. G. R. H.

Turner, H. F. L

Howard, Greville (St. Ives)

O'Neill, Rt. Hon. Sir H. (Antrim, N.)

Vane, W. M. F.

Hudson, Sir Austin (Lewisham, N.)

Ormsby-Gore, Hon. W. D.

Vosper, D. F.

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

Orr, Capt. L. P. S

Wakefield, Edward (Derbyshire, W.)

Hulbert, Wing Cmdr. N. J.

Osborne, C.

Wakefield, Sir Wavell (Marylebone)

Hurd, A. R.

Partridge, E.

Walker-Smith, D. C.

Hutchinson, Sir Geoffrey (Ilford, N.)

Peake, Rt. Hon. O.

Ward, Miss I. (Tynemouth)

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

Perkins, W. R. D.

Waterhouse, Capt. Rt. Hon. C

Hylton-Foster, H. B H.

Peto, Brig. C. H. M

Watkinson, H. A.

Jennings, R.

Peyton, J. W. W.

Webbe, Sir H. (London & Westminster)

Johnson, Eric (Blackley)

Pickthorn, K. W M

Wellwood, W.

Johnson, Howard (Kemptown)

Pitman, I. J.

White, Baker (Canterbury)

Jones, A. (Hall Green)

Powell, J. Enoch

Williams, Gerald (Tobridge)

Joynson-Hicks, Hon. L. W.

Price, Henry (Lewisham, W.)

Williams, Sir Herbert (Croydon, E)

Kaberry, D.

Prior-Palmer, Brig. O. L.

Williams, R. Dudley (Exeter)

Keeling, Sir Edward

Profumo, J. D.

Wills, G.

Lambert, Hon. G.

Raikes, H. V.

Wilson, Geoffrey (Truro)

Lambton, Viscount

Rayner, Brig. R.

York, C.

Langford-Holt, J. A.

Redmayne, E.

Law, Rt. Hon. R. K.

Remnant, Hon. P.

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

Renton, D. L. M.

TELLERS FOR THE NOES:

Legh, P. R. (Petersfield)

Roberts, Peter (Heeley)

Mr. Studholme and Mr. Oakshott.

Lennox-Boyd, Rt. Hon. A. T.

Robertson, Sir David

NOES

Acland, Sir Richard

Clunie, J.

Glanville, James

Albu, A. H.

Cocks, F. S.

Greenwood, Anthony (Rossendale)

Anderson, Alexander (Motherwell)

Coldrick, W.

Grey, C. F.

Anderson, Frank (Whitehaven)

Collick, P. H.

Griffiths, David (Rother Valley)

Attlee, Rt. Hon. C. R.

Cove, W. G.

Griffiths, Rt. Hon. James (Llanelly)

Awbery, S. S.

Craddock, George (Bradford, S.)

Hall Rt. Hon, Glenvil (Colne Valley)

Baird, J.

Crosland, C. A. R.

Hall, John (Gateshead. W.)

Balfour, A.

Cullen, Mrs. A.

Hannan, W.

Barnes, Rt. Hon. A. J

Daines, P.

Hardy, E. A.

Bartley, P.

Dalton, Rt. Hon. H

Hargreaves, A.

Benn, Wedgwood

Davies, A. Edward (Stoke, N.)

Harrison, J. (Nottingham, E.)

Benson, G.

Davies, Ernest (Enfield, E.)

Hastings, S.

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

Davies, Harold (Leek)

Hayman, F. H.

Bing, G. H. C.

Deer, G.

Henderson, Rt. Hon A (Rowley Regis)

Blackburn, F.

Delargy, H. J.

Herbison, Miss M

Blenkinsop, A.

Dodds, N. N.

Hobson, C. R.

Blyton, W. R.

Ede, Rt. Hon. J. C.

Holman, P.

Boardman, H.

Edwards, Rt. Hon. Ness (Caerphilly)

Holmes, Horace (Hemsworth)

Bowles, F. G.

Field, W. J.

Houghton, Douglas

Braddock, Mrs. Elizabeth

Fienburgh, W.

Hoy, J. H.

Broughton, Dr. A. D. D.

Finch, H. J.

Hudson, James (Ealing, N.)

Brown, Thomas (Ince)

Fletcher, Eric (Islington, E.)

Hughes, Cledwyn (Anglesey)

Burke, W. A.

Follick, M.

Hughes, Emrys (S. Ayrshire)

Castle, Mrs. B. A.

Forman, J. C.

Hynd, H. (Accrington)

Champion, A. J.

Fraser, Thomas (Hamilton)

Hynd, J. B. (Attercliffe)

Chapman, W. D.

Freeman, John (Watford)

Irvine, A. J. (Edge Hill)

Chetwynd, G. R.

Gaitskell, Rt. Hon. H. T. N

Irving, W. J. (Wood Green)

1230

1231

Janner, B.

Nally, W.

Steele, T.

Jay, Rt. Hon. D. P. T.

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

Stewart, Michael (Fulham, E.)

Jeger, George (Goole)

Oldfield, W. H

Stokes, Rt. Hon. R. R.

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

Oliver, G. H.

Strachey, Rt. Hon. J.

Jenkins, R. H. (Stechford)

Orbach, M.

Summerskill, Rt Hon. E

Johnson, James (Rugby)

Oswald, T.

Sylvester, G. O

Jones, David (Hartlepool)

Padley, W. E.

Taylor, Bernard (Mansfield)

Jones, Jack (Rotherham)

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

Taylor, John (West Lothian)

Jones, T. W. (Merioneth)

Pannell, Charles

Taylor, Rt. Hon Robert (Morpeth)

Keenan, W.

Parker, J.

Thomas, David (Aberdare)

Kenyon, C.

Paton, J.

Thomas, lorwerth (Rhondda, W.)

Key, Rt. Hon. C. W.

Pearson, A.

Thomas, Ivor Owen (Wrekin)

Kinley, J.

Porter, G.

Thurtle, Ernest

Lever, Leslie (Ardwick)

Price, Joseph T. (Westhoughton)

Tomney, F.

Lewis, Arthur

Price, Philips (Gloucestershire, W.)

Ungoed-Thomas, Sir Lynn

Lindgren, G. S.

Proctor, W. T.

Usborne, H. C

Lipton, Lt.-Col. M.

Pryde, D. J.

Viant, S. P.

Logan, D. G.

Pursey, Cmdr. H.

Wallace, H. W.

McGhee, H. G.

Reid, Thomas (Swindon)

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

McInnes, J.

Rhodes, H.

Weitzman, D.

McKay, John (Walisend)

Richards, R.

Wells, Percy (Faversham)

McLeavy, F.

Roberts, Albert (Normanton)

Wells, William (Walsall)

MacMillan, M. K. (Western Isles)

Robinson, Kenneth (St. Pancras, N.)

West, D. G.

MacPherson, Malcolm (Stirling)

Rogers, George (Kensington, N.)

Wheatley, Rt. Hon. John

Mainwaring, W. H.

Royle, C.

White, Mrs. Eirene (E. Flint)

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

Schofield, S. (Barnsley)

White, Henry (Derbyshire, N.E.)

Mann, Mrs. Jean

Shackleton, E. A. A

Whiteley, Rt. Hon. W.

Manuel, A. C.

Shawcross, Rt Hon. Sir Hartley

Willey, Frederick (Sunderland, N.)

Marquand, Rt. Hon H A

Shinwell, Rt. Hon E.

Williams, David (Neath)

Mellish, R. J.

Short, E. W.

Williams, Rt. Hon. Thomas (Don V'll'y)

Mikardo, Ian

Shurmer, P. L. E.

Williams, W. R. (Droylsden)

Mitchison, G. R.

Silverman, Julius (Erdington)

Williams, W. T (Hammersmith, S.)

Morgan, Dr. H. B. W.

Silverman, Sydney (Nelson)

Winterbottom, Ian (Nottingham, C.)

Morley, R.

Simmons, C. J. (Brierley Hill)

Winterbottom, Richard (Brightside)

Morris, Percy (Swansea, W)

Slater, J.

Woodburn, Rt. Hon. A.

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

Smith, Norman (Nottingham, S.)

Wyatt, W. L.

Mort, D. L.

Snow, J. W.

Yates, V. F.

Moyle, A.

Sorensen, R. W.

Younger, Rt. Hon. K.

Mulley, F. W.

Soskice, Rt. Hon Sir Frank

Murray, J. D.

Sparks, J. A

TELLERS FOR THE NOES:

Mr. Wilkins and Mr. Arthur Allen.

Question put, and agreed to.

Clause ordered to stand part of the Bill.
Clause 65 ordered to stand part of the Bill.

New Clause.—(ADDITION TO STANDARD PROFITS IN RESPECT OF BORROWED MONEY.)
(1) Where a body corporate's standard profits for a full year fall to be calculated by reference to its profits during the standard years then—

(a) if the average amount of its borrowed money in the chargeable accounting period exceeds the average amount of its borrowed money during the standard years, its standard profits for a full year shall be increased by an amount equal to four per cent. of the difference; and

(b) if the average amount of its borrowed money in the chargeable accounting period is less than the average amount of its borrowed money during the standard years, its standard profits for a full year shall be decreased by an amount equal to four per cent. of the difference:

Provided that where the body corporate makes an election under paragraph (a) of subsection (4) of section thirty-three of this Act paragraphs (a) and (b) of this subsection shall have effect as if it had had no borrowed money during the year specified in the election.
(2) Where a body corporate's standard profits for a full year fall to be calculated
1232
otherwise than by reference to its profits during the standard years, its standard profits for a full year shall be increased by an amount equal to four per cent. of the average amount of its borrowed money in the cheargeable accounting period:
Provided that this subsection shall not apply to any chargeable accounting period for which an election under section thirty-five of this Act has effect as respects the body corporate.—[Mr. Boyd-Carpenter.]
Brought up, and read the First time.
Mr. Boyd-Carpenter: I beg to move, "That the Clause be read a Second time."
This is the first of the new Clauses in the name of my right hon. Friend the Chancellor. It carries out the undertaking which he gave a week ago to insert a provision in the Bill to provide—for E.P.L. purposes—for the position of borrowed money. As the tax was introduced there was no such provision. The reason why, on consideration, it was thought desirable to introduce this provision was described briefly by my right hon. Friend a week ago.
The purpose of the Clause is to provide that where standard profits are to be calculated by reference to profits during

1233
the standard years, borrowed money shall be taken into account by adding a figure to the standard of the rate of interest actually paid plus 4 per cent. A similar provision is made under subsection (2) of the new Clause, where the calculation is based either on nominal capital or on the net assets standard.
These changes provide, in particular, for the case where debenture capital has been raised, as it has been on a substantial scale by a good many companies during recent years. Simply for purposes of comparison it might interest hon. Members to note what was done on this subject under the wartime Excess Profits Tax. There, allowance was also made for borrowed money, but a slightly different formula was adopted. In that case the amount of interest paid was deducted from a maximum of 8 per cent. and the resultant figure was the allowance for Excess Profits Tax purposes. It was the same formula that we are applying, but in reverse.
That is the effect of the Clause, and the only other matter which arises is whether this is the correct percentage of addition. It was because there are Amendments down that I thought it convenient to move the Clause at this stage.
7.30 p.m.
Mr. Roy Jenkins: We have some Amendments on the Order Paper, Colonel Gomme-Duncan. I do not know whether it is your intention to call them and whether we shall have the main debate on the Amendments, or not.
The Temporary Chairman (Colonel Gomme-Duncan): It is proposed to call the Amendments, but of course the decision on the Clause must be reached before we can amend it.
Clause read a Second time.
Mr. Jenkins: I beg to move, as an Amendment to the proposed Clause, in line 6, to leave out "four," and to insert "two."
The Temporary Chairman: Before we begin the discussion, may I suggest that it would be for the convenience of the Committee if the three Amendments on the new Clause—all similar—were taken together.
Mr. Boyd-Carpenter: That would be convenient.
Mr. Jenkins: This is one of the concessions which the Chancellor made as part of a great batch of concessions placed on the Order Paper a week or so ago, and it is one of the few which we think go rather too far. The provision is that where a company borrows new money, or has been operating on something other than profits actually earned, where its borrowed capital is part of the structure, then this company, in arriving at its standard profits, should be able not only to deduct the cost of servicing the loan capital, however high it may be, but also to deduct an additional 4 per cent. over and above that.
That seems an excessively generous provision. There can be no conceivable obligation upon a company to pay to its debenture holders, or to those who hold an unsecured note issued by it, any sum greater than that covered by the rate of interest of the debenture or the unsecured note. That is already fully covered, without this special provision for an additional 4 per cent.
What is the basis of giving the 4 per cent. concession? Is it to enable a company to make some provision for redeeming the loan capital which is raised in this way? If so, that seems a rather doubtful proposition, because what it means in effect is that a company which raises loan capital will be allowed to meet that capital, as far as E.P.L. is concerned, out of tax-free profits and to build up the assets which belong to the ordinary shareholders out of tax free profits, as far as E.P.L. is concerned.
As far as our general taxation provisions are concerned, it is obviously the case that, out of taxed profits, companies apply a great part of their profits to redeeming prior charges or building up the business in other ways. In that way, out of taxed profits, the value of the holdings of the ordinary shareholder is substantially increased. What we are providing for here, however, is a situation in which companies are entitled to do that out of tax-free profits as far as E.P.L. is concerned, and there does not seem any good reason for such a principle.
Further, it may benefit a company to have raised loan capital in the past instead of ordinary share capital. Suppose we take the case of a company which, some time ago, brought into its capital

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structure debentures bearing a very high rate of interest—a 7 per cent. debenture, not a very usual thing but one which might not be altogether unknown in certain circumstances in a very doubtful company. That company, which will get 7 per cent. in the normal way for servicing the debenture, will get an allowance of another 4 per cent. under the new Clause, whatever its capital structure, making a total of 11 per cent. by virtue of the capital raised by means of that debenture. Yet if it were dependent upon a capital standard and not upon either a net asset standard or a standard based on profits actually earned, it would get only 10 per cent. on capital raised by means of ordinary share capital.
That seems to me an entirely anomalous position—that it may have paid a company better in the past to have raised money by means of issuing a debenture rather than by means of issuing ordinary share capital. It is conceivable in certain companies that this may even apply in the future. I am aware that ordinary share capital raised in the future will raise the profit standard of the company not by 10 per cent. but by 12 per cent.
We do not know how far the Government intend to go in the direction of dearer money, although we had a lot of discussion about that on an earlier Clause. Certainly they gave no indication then, nor is there any indication in the present situation, that they have yet achieved their objective by the policy of dearer money, as far as it has gone, or that they will not need to go further in this direction. If they do go further in this direction, it may be that companies which, by their nature, are not of very high credit standing, will have to pay very high rates of interest indeed on loan capital which they raise. If in one or two exceptional cases it were to get to 8 per cent., companies would be doing better and existing ordinary shareholders would be doing better to raise their new capital by means of issuing loan capital instead of ordinary share capital, or, even, of ploughing capital back into the business.
It is highly undesirable that any such possibility should arise, but if there were a case of a company which had to pay a very high rate of interest on loan capital,
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that could well be the situation. Suppose a company had to choose between raising equity capital and raising loan capital bearing a rate of interest of about 8 per cent. If it chose the former and raised equity capital, it would let new people in from outside to share in the interests of the existing shareholders. Whatever dividend is paid on the ordinary shares, then by however much the 12 per cent. exceeds that, the amount to which that enables money to be put back belongs to the new ordinary shareholders rather than the previous ordinary shareholders.
If, on the other hand, the company decides to raise money by loan capital, the only thing which will belong to the new debenture holders will be the interest which they will receive. and the additional profits standard, which will let rather more money be ploughed back, will go to swell the value of the holding of the existing ordinary shareholders. I see a certain danger if the policy of dearer money were to be pushed further than it has been pushed at present. This generous provision might have the unfortunate effect of encouraging companies to raise new capital in the form of debentures or other loans rather than in the form of share capital.
It is undesirable that that should be encouraged. It is undesirable that one should give companies fiscal inducements—and this was one of the difficulties about the Profits Tax under the late Government—to have a highly geared capital structure. It is desirable to encourage them to have a low-geared capital structure—to have a lot of ordinary share capital and not to have a great pyramid of loan capital. I am afraid that this generous provision may go too far to encourage that undesirable result.
My hon. Friends and myself have put down an Amendment to reduce the amount to 2 per cent. We did not oppose the Second Reading of the new Clause because as we have shown from previous speeches, we believe strongly in the heavy taxation of company profits, although we regard the method of doing it by E.P.L. as a very bad one. Therefore, we upon this side of the Committee look with great favour upon all the proposals which the Chancellor has brought forward at a very late stage to alleviate the very damaging effects of the E.P.L., but in this case it

1237
does seem that he has been a little unnecessarily generous.
We feel that, perhaps, there is some case for giving a company which has raised or is raising loan capital a certain amount of allowance beyond the mere rate of interest, but 4 per cent. does seem to us to be an over-generous provision; it seems to us to be one which may encourage companies to raise loan capital rather than ordinary share capital in certain circumstances. Therefore, we feel that the Chancellor may save a small amount of the revenue which he is giving away by his concessions by this 2 per cent. We feel that our proposal is very unlikely to have any deleterious effects, and we hope that the Government will seriously consider the Amendment.
Mr. Crosland: Like my hon. Friend, I should like to go into this question in rather more detail than did the Financial Secretary. I am not making any complaint against him on that ground, because he could not know how much interest this Clause was going to arouse.
Mr. Boyd-Carpenter: The hon. Gentleman will forgive me, but if he had been in his place at the time when I moved the Second Reading of the new Clause he would have appreciated that I did indicate that there were Amendments down, and that I would reserve my observations on them until they were moved. I was not discourteous, but was only waiting to hear the arguments for the Amendments before answering them.
Mr. Crosland: I certainly did not intend to suggest that there was any discourtesy on the hon. Gentleman's part, for he has been consistently courteous throughout the Committee stage.
This new Clause is the result of a great deal of pressure on the Government; indeed, the failure to make some provision of this sort was one of the points about the original proposals for the levy which were picked on for most discussion in the economic and financial Press, and the argument put forward. I want to go into it in some detail, because I think it is an important point. The argument put forward was this, that a company, broadly speaking, had two alternative methods of raising money: it might raise it by an issue of share capital, or it might raise it by borrowing.
1238
If we take the case of a company wishing to raise £100,000 of new money, it may either raise it through the issue of 5 per cent. debentures, or it may go to the market with a new issue of ordinary shares. The argument was that if the company raised the new money by means of 5 per cent. debentures, it was then allowed only 5 per cent. on that £100,000 before E.P.L. first became payable.
If, on the other hand, it raised the new money by means of an issue of share capital, it was then, under the original provisions, allowed 10 per cent. on that £100,000 before it became liable to E.P.L., and in one of the Chancellor's later Amendments it is now allowed 12 per cent. on that without E.P.L. liability. The argument was that this was a very unfair disparity, between merely being allowed the rate of interest, 5 per cent. in the one case, and in the other case being allowed 10 per cent., as originally it was, and 12 per cent. as it now is. The argument was that this disparity was unfair and had no justification on any grounds of economics or anything else.
I want to suggest that much of the argument on this point was in fact highly misleading—much more misleading, I think, than my hon. Friend the Member for Stechford (Mr. Roy Jenkins) made out in his speech, because clearly the 5 per cent. interest payable on those debentures could be offset by the company against Profits Tax, whereas the 10 per cent. or 12 per cent. allowed on any share capital before becoming liable to E.P.L. naturally was subject to the Profits Tax. If we bring in the factor of Profits Tax, the discrepancy between the two figures is nothing like as great as appears at first sight.
Suppose there was a full distribution—I am taking the extreme limiting case here—suppose a full distribution with nothing put to reserves, the 10 per cent. that is allowable on share capital before E.P.L. becomes payable then in fact becomes, at the new Profits Tax rate of 22½ per cent., 6.9 per cent.—once Profits Tax has been paid, assuming a full distribution, and even with that 12 per cent., once Profits Tax has been paid on a full distribution, the figure allowed before E.P.L. becomes payable is then reduced effectively to 8.3 per cent, and so it is clear, once we take into account the factor of Profits Tax, and the contrast between what is allowable

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in the case of debentures, namely, a mere 5 per cent., and what is allowable in the case of share capital, namely, 10 per cent. originally but 12 per cent. on new issues—once we take Profits Tax into account this disparity becomes very much less than appears at first sight.
7.45 p.m.
Surely it is right and reasonable that there should be a substantial disparity between the percentage allowed for E.P.L. purposes on borrowed money, on the one hand, and of share capital on the other hand. This seems to me perfectly logical and perfectly sensible—that there should be a disparity, because, after all, the borrowed money costs very much less to raise than the issue of new share capital. In the case which I have taken by way of illustration, the £100,000 obtained by a new issue of debentures only costs the rate of interest of 5 per cent., whereas a similar sum of money raised by a new issue of share capital, of course, would cost effectively very much more to raise—for perfectly obvious and sensible reasons.
What is the excess that we are interested in when we are considering this matter? It is surely the excess over the essential cost to the company—or the prospective cost to the company—of raising this extra £100,000 of money; and the plain fact is that the effective cost to the company is much greater in the case of the issue of new share capital than it is in the case of borrowing to the same amount; and this is particularly so today, with yields as high as they are now—obviously very much higher than they were a year ago. So this is particularly true at the present moment.
The new Clause comes very near to eliminating completely this gap between what is allowed in respect of borrowed money and what is allowed in respect of new issues of share capital. In the case I took, the case of 5 per cent. debentures. 5 per cent. actual rate of interest on the debentures plus an additional 4 per cent.—the figure laid down in this Clause—is now allowed so far as those debentures are concerned, but if we take the case of share capital, and allowing the company makes a full distribution, and allowing also for the fact that Profits Tax has now been raised to 22½ per cent., this cost—this 9 per cent. which is allowed for de-
1240
bentures—comes to more than the 12 per cent. which is allowed on the new issue of share capital, once we take the distributed Profits Tax into account. In fact, the 9 per cent. allowed on debenture compares with 8.3 per cent. when once we take Profits Tax into account, and this seems to me—and this is the point which my hon. Friend did make, though not, as I say, strongly enough—really an absurdity—that the allowance in respect of borrowed money is actually greater now in many cases than the allowance in respect of a new issue of share capital.
We realise that there is a case for allowing a company for the purposes of E.P.L. something over and above the actual rates of interest it has to pay on borrowed money. It may be reasonable to say it should make some net profits on that borrowed money which it is using before it becomes liable to E.P.L.—over and above the rate of interest it has to pay. That may be a perfectly reasonable case.
It may be reasonable to say that before it becomes liable to levy it should be allowed to make some provision for repayment of the borrowed money. But we think, in view of the considerations that I have given, that 4 per cent. goes very much too far, and that is why we put forward this Amendment to reduce the figure of 4 per cent. to 2 per cent. We believe that this figure will be adequate for the legitimate purposes for which it is required and that 4 per cent. is undoubtedly very much too high.
The real argument which I have been trying to make is that if we accept the figure of 4 per cent., it then weighs the scales too heavily against a company which wants to raise new equity capital and in favour of doing so by borrowing—the issue of debentures, unsecured loans and so on; and it weighs the scales too heavily against the issue of new equity capital. I agree that there is a case for saying that the effects of taxation over the last few years have been to discriminate too strongly against the issue of new capital.
We take the view that so far as discrimination already exists because of the effects of Profits Tax, nothing should be done under levy which makes it worse. It is for that reason that we wish to reduce the temptation to companies wishing to raise new capital to do so by borrowing and not to do so by the issue of new

1241
equity capital. Because we want to reduce that temptation, we are moving this Amendment that 4 per cent. should be 2 per cent.
Mr. Grimond: There is, I think, general agreement in the Committee that some such new Clause as this is necessary. The argument turns on the amount, whether it should be 4 per cent. or 2 per cent. I must say that I share the views of the hon. Member for Gloucestershire, South (Mr. Crosland) that it is very undesirable to encourage the raising of capital by debentures or fixed charges rather than by the issue of equity shares.
On the other hand, I think that we have to realise that this new Clause will affect not only capital raised now or in the future but affects the company which has already raised capital. In the years which it will cover, a great deal of capital has been raised by debentures, not so much because a company wanted to do that, but because it was encouraged to do so.
I think, too, that it has often been a developing company which has found it easier to raise capital by way of debentures than by a new issue. Personally, I am not convinced by the argument put forward in favour of this Amendment. I believe that if we say that 4 per cent. is too high for the reasons which have been given, we shall be leaving out of account that much of this money has really been raised for the same purpose as if it was equity capital, and it is not fair to say that really all a company which raises capital by debentures wants is to be able to earn enough with that money to be able to pay interest on the debentures and create a sinking fund. I do not think that is always sufficient.
It requires also to earn enough with that money to build up reserves in business and to enable it to supply itself with working capital and with capital in general. Therefore, it should be entitled to some considerable amelioration of the terms of the levy, such as is given by this new Clause. We have to bear in mind when considering this matter at every stage that companies today are not free agents. They have been affected again and again by changes in the economic situation, or changes in the financial
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policy of the Government which are entirely outside their control. A great many companies are going to be affected, for instance, by devaluation when it comes to assessing them for liability under this levy or by the activities of the new Issues Committee, and so on.
I hope that the Financial Secretary will be able to give at least some indication of his views about the future. I hope he will say that it is not desirable to make companies conform to some capital structure imposed upon them, and that as far as possible the policy of the present Government will be to try and avoid interference with their normal growth.
I also hope that he will give us some financial reason for the justification of this figure of 4 per cent. Personally, I should not like to do so. I do not know why 4 per cent. was chosen. But I feel that in this Committee the financial reasons for this levy, if there are any good financial reasons, have not been stressed sufficiently. Moral reasons and reasons based on the fulfilment of pledges have been stressed. But after all this, the country, as I think we all agree, is in a very serious financial state.
If the Government are going to bring in proposals in the Finance Bill, they ought to be justified with reference to the economic state of the country and not merely to fulfil electoral pledges that may have been given. If it is necessary to break electoral pledges I am sure that the Government would accept the proposition that they should do so if it is in the interests of the country. I hope that the Financial Secretary will tell us why 4 per cent. was chosen. I certainly think that 4 per cent. is not an excessive figure. I think, however, that the Amendment will have served a very useful purpose if it encourages the Government to tell us why they chose this particular figure.
Mr. Boyd-Carpenter: I think that in this sort of case the precise figure one favours is a matter of judgment and of forming one's view of what seems to be in substance the rate at which to fix the figure; and it is, therefore, a matter upon which legitimate opinions can differ. I think there was great force in what the hon. Member for Orkney and Shetland (Mr. Grimond) said as to the undesirability of forcing companies to adopt a

1243
capital structure other than that which, in their own judgment of their own needs, they approve. I think that is a consideration which is rather material to this Amendment, as well as an extremely sound principle.
The hon. Member for Stechford (Mr. Roy Jenkins), in moving this Amendment, gave us his view that we were overgenerous in the fixing of this particular figure. In view of criticisms on other parts of this tax as to lack of generosity, there was a certain refreshing novelty in that criticism; but it is, of course, a fact that when looking at this problem it is much a matter of opinion whether 4 per cent. is over-generous or not. I am bound to say that I see no evidence of what the hon. Member suggested. I will come to the reasons in a moment. Perhaps I may, first of all, comment on some of the figures which the hon. Member for Gloucestershire, South (Mr. Crosland) adduced in supporting the Amendment.
So far as I could follow him—the hon. Member will himself appreciate the difficulties sometimes in following figures in an argument across the Floor of the Committee—the figures were based on the assumption that all the profits earned as a result of the borrowing of this money would be distributed. I think that is the basis of his calculation.
Mr. Crosland Mr. Crosland indicated assent.
Mr. Boyd-Carpenter: I am glad to see that the hon. Member confirms that. That being so, it would seem to me somewhat to invalidate the conclusions he based on it. It certainly would not be the experience of most hon. Members that companies which raised loan capital promptly distributed all the profits made as a result of the use of that loan capital. It would be, in most cases, a most unwise and improvident thing for them to do, from every point of view, and I do not think that we need necessarily concern ourselves very much with the effect of these extreme cases. We have to concern ourselves much more with the general effect in the generality of cases. What we have to do there is to try to keep a fairly even balance between an excessive encouragement and an excessive discouragement to use loan capital.
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8.0 p.m.
I was interested to note one thing about the Amendment of the hon. Member for Stechford. He tabled the Amendment to reduce the figure from 4 to 2 per cent. at a time when the figure in the Bill for new capital or profits ploughed back was 10 per cent. It was subsequent to his tabling of the Amendment that my right hon. Friend brought forward the proposals which raised the figure to 12 per cent. Therefore, some of the force of his argument as to the relationship between the figures for loan capital and profits ploughed back and new ordinary capital has been diminished by the change which my right hon. Friend has effected in the latter figure.
If we are concerned, as we all are, to secure that the relationship is the right one, that undue pressure is not put upon companies on either side, the fact that one figure has been altered—whether in the hon. Member's opinion that has rightly or wrongly been done is not at this point material—must affect another. Therefore, it seems to me the force of his argument would have been stronger had the rest of the Bill remained as it was at the time that he tabled the Amendment.
Mr. Jenkins: The Financial Secretary is correct in his description of the chronological course of events. This is the first reason I have heard for the very odd order in which the Chancellor tabled his Amendment, one batch before the weekend and another batch afterwards.
Mr. Boyd-Carpenter: My view is that on the 12 per cent. basis for new capital and profits ploughed back, the 4 per cent. on the loan capital is right. Perhaps it seems to us just about as right as probably the previous figure, if the Amendment were accepted, would have seemed right to the hon. Gentleman, but that is a matter on which opinions can differ.
We went very carefully into the matter before tabling the main Amendment which is embodied in the new Clause, and although much of what the hon. Member has said is persuasive, as it always is, I am convinced that our figure of 4 per cent. is right in substance. This part of the operation of the tax will be watched, as all parts will be. The objective which I have already disclosed to the Committee, of seeing that the tax operates fairly in the sense of not penalising or over-encouraging other types of

1245
capital, will be borne in mind, but we are inclined to think at this stage that 4 per cent. is the right figure and that it should stay.
Mr. Gaitskell: The Committee is indebted to my two hon. Friends for raising this important matter and for the very clear and interesting speeches which they have delivered. I agree with the Financial Secretary that we are not on a major issue here. This is certainly a minor point, and a point on which one can legitimately accept his argument that it is a matter of opinion and judgment. I think my hon. Friends will agree that he has given us a courteous and clear reply.
I must admit that one of his arguments certainly weighed with me, and that was that since the Amendment was put down the Chancellor has increased the capital standard rate from 10 per cent. to 12 per cent. In comparing the position of a company desiring to raise capital by the issue of ordinary shares or by a loan the balance has, so to speak, by that Amendment of the Chancellor's been put rather further in the direction of equity capital. Therefore, the argument for reducing the figure from 4 per cent. to 2 per cent.—I have not had time to consult my hon. Friends—is to that extent weakened.
It has been useful to have the discussion. In general, we all agree that some allowance should be made, as both my hon. Friends have made clear, for an addition to profits arising out of the raising of additional loan capital. We have had a discussion on just how much there should be, but I do not feel that it is exactly a matter which we wish to press any further.
Mr. Jenkins: I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause added to the Bill.

New Clause.—(COMPUTATION OF PROFITS FOR PURPOSES OF EXCESS PROFITS LEVY IN THE CASE OF CONCERNS PRODUCING CERTAIN METALS, ETC.)
(1) If the Treasury certify that an increase in output of any metal, or of oil or asbestos, over output at the normal rate is essential in the national interest, a body corporate whose trade or business consists of or includes the mining of the metal, the getting of oil from oil wells or the extraction of asbestos from natural deposits may, by notice in writing given to the
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Commissioners within twelve months from the end of its first chargeable accounting period, or within such longer period as the Commissioners may in their discretion allow, elect that its profits shall be computed, for the purposes of the excess profits levy, in accordance with the following provisions of this section, and those provisions shall have effect accordingly unless the certificate is revoked.
(2) If in any chargeable accounting period the profits of the body corporate include profits attributable to the output of metal, oil or asbestos in excess of the output at the normal rate as defined in the next two following subsections (in this section referred to as "additional output"), a deduction shall be allowed equal to an amount representing profit at the normal rate on so much of the additional output as was achieved within the chargeable accounting period.
(3) Where a body corporate's standard profits for a full year fall to be calculated by reference to its profits during the standard years, its output of the metal, oil or asbestos at the normal rate shall be taken to be its output thereof during the standard years, reduced so as to bear to the whole of that output the same proportion as the length of the chargeable accounting period bears to two years less so much, if any, of the first of the standard years as preceded the commencement of the body corporate's trade or business:
Provided that where, by virtue of an election under paragraph (a) of subsection (4) of section thirty-three of this Act, the amount mentioned in that paragraph is treated as its profits for the year specified in the election, its output in that year shall be taken to have been an output profit on which at the normal rate would be equal to that amount.
(4) Where the body corporate's standard profits for a full year fall to be calculated otherwise than by reference to its profits during the standard years, its output at the normal rate of the metal, oil or asbestos shall be taken to be an output profit on which at the normal rate would be equal to its standard profits, calculated without regard to any undistributed profits or over-distribution of profits and without regard to any sums received or paid in cash by the body corporate after the date specified in the next following subsection in respect of any issue of its share capital or as the case may be, by way of repayment of any of its share capital.
(5) The date referred to in the last preceding subsection is—

(a) where the body corporate's trade or business commenced on or before the first day of January, nineteen hundred and forty-seven, at the election of the body corporate, the end of the year nineteen hundred and forty-six or the end of the year nineteen hundred and fifty-one;

(b) in any other case the date falling twelve months after the commencement of its trade or business,

so, however, that where the body corporate has made an election under paragraph (b) or paragraph (c) of subsection (4) of section thirty-three of this Act the year specified in that election shall be deemed to have also been

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elected by it under paragraph (a) of this subsection.
(6) Where the body corporate's trade or business includes, but does not consist wholly of, the mining of the metal, the getting of the oil or the extraction of the asbestos, as the case may be, its output, or output at the normal rate, of the metal, oil or asbestos as calculated under the proviso to subsection (3) or under subsection (4) of this section shall be reduced to such extent as may be just having regard to the extent to which its trade or business consists in the said mining, getting or extraction.
(7) Whether or not the profits of the body corporate include profits attributable to additional output, they shall be computed as if section twenty-two of the Finance Act, 1949, section three hundred and ten of the Income Tax Act, 1952, and section eighteen of this Act had not been passed.
(8) The Treasury may by statutory instrument make regulations for carrying this section into effect, and those regulations may in particular lay down rules to be followed (subject to the preceding provisions of this section) in determining for the purposes of this section the question whether there is any, and if so what, additional output achieved in any period, and the question what amount is to be taken to represent profit at the normal rate of any output.
Any statutory instrument made under this section shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.
(9) This section does not apply in relation to any chargeable accounting period for which an election under section thirty-five of this Act has effect as respects the body corporate.—[The Solicitor-General.]
Brought up, and read the First time.
The Solicitor-General: I beg to move, "That the Clause be read a Second time."
The Clause is intended to provide wholly exceptional relief. It is at present confined to metal mines, oil and asbestos concerns, and in those cases, if the Treasury certify that the increase of output over the output at the normal rate is essential in the national interests the concern can take advantage of the provisions of the Clause.
The certificate has to be given when the Treasury are satisfied that the increase of output is in the national interest, and not only an output from wasting assets. In certain industries it is vitally urgent in relation to our rearmament programme that there should be an increase above the normal output. The Clause applies not only to mining overseas, such as Rhodesian copper, but also to Cornish tin mines.
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Having regard to what is in the national interest, regard must also be had to the extraction which assists in our balance of payments position. I would emphasise that to come within the Clause it is not sufficient just to show that a bigger profit is made. It must be shown that a future profit has been anticipated in the national interest and a future profit realised in a period which is subject to E.P.L.
I suggest that the Clause gives generous and exceptional relief. I should like to give an example to show how it works. Let us take a mining company whose normal output is 1,000 tons and normal profit is £50 a ton. Let us assume that it increases its output during the E.P.L. chargeable year to 1,200 tons and earns a profit during that period of £70 a ton. Thus, its excess profits are £34,000; that is, 1,200 tons at £70 a ton less 1,000 tons at £50 a ton. We can split that excess profit into the excess attributable to the increase in price, that is, 1,200 tons at £20 a ton, which equals £24,000, and the excess attributable to increase in output, which is 200 tons at £50 a ton, which equals £10,000.
In the appropriate cases, that £10,000 will be excluded from the profits of the company as being an anticipation of future profits. The other figure of £24,000 is an ordinary excess profit and is properly chargeable to Excess Profits Levy. That gives an indication of the manner in which the Clause is intended to operate and will operate. I would only add that when we discussed Clause 47 there was considerable discussion about the scope of the Clause.
For the reasons I have indicated sufficiently already, any claim for benefit under this Clause in relation to increased output would have to be proved up to the hilt. It does not apply automatically to metal, oil or asbestos. A certificate from the Treasury has to be obtained. It might save time, however, if I said that my right hon. Friend will give most careful consideration to any other cases that may be put forward between now and the Report stage as to whether or not there should not be some extension of the scope of this Clause while retaining the powers of the Treasury to grant or withhold a certificate.
I do not propose to deal with the question of sand ballast or specific extractive industries. I merely say that if

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my hon. Friends and others put forward arguments for coming within the scope of this Clause, I give the assurance, without any commitment, that arguments which may be put forward later will be seriously considered.
Mr. Crosland: We on this side of the Committee welcome this new Clause in general terms, because we think it is almost impossible to imagine that too many concessions can be made to genuine producers of scarce raw materials. I would put this on a much wider ground than did the Solicitor-General. It is not a question only of re-armament. There are many more far-reaching questions involved.
There is the question of whether the sterling area can ever pay its way, and there is the question of whether or not the world will be able to continue to sustain its likely increase in industrial output unless there is a much larger expansion of raw material output than is likely to be the case on present trends. So that our general attitude is in favour of concessions which will aid these raw material producers, particularly those within the sterling area.
The scale of the concession is a generous one. I believe I am correct in saying that there was a similar concession to metal mining and oil companies in E.P.T., but this goes a good deal beyond that. The way in which it goes beyond is worth a comment, namely, that the element in the profits of those companies which is due to an increase in output since the standard period, and is certified to be in the national interest, and which can therefore be offset against E.P.L., is not added to the standard profit but is deducted from the chargeable profits. This is different from the E.P.T. system.
In the case of many companies this charge compared with E.P.T. will not make any difference to their E.P.L. liability, but the fact that it is done in this way, and not by adding it to the standard profits, will make a difference to the E.P.L. liability in the case of all those companies which come within the over-riding maximum payment of 10 per cent. Therefore, a particularly generous method has been found in making this concession. I do not particularly object
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to that, but I want to raise one or two of the complications of this concession.
It is extremely hard to see how it will work out in some cases. The Solicitor-General gave a quantitative example which it was perfectly simple to follow. However, he left out all the difficult part of the calculation because he already assumed the normal profit and normal rate of output, whereas the difficulty lies in determining what is a normal profit and a normal rate of output in the first place.
8.15 p.m.
The whole concept of normal profits seems to me to be difficult and I hope that some explanation will be given from the Government Front Bench of what is in mind when this phrase is used. What are normal profits? There is no simple criterion of what is a normal and what is an abnormal profit. I daresay hon. Members opposite and hon. Members on this side would give different definitions of what constituted a normal profit. If it is difficult in the case of an ordinary industrial company, I should have thought it was almost impossible in the case of a raw material producing company. If one considers the fluctuations in raw material prices that happen over every decade, it is hard to speak of a normal profit.
What is the normal profit of a copper company? Is it the profit when the copper price is what it is today, what it was three years ago or what was it before the war? I should like some guidance from the Solicitor-General as to what sort of consideration will be in the minds of the Treasury when they come to define, as they will have to under Statutory Regulation, what constitutes a normal profit.
That is the first general complication. Allowing for that, it is tolerably easy to work out how this Clause will operate so far as subsection (3) is concerned; that is to say, where standard profits are calculated as the profits of any two or three of the standard years. But where the body corporate elects to have its standard profits assessed on the net assets standard, and therefore comes under subsection (4) of this new Clause, it seems to be extremely complicated and difficult to work out how it will be effective.
I want to take one imaginary example which probably covers a good many of

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these companies. I am concerned with companies who are choosing the net assets standard and are therefore covered by subsection (4). Take the case of a company which, between the end of 1949 and the end of 1951 greatly expanded its net assets, as many of these raw material producing and oil companies did. In particular, the oil companies were investing heavily during this period and were encouraged by the then Government to do so. Companies in this position will choose to be assessed on their net assets at the end of 1951. What will be the position of such a company? How is its liability for E.P.L. to be decided? In particular how is its normal rate of output to be decided?
First we have to decide what is its standard profit—8 per cent. on the net assets at the end of 1951. We then have to decide what is considered to be a normal profit on the ton of copper, barrel or oil, or whatever it may be. We then have to calculate the number of tons or barrels on which a normal profit would give a total profit equal to the standard profit, which we assume is already known to the Treasury, and that number of tons or barrels constitutes a normal rate of output. That is just comprehensible. One can just seize that and have some rough idea of how it will work in the ordinary case. But in the case of which I have been talking, where there was a large growth in net assets from end 1949 to end 1951, what will be the consequences of this calculation?
I maintain that the calculation in that case will give a normal rate of output as defined under this Clause far in excess of the company's actual output during the standard years. I do not want to give this calculation in the form of figures, because I do not think the hon. Member for Croydon, East (Sir H. Williams), would begin to understand it if I did.
Sir H. Williams: The hon. Member might try.
Mr. Crosland: On the whole I would rather not take the risk, so I will eschew figures and, because I think it is slightly more simple, use one or two signs. Suppose an output of X, on which the normal profits per ton come to a figure of total profits which we will call Y. That is simple. Suppose, also, a figure of net
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assets at end-51, which we call Z, 8 per cent.—[interruption.] It comes out all right in the end—which gives total profits also equal to Y. Then the standard profit is equal to the normal profit on the normal rate of output.
All I am saying is that there is some figure of capital employed in business at end-51, and some figure of normal profit on normal rate of output, which will both give rise to the same total level of profits. It is not actually a very peculiar case. It must be quite common. In this case, the standard profit is equal to the total normal profit, as defined in the proposed new Clause.
That being so, the normal rate of output is the output which I originally called X, and that rate of output in this case could be the same as was actually achieved at end-51. The normal rate of output under the proposed new Clause is the same in this case as the actual rate of output at the end of 1951. The point is perfectly simple. In the case of a company which invested heavily during the years 1949–50–51, their end-51 output would surely be greatly in excess of their actual output during the standard period 1947–48–49. That seems a perfectly likely case to consider, in which the normal rate of output as defined in this Clause exceeds the actual rate of output during the years 1947–49.
In this case the concession is very much less than it might seem, because it depends upon having the largest possible gap between the normal output and the rate of output achieved during the chargeable period; but when the normal rate of output is in fact very much higher than the actual rate of output during the standard period, the concession means a good deal less to these companies than one might otherwise suppose, because the concession depends upon the gap between the normal output and the actual output during the chargeable period.
I do not know whether there is an answer to this. I imagine that the answer that the Solicitor-General will give is that the company in this case had had a great increase in its net assets between end-49 and end-51, and, finding itself rather unfavourably placed from the point of view of the definition of the normal rate of output, it would, by definition, find itself very favourably placed from the point of

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view of the net assets standard. The 8 per cent. will be computed on the net assets at the end of 1951, although they were greatly swollen in the previous years. We might suppose that those two factors would cancel each other out.
I do not ask for a detailed answer tonight as I have only taken this case as an illustration. I suggest, with great respect, that it is the sort of case that must be quite common. There must be a considerable number of companies for which the value of the various items will be the same as the X Y Z which I have taken in this instance. It is an important point.
In conclusion, let me refer to my main point. Although the proposed new Clause will command general welcome in the Committee, we should like to be assured of the sort of consideration which will operate when the Treasury come to the definition of normal profit. They have a phrase here which no two people would define alike. It is extremely hard for us to decide what the precise effects of the proposed new Clause will be unless we are given some insight into the Government's attitude on the subject of normal profit.
Mr. Nabarro: I hope I may be forgiven if I do not attempt to follow the hon. Member for Gloucestershire, South (Mr. Crosland) in his abstruse and most instructive harmonical progression. Although I think we agree in all parts of the Committee that the proposed new Clause is admirable in principle, it will undoubtedly lead to considerable complexity in actual operation, in view of the number of variables involved, such as the value of the raw materials three years ago, their value in the chargeable accounting period, the cost of operation in these respective periods, and the assessment of the profits made.
I rise to draw attention to one specific omission in the list of materials covered in the proposed new Clause. There is no reference in it to coal. Although the bulk of the coal industry in the United Kingdom is nationalised, quite a large number of small pits are licensed for private operation. One that springs to my mind immediately is Brora, a well-known pit in Sutherland which, although it is only small, has I believe, the largest output per man year of any pit in the United Kingdom. There are several of
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these licensed pits in the Midlands. Surely coal is the most important single raw material we have in this country.
It is a wasting asset, and I should have thought it would have been made subject to the provisions of this Clause. In view of the statement made by the Solicitor-General that between this stage and the Report stage of the Bill he will consider extensions in certain circumstances, I wonder whether the Treasury might give consideration to the small licensed coal mines in this country.
Complementary to them—although I cannot give a specific example, for obvious reasons—there are, I believe, quite a number of coal mining companies in the Dominions and Colonies which are controlled from head offices in London, and the bulk of the share capital of which is subscribed from the United Kingdom and is actually held by United Kingdom residents. I should have thought that the provisions of this Clause would apply to those coal mining companies as a complementary measure to the small licensed pits in the United Kingdom. I hope that the Chancellor will give consideration to this raw material between now and the Report stage.
Sir H. Williams: I do not want to speak at any great length, particularly as I see I have lost my mathematical opponent the hon. Member for Gloucestershire, South (Mr. Crosland) with his X Y Z. As my Amendments are not likely to be called, I missed the first few minutes of the Solicitor-General's speech. I understand that he indicated that something more might be said on this subject when we reach the Report stage. I hope that it will be something comforting.
I know that my proposals are incomplete. The words "oil, metal and asbestos" appear so frequently that I was not able to spot them every time. I hope that when we get to the later stage consideration will be given to the very large extractive industry, wtih which I have an indirect connection. I said yesterday most of what I want to say, so I will not repeat it now.
Mr. Gaitskell: One thing we can all agree about in the proposed new Clause is its great complexity. I found it complex before my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) began to speak about it.
Sir H. Williams: He has gone to dinner.
Mr. Gaitskell: He deserves it. I find arithmetic easier than algebra. I began with arithmetic and went on to algebra, but I could have wished that the examples of my hon. Friend had been in arithmetical form. I have some sympathy with the Solicitor-General in giving any kind of answer to the extremely complex points that have been put to him.
While drawing attention to that matter and to the great and distinct improvement in the administration of the Excess Profits Levy, one cannot but point out that that is the sort of difficulty we are bound to get into as soon as we try to do reasonable justice and prevent the ill effects of the Excess Profits Levy coming into action.
The position of the Treasury under this new Clause is extraordinarily difficult. They have a very remarkable degree of authority for deciding whether an increase in output is in the national interest, what a normal profit should be and so on. I confess that I do not envy the job of the official who will have to do this. However, I suppose that in the circumstances it is better to try it than to do nothing at all.
8.30 p.m.
That brings me to the other point that I want to mention, relating to the scope of the Clause. My hon. Friend said quite rightly that the case for dealing with mining companies generally did not rest on re-armament alone, but there can be wider grounds. Equally, I will once again say it is ridiculous to limit the benefits of this Clause to three products, oil, metals and now we have asbestos thrown in for some obscure reason. Why asbestos came in here and not at an earlier stage I do not know.
I understood from the Solicitor-General that the whole matter was to be looked at again. I should like him to give us an assurance that it is not a matter of saying, "Well, shall we add two or three other things to the list to see if it looks a bit better." We ask the Chancellor to consider whether it would not be possible to cover the problem we have in mind by a general phrase, and, if necessary, to set up an administration to deal with it. After all, the Treasury will have to face a difficult problem under the Clause
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already, and I would have thought that adding another problem, namely, whether a particular type of mineral extraction came under the Clause, would not add greatly to their difficulties.
If only we could get some general phraseology so that those concerned could apply to the Treasury it would meet the wishes of the majority of the Members of the Committee. I hope, therefore, that the assurance that the Solicitor-General has given is not limited in this way to looking at one or two other possible cases, but that the Chancellor will consider if it is not possible to cover the matter in the way that I have suggested.
The Solicitor-General: The object of this Clause seems to have met with approval from every quarter, but its interpretation has given rise to alarm owing to its very complex character. One must admit that it is extremely complicated, and I am not going to attempt —what I know I am unequal to—to deal with the very difficult algebraic problem that the hon. Member for Gloucestershire, South (Mr. Crosland) put to me. All I can say in his absence is that I hope that what he said has been recorded correctly, so that we can ponder it at our leisure and see whether his arguments as to that particular hypothetical company are well founded.
In moving the Second Reading of this new Clause I did not seek to restrict the meaning of national interest as solely in relation to the re-armament programme. I gave that as one instance on which we could act in view of the necessity for an increased output for that programme. I also made some reference to the overseas position and to the balance of payments problem. All these matters have to have consideration given to them.
The right hon. Gentleman has asked me certain questions about a statement I made as to other industries. My hon. Friend the Member for Kidderminster (Mr. Nabarro) raised the question of coal and my hon. Friend the Member for Croydon, East (Sir H. Williams) that of sand and ballast.
What I said is general in character. I am not committing myself any further than to say, as I have already said, that we are looking, and will look, into the position as a whole in relation to other industries. What change will be made,

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I cannot predict. I cannot give any assurance as to whether any change will be made. All I am saying is that we shall look at the whole problem and that there may be one or more alternative ways that might be adopted.
I cannot go further than that tonight, except to say, as, I think, one must say, that this is a wholly exceptional kind of relief and that the case for applying it to the other industries requires to be very clearly established. We shall go into all that, and we shall, no doubt, have an opportunity of discussing this matter further if what we decide to do does not meet, although I hope that it will, with universal approval.
Clause read a Second time, and added to the Bill.

New Clause.—(BODIES CORPORATE HOLDING SHARES IN OTHER BODIES CORPORATE.)
(1) The following provisions of this section shall have effect, where, during the whole of any chargeable accounting period of a body corporate ordinarily resident in the United Kingdom—

(a) that body corporate, or, if it is a member of a group within the meaning of the Eleventh Schedule to this Act, the members of the group together, own at least one quarter of the ordinary share capital of another body corporate ordinarily resident in the United Kingdom; and

(b) the first-mentioned body corporate and the said other body corporate are not members of one group within the meaning of the said Eleventh Schedule.

(2) If the standard profits for a full year of the first-mentioned body corporate fall to be computed by reference to its profits for the standard years—

(a) sub-paragraphs (1) and (2) of paragraph 10 and sub-paragraph (a) of paragraph 11 of the said Eleventh Schedule shall, for the purposes of computing its profits for the said chargeable accounting period, and its standard profits for a full year in relation to that period, apply as if it and the said other body corporate were members of a group; and

(b) where it makes an election under paragraph (a) of subsection (4) of section thirty-three of this Act, the said subsection (4) shall have effect, for the purpose of computing the said standard profits, as if the average amount of its paid-up share capital in the year specified in the election were reduced by an amount bearing to the amount paid by it in cash for any share capital of the said other body corporate owned by it during the year specified in the election the same proportion as the average amount of that share capital so owned by it bears to the full amount thereof.

(3) If the standard profits for a full year of the first-mentioned body corporate fall to be calculated by reference to the percentage of an amount (other than the amount referred to in paragraph (a) of subsection (4) of the said section thirty-three)—

(a) its standard profits for a full year in relation to the said chargeable accounting period shall he reduced by an amount equal to the like percentage of the amount paid by it in cash for any share capital of the said other body corporate owned by it during the whole of the chargeable accounting period; and

(b) in computing its profits or losses (otherwise than for the purposes of ascertaining its undistributed profits or over-distribution of profits for any period) for the said chargeable accounting period any dividends received from that share capital shall be left out of account.

(4) The preceding provisions of this section shall not apply in any case where the provisions of section forty-four of this Act have effect as respects the liability to the excess profits levy of the first-mentioned body corporate by reason of its acquisition of the ordinary share capital of the said other body corporate.
(5) For the purposes of this section a body corporate shall be taken to own ordinary share capital of another body corporate if it owns it directly or through another body corporate or other bodies corporate or partly directly and partly through another body corporate or other bodies corporate, and the provisions of subsections (2) and (3) of section forty-two of, and Part I of the Fourth Schedule to, the Finance Act, 1938 (which defines certain expressions used in this section and in the said section forty-two), shall have effect for the purposes of this section as they have effect for the purposes of the said section forty-two.—[The Solicitor-General.]
Brought up, and read the First time.
The Solicitor-General: I beg to move, "That the Clause be read a Second time."
It seems to be my fate to move the Second Reading of Clauses of extreme complication, but I hope that this one will be equally acceptable to the Committee. It is the Clause which endeavours to make provision for the position where one body corporate ordinarily resident in the United Kingdom has at least a 25 per cent. shareholding in another body corporate. The Clause meets Amendments which were tabled in the names of my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) and others. Its purpose is to exclude from the company's profits dividends received from any trade investment amounting to at least one-quarter of the issued share capital of another company.
If we exclude from the company's profits those dividends from such an

1259
investment, it is also right that in computing the owner-company's capital or undistributed profits, we should deduct the investment itself. The two things go together. Where the capital is on a profits standard, that capital adjustment is only necessary in so far as the investment was acquired after the beginning of the company's standard years. Investments acquired before the standard period do not affect the comparison between the standard period capital and the present capital.
In such a case, what happens is that it is the dividend which is taken out both from the standard profits and the chargeable profits and, in effect, a 25 per cent. shareholding is being treated for the two purposes of excluding the dividends and excluding the cost of the shares, in exactly the same way as the holding of 75 per cent. or more by a member of a group of companies in another member of the same group under the provisions of the Eleventh Schedule.
I hope that that explanation, although brief, is clear, and if there is any other point on which hon. Members think that I can assist them, I shall be very glad to do so.
Sir F. Soskice: The Solicitor-General has explained very clearly how the Clause is to work. He has explained that where there is an investment consisting of a 25 per cent. holding in another company, the income from that investment is to be excluded for the purpose of computing the standard and the chargeable profit. There is a corresponding provision, as the hon. and learned Gentleman has said, for excluding, in respect of the acquisition of such a holding before the relevant period, the cost of acquiring that holding.
I can quite see how it works. What I rather hoped that the Solicitor-General might say was what precisely is the purpose of excluding a holding of that sort and the income from it. In what way does the change, now being made by the Clause proposed by the Solicitor-General, fit in with the general structure of this Excess Profits Levy?
I think the Committee might have had some explanation of the reason for this change, in addition to the explanation as to the exact machinery of the change proposed. I would ask the Solicitor-General to explain why it is that at this stage in
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our deliberations this proposal is being made, and in what sense it is thought that the original scheme of taxation was defective and requires now to be remedied by this proposed alteration?
Sir P. Spens: I apprehend—I may be wrong—that the object of this Clause, in part, is to meet the argument against double taxation, and that this applies to all companies, that is to say trading companies, or insurance companies, or any other company which has to carry investments as part of its business; while in fact if it holds 25 per cent. or upwards of the original share capital of a company, to that extent it is not included in its accounts, because already that company will have paid the Excess Profits Levy, if it ought to have been paid.
I hope that this is not to be all which is to be done for investment trust companies. I raised the question of those companies at a very much earlier stage in the discussions on this Bill. I was promised that it would be reconsidered before Report stage. When that promise was given this new Clause was already on the Order Paper. I merely wish to repeat what I said then, that investment trust companies, which are nothing but conduit pipes for using the savings of the public and putting them into safe investments, are something quite different from any form of commercial or other company which has to have certain investments in the course of its trade.
It seems to those of us who are interested in investment trust companies that it ought not to be necessary that an investment trust company should hold as much as 25 per cent. of the ordinary share capital of a company to be entitled to this relief; but that whatever the amount of the holding in the ordinary share capital trading company, which has already been subjected to the Excess Profits Levy, that income should not again be brought into account for Excess Profits Levy when it has been received by an investment trust company. I hope the Solicitor-General will be able to say that that matter is still open for reconsideration between now and Report stage.
Mr. G. R. Mitchison: There is one question which I should like to ask the Solicitor-General. I am rather puzzled at the way in which the Chancellor has approached the question of

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subsidiary companies, both in this new Clause and in the Schedule relating to connected companies.
He has taken a particular line, 25 per cent. I do not know why. The interconnected companies were originally taken on the basis of a holding of 75 per cent. Now we have a Clause dealing with companies holding from 25 per cent. up to 75 per cent. The one thing which seems to have been entirely rejected appears to me to be the most essential thing; that is some distinction between companies which really are subsidiaries, because half or more of the capital is held by another company, and the kind of case, put by the hon. and learned Member for Kensington, South (Sir P. Spens), of investments and the precautions or methods for not taxing the same income twice.
8.45 p.m.
It seems to me that the two types of holding are rather different problems, and that, in a way, to treat companies with a holding of between 51 and 75 per cent. under these provisions, instead of treating them under the Schedule, is rather illogical, because the same question of control arises. While, generally, no one wants to have double taxation in this kind of case, it does leave the companies between 51 and 75 per cent. much freer in one sense than those in which there is a rather larger holding.
Therefore, if I might summarise the question which I am putting to the hon. and learned Gentleman, it is this. Why was a subsidiary company restricted to this rather novel and high definition in the Eleventh Schedule, leaving it over to this Clause to deal with a group of cases, some of which will concern subsidiaries while others will not? Lastly, why, when we come to the bottom of the scale, was the figure of 25 per cent. taken? It seems to me that 25 per cent. does not have any particular reason for its existence one way or the other, and perhaps the hon. and learned Gentleman will tell us what mathematical or philosophical considerations influenced the Chancellor or the Treasury when they arrived at that percentage.
The Solicitor-General: If I may, I will deal first with the question raised by the hon. and learned Member for Kettering (Mr. Mitchison). He referred in particu-
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lar to the Eleventh Schedule and the conditions under which we can treat various companies as one entity for the purposes of E.P.L. We had a debate about that last night, and I doubt if I would be in order in going into it very far this evening. But I would say that the test there—and it may be right or wrong—is to see whether we can treat a number of companies as one for the purposes of E.P.L.
This new Clause really deals with a different problem, and it is aimed at dealing with the same income bearing E.P.L. twice. My hon. and learned Friend the Member for Kensington, South (Sir P. Spens) was right in stating the objective of this new Clause, and I say to him straight away that the submission of this new Clause does not in any way restrict the assurance which he received from my hon. Friend on an earlier occasion in regard to franked investment income.
Indeed, I think I am right in saying that Amendments in the names of my hon. Friends put forward proposals somewhat on these lines, in which these dividends of 25 per cent. or over were described as franked investment income, no matter by whom the income was received. The object of the Clause is to avoid, as far as it can be avoided, double taxation for purposes of E.P.L.
The hon. and learned Member for Kettering asked me about the 25 per cent. One must admit that it is an arbitrary figure, but I think the line is drawn in the right place. It would be very difficult administratively if we were to say that any investment income received from another company should receive the treatment proposed in this Clause, and we came to the conclusion that a holding of 25 per cent. at least was the right limit to draw on the lowest level.
Mr. Mitchison: If I may interrupt the hon. and learned Gentleman, surely, the same point arose over the Profits Tax and has been dealt with? If, as we are told, the object of this Clause is to deal with the question of double taxation, then why limit it at the comparatively high figure of 25 per cent.? If it is to deal with subsidiaries, then I could have understood it, although I should have thought that the 25 per cent. was too low. If it is a question of double taxation why 25 per cent.?
The Solicitor-General: I have done my best to indicate to the hon. and learned Gentleman why we arrived at that figure. As a matter of fact, it is a figure which was proposed by my hon. Friends in their Amendments. That is a pure matter of coincidence, but it shows that there is a number of people who think that is the right place at which to draw the line. One can always argue where the line should be drawn, either above or below, but one thing we must avoid is the tremendous administrative complications that would arise in relation to every case if we had no line at all, and which would add considerably to the work entailed. While we think there should be a line, we also believe that in this case we have drawn it at the right place.
Sir F. Soskice: I am sorry to prolong the debate on this point, and I can assure the Solicitor-General that I do so with no desire to harass him. He has been very courteous and has given us the information at his disposal, but I must confess that I do not think he has really answered the question put to him. I asked what the object of this particular provision was. He answered, in effect, that the object was to exclude franked investment income for the purpose of the computation of the Excess Profits Levy. That is perfectly intelligible.
Some hon. Members feel that the franked investment income provisions are appropriate to the levy, and some do not. Some think they are appropriate only in the case of investment companies, and that is how the matter stands. What we on this side of the Committee feel great difficulty about is that if it is desired that income which has already been taken into account for the purposes of the Excess Profits Levy shall not be taken into account again, then it seems, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, very difficult to see why a minimum of 25 per cent. is imposed.
Surely, if the object is simply to secure that if one company has included in the computation of its profits, in order to see whether it is liable to the Excess Profits Levy, a certain stream of income, and that same stream of income should not again be taken into account in computing another company's profits for this Excess Profits liability, then all we need to provide is that the second company should
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have received income from the first company; that is to say, that the second company should have received some dividends from the first company.
There does not seem to be any object in computing a minimum shareholding of 25 per cent., or any other percentage. I am not sure whether I understood the Solicitor-General to imply this, but it may be that this is the answer he wishes to convey. It may be that what he wishes to say is that we do not want too elaborate a system to be introduced; we do not want to have to exclude all income which has previously drawn tax because it would impose on the taxing authorities an unduly heavy burden.
That is something I can perfectly understand, if that is the answer which was intended to be given. But it was not the answer given, although, if I understood the hon. and learned Gentleman correctly, he seemed to be implying that was the reason. Perhaps he will be good enough to say whether, in fact, that is the reason or not, and whether the object of the 25 per cent. limit is that a number of categories of income which would otherwise count as franked investment income are to be excluded because the shareholding of the second company is not sufficiently large to warrant their being included in the company's income. If that is the object, will the hon. and learned Gentleman say so? From what we can see from the Clause, it seems to be neither here nor there.
If the object is to exclude franked investment income, so far as we can see there is no point in having a shareholding limit. If it is not, then we should like to know what the object is. Accordingly, we would press the Solicitor-General to refresh himself from the usual sources of information, if he has not the information ready at his fingertips, and inform us what the object is and why that particular limit was settled upon as the right one.
The Solicitor-General: The additional reason for selecting the 25 per cent. limit is that, quite apart from the administrative difficulties, we want to secure that what one is dealing with here is a real investment which is something more than an attempt to invest surplus funds.
Mr. Roy Jenkins: Can the reason be the fact that the Solicitor-General takes the view that the companies most affected

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by the hardship of double taxation of what is normally called franked investment income are those with a 25 per cent. holding or above in another company? I should have thought that that was not so. The kind of company likely to own 25 per cent. or more of another company would probably be a company—
The Solicitor-General: I said earlier that this Clause does not seek to implement the assurance given to my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) with regard to an investment company. This is a Clause of general application dealing with the investments of all kinds of companies.
Mr. Jenkins: The difficulty, I understand, is that an assurance was given by the Chancellor to the hon. and learned Member for Kensington, South (Sir P. Spens) about investment companies. Do we understand that that is intended to cover only investment companies and not, for instance, insurance companies? If we are left in the position that we have an assurance that may amount to something or may amount to very little so far as investment companies are concerned, and that we are passing a new Clause dealing with companies owning more than 25 per cent., we are bound to ask why these particular categories have been chosen—one to be dealt with specifically at this stage and the other possibly on the Report stage—and why companies left out altogether, such as insurance companies, are not within this Clause.
It seems to me that so far as hardship does arise from double taxation on investment income, those affected are not those companies owning 25 per cent. or more of another company but those companies with a very wide portfolio of investments, such as insurance companies which do not own as much as 25 per cent. of another company. We want to know whether anything is to be done for those companies. Are we to be left in the extraordinary anomalous position of having something done for companies owning 25 per cent. or more of another company, and possibly something to be done for investment companies and nothing to be done for a wide range of companies which come into neither category?
Sir John Mellor: I find it difficult to understand what my
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hon. and learned Friend the Solicitor-General means by administrative difficulty. Surely it is only a question of the Revenue recognising that the income is, in fact, received from another company. Once that is recognised I see no difficulty whatsoever from the point of view of administration in regarding it as franked investment income. I should like to know what the Solicitor-General has in mind about the administrative reason, which was the first reason and therefore, presumably, the most important reason he gave for requiring this provision.
9.0 p.m.
How can an administrative difficulty possibly arise in such a matter? I would press my hon. and learned Friend for an explanation. He has spoken freely of the administrative difficulty, but a vague reference to administrative difficulty is not very convincing if he is not prepared to tell us how that administrative difficulty can arise. Could I have an answer?
Clause read a Second time, and added to the Bill.

New Clause.—(DEDUCTIONS IN COMPUTING INCOME OF CERTAIN COMPANIES FOR PURPOSES OF SURTAX.)
(1) Where for the purposes of section twenty-one of the Finance Act, 1922, or Chapter III of Part IX of the Income Tax Act, 1952 (which provide for the payment of surtax in certain cases, on undistributed income of companies), the actual income from all sources of a body corporate for a year or period ending after the end of the year nineteen hundred and fifty-one falls to be computed under paragraph 6 of the First Schedule to the said Act of 1922 or subsection (3) of section two hundred and fifty-five of the said Act of 1952, then, if any amount is payable by the body corporate by way of the profits tax or the excess profits levy, respectively, for any chargeable accounting period falling wholly or partly within that year or period, a deduction shall be allowed, in computing the said actual income, of such an amount as would, after deduction of income tax at the standard rate in force for the year of assessment during which the said year or period ends, be equal to so much of the amount so payable by the body corporate as is apportionable to the said year or period:
Provided that this subsection does not apply in relation to any chargeable accounting period ending at or before the end of the year nineteen hundred and fifty-one.
(2) Paragraph (a) of the proviso to subsection (2) of section two hundred and sixty-two of the Income Tax Act, 1952 (which relates

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to the deductions allowable in computing the actual income from all sources of an investment company in relation to which a direction is in force under subsection (1) of that section), shall have effect as if instead of authorising a deduction for profits tax payable by the company by way of profits tax or the excess profits levy, of such an amount as would, after deduction of income tax at the standard rate in force for the year of assessment in respect of which the direction is given, be equal to the first-mentioned amount.
(3) The last preceding subsection shall, in relation to any chargeable accounting period ending after the end of the year nineteen hundred and fifty-one, apply to paragraph (a) of the proviso to subsection (2) of section fourteen of the Finance Act, 1939, as it applies to paragraph (a) of the proviso to subsection (2) of section two hundred and sixty-two of the Income Tax Act, 1952.
(4) If—

(a) the amount payable by a body corporate in respect of the excess profits levy for any chargeable accounting period is reduced by reason of a deficiency of profits for a subsequent period; and

(b) the amount deducted under the preceding provisions of this section in computing the actual income from all sources of the body corporate was arrived at without regard to the reduction and is excessive in view thereof,

such apportionments, assessments or additional asssessments to surtax shall be made as are necessary to counteract the excessive deduction and may be so made notwithstanding that the time limited by law for making assessments or additional assessments has expired.
(5) For the purposes of this section—

(a) any amount recovered under paragraph 18 of the Eleventh Schedule to this Act by one member of a group from another member shall be treated as an amount of excess profits levy payable by that other member and as correspondingly reducing the amount of excess profits levy payable by the first-mentioned member;

(b) any amount paid by a subsidiary to the principal company (as defined in section twenty-two of the Finance Act, 1937) by way of reimbursement of profits tax which, by virtue of a notice having been given under the said section twenty-two, was paid by the principal company shall be treated as an amount of profits tax payable by the subsidiary and as correspondingly reducing the amount of profits tax payable by the principal company.—[Mr. Maudling.]

Brought up, and read the First time.
The Parliamentary Secretary to the Ministry of Civil Aviation (Mr. R. Maudling): I beg to move, "That the Clause be read a Second time."
This Clause deals with a very small point relating to one-man companies. Where the income of a one-man company is wholly apportioned for Surtax pur-
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poses it is not affected by the Excess Profits Levy or by Profits Tax; but cases may arise when the income of a one-man company will be partly but not wholly apportioned.
In such cases, under the Profits Tax system existing until the end of 1951, the gross amount of Profits Tax was treated as a deduction for Surtax purposes. As the Committee is aware, a change has been made in this Finance Bill in that, in future, Profits Tax is to be charged at a net rate and shall not rank as a deduction. That applies only to Income Tax and not to Surtax and, in order to avoid circumstances in which shareholders in one-man companies might have to pay surtax on sums paid for the Excess Profits Levy, this Clause is designed to re-enact the Profits Tax system, whereby the gross equivalent of E.P.L. paid will be taken off in full for Surtax purposes in cases where there is a partial apportionment.
That is the sole purpose of this new Clause. It is a small point, but it is intended to remove what may be a very grave inconsistency.
Clause read a Second time, and added to the Bill.

New Clause.—(AMENDMENT OF FINANCE ACT, 1947, s. 40 (3).)
Subsection (3) of section forty of the Finance Act, 1947 (which provided, among other things, that certain payments made by Area Electricity Boards to the British Electricity Authority should not be allowed as a deduction in computing the profits of the said boards for the purpose of the profits tax and should not be taken into account in computing the profits of the said authority for those purposes), shall apply, and be deemed always to have applied, in relation to Area Gas Boards, the Gas Council and payments of the like nature made by Area Gas Boards to the Gas Council, as it would apply to the first-mentioned boards, authority and payments but for section seventy-nine of the Finance Act, 1948 (under which profits tax is chargeable as if any trade or business carried on by an Area Electricity Board were part of the trade or business carried on by the British Electricity Authority).—[Mr. Boyd-Carpenter.]
Brought up, and read the First time.
Mr. Boyd-Carpenter: I beg to move, "That the Clause be read a Second time."
This Clause deals with a somewhat technical point relating to the debentures

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of the Gas Council and the area gas boards. Some difficulty has arisen by reason of the fact that the area gas boards, in remitting funds for the purpose of payment on the compensation stock, remit them through the Gas Council and not direct.
For that reason there is at least a doubt whether the general treatment for the nationalised industries—which, as the Committee is aware, make use of the provisions of Section 40 of the 1947 Act—applies, in this case, and to make sure that it does, and to deal with the doubt that has arisen in this case, it is intended that the Gas Council and the area gas boards shall be treated for Profits Tax and E.P.L. purposes on the same basis as the British Electricity Authority and the area electricity boards.
Mr. Gaitskell: In view of the length of time spent on the Committee stage of the Gas Bill it is surprising that there should be anything wrong with the Gas Act, especially as the Financial Secretary took part in the proceedings on behalf of the Opposition at that time; but I suppose that we must accept his view that there is at least a doubt whether the area gas boards are placed in exactly the same position as the area electricity boards. We agree that it would be very wrong if they were not in the same position as the electricity boards and we shall not oppose this new Clause.
Clause read a Second time, and added to the Bill.

New Clause.—(REDUCTION OF PURCHASE TAX ON FUR-TRIMMED GARMENTS AND FUR GLOVES.)
(1) Garments trimmed with fur skin (including any skin with fur, hair or wool attached), but not otherwise made thereof, shall cease to be comprised in paragraph (f) of Group 1 in Part I of the Eighth Schedule to the Finance Act, 1948, and (except so far as they are comprised in some other paragraph of that Group) shall—

(a) if of a kind suitable for young children's wear, be exempt from purchase tax; and

(b) if not of such a kind, be comprised in paragraph (a) of the Group:

Provided that this subsection shall not apply to any such garment in the case of which the trimming of fur skin either—

(i) represents a cost to the manufacturer of the garment greater than the cost to him of the other components; or

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(ii) has an area greater than one-fifth of the area of the outside material.

(2) Accordingly in the said Group 1 there shall be made the amendments provided for by paragraph 2 of the Third Schedule to this Act.
(3) For the purposes of subsection (1) of this section and of Part I of the said Eighth Schedule, the cost of any component of a garment to the manufacturer of the garment is to be taken to be the total cost to him of that component ready for assembly into the garment:
Provided that where the Commissioners are not satisfied both—

(a) that the whole of the cost of the component was actually borne by the manufacturer of the garment; and

(b) as to the amount thereof;

there shall be substituted for the actual cost to him the cost which in their opinion would be incurred by a manufacturer of a similar garment who did bear the whole of the said cost.
(4) If, in ascertaining the amount of tax for which any person is accountable, any dispute arises as to the amount which is to be taken for the purposes aforesaid to be the cost of any component of a garment to the manufacturer of the garment, subsections (2) and (3) of section twenty-one of the Finance (No. 2) Act. 1940 (which provide for arbitration in the event of disputes as to wholesale value), shall apply with the necessary modification of any reference to the wholesale value of the goods.
(5) Subsections (1) and (2) of this section shall have effect subject to any order made by the Treasury after the passing of this Act under section twenty-one of the Finance Act, 1948, and any such order varying or revoking subsection (1) of this section may, in connection therewith, vary or revoke subsection (3) of this section.
(6) Subject to any order made by the Treasury under the said section twenty-one after the passing of this Act, gloves made wholly or partly of fur skin (including any skin with fur, hair or wool attached) shall be comprised in paragraph (a) of Group 3 in Part I of the Eighth Schedule to the Finance Act, 1948, and paragraphs (b) and (c) of that Group shall accordingly be omitted.
The Purchase Tax (No. 11) Order, 1950 (which amended the said paragraph (b)), is hereby revoked.
(7) This section shall have effect as from the seventeenth day of March, nineteen hundred and fifty-two, except that the last foregoing subsection shall only have effect as from the fourteenth day of May, nineteen hundred and fifty-two.—[Mr. Boyd-Carpenter.]
Brought up, and read the First time.
Mr. Boyd-Carpenter: I beg to move, "That the Clause be read a Second time."
This new Clause was forecast during the debate on Clause 7 of the Bill. It has two effects. First, it substitutes for the original Clause 7 (2) provisions further redrafted for the concession made in respect of fur-trimmed garments.

1271
With the passing of the old Utility exemptions, cloth coats merely trimmed with fur would be liable to be treated as fur coats and taxed at the rate of 100 per cent., which would have a serious effect on the production of articles of this sort. This Clause provides for the reduction of the rate of Purchase Tax on fur-trimmed garments to 25 per cent.—the same rate as if they were made of cloth.
In view of the obvious possibilities of abuse, provisions are inserted. There are two in particular, to prevent abuse. They relate to the area which may be trimmed with fur and also to the proportion of the total value of the garment which may be of fur. If it were not for those provisions it would be possible to put an expensive mink collar on a cheap coat, get it through the Purchase Tax grid at 25 per cent., remove the coat and have a substantially tax free fur collar. To prevent that evasion it has been necessary to insert the provisions into the Clause.
At the same time, the new Clause introduces the concession in the case of fur gloves announced by my right hon. Friend during the general debate on the Purchase Tax. On the introduction of the D scheme, those gloves became chargeable at 100 per cent. on the amount by which they exceeded the D value, in this case 12s. The tax is reduced from 100 per cent. to the general rate of 25 per cent. applying to articles under the D scheme, which should help manufacturers of those articles, who, particularly those in the West of England, were somewhat perturbed by the incidence of the tax.
Mr. W. A. Burke: There is an Amendment down which I think is not being called, and perhaps I may be able to say a word or two now about this problem. My problem does not concern garments the exterior of which is trimmed with fur but concerns interior trimming of a shuttle. We have had some correspondence with the Treasury about this matter and I understand that it is a question of definition. It is a most important matter to the textile trade in Lancashire and, indeed, to the textile trade of other parts where they weave silk. It is more important to the silk and rayon trades than to the cotton trade.
Inside a shuttle, which is essential to the cotton trade, there has to be a small strip of fur. I understand that if the
1272
shuttle is sold with the fur in it to begin with, it is free of Purchase Tax, but of course the little strip of fur has to be renewed from time to time and then it is subject to Purchase Tax. It is only a small strip of fur, a matter of nine inches long and one inch wide, but it is essential if the cotton and silk trades are to produce the right quality.
The Temporary Chairman (Mr. George Thomas): I think the hon. Member is going a little wide of this Clause, which deals with garments and gloves. I am sorry, because I should like to help him.
Mr. Gaitskell: I understood from the Chairman that it would be possible for my hon. Friend to raise this extremely important point on the Question that the Clause stand part. I hope that it will be possible for him to continue. Perhaps you could be a little elastic in your judgment of this matter, Mr. Thomas.
The Temporary Chairman: I am sorry that I was not here when my predecessor reached that understanding, but if it was in the hearing of the Committee—
Mr. Gaitskell: I am afraid it was a private understanding.
The Temporary Chairman: Then I am afraid I must stop the hon. Member. I am very sorry. Perhaps he could try to keep in order.
Mr. Boyd-Carpenter: Perhaps I can assist. I do not know whether I shall be out of order if I say that we have been in touch with representatives of those concerned in this matter and are considering representations. As you have said, Mr. Thomas, it is clearly not within the ambit of this Clause, which deals with fur trimmed garments, whereas the matter to which the hon. Member is referring is that of fur trimmed implements of production; but the point that he has succeeded in making is one of which we are well aware.
Mr. Burke: It affects the fur trade in this respect, that it has to sell fur to the Lancashire textile trade. I should have thought that anything necessary to help the textile trade would have appealed to the Government at this time. I do hope the Chancellor will look at the matter and see if he can do something to enable the textile trade to use its implements at lower cost than that obtaining at the present time.
Mr. Assheton: I should like to add one word in support of what the hon. Member for Burnley (Mr. Burke) has said. I, too, have had similar representations made to me. I am quite certain that the case the hon. Gentleman has made is very sound, and I hope that the Board of Customs will find some way to meet it.
Mr. F. Blackburn: I was going to add my support to what my hon. Friend the Member for Burnley (Mr. Burke) said, but, since it is out of order, perhaps I had better leave it, in view of the concession that has been granted by the Financial Secretary. I want only to say a brief word of thanks to the Chancellor for the concession that has been made with regard to the glove trade; but I would remind the Financial Secretary that it is not only in the West Country that gloves are made. I hope that the Chancellor will not think that, having made this concession, he has made all the concessions so far as the glove trade is concerned, and that he will not forget that he promised before the Report stage to look further into the matter to see if he could make further concessions.
Major Sydney Markham: I should like to add a word, too, in view of the forthcoming Coronation, because this will affect those in another place who will have to invest in garments of which a fifth will be fur. The exact arithmetical proportion of fur is one fifth, the other materials comprising four fifths. I wonder if the Chancellor could give a ruling as to whether one fifth in this case is within the meaning of the Clause, of outside it.
Clause read a Second time, and added to the Bill.

New Clause.—(INTERMEDIATE RATES OF PURCHASE TAX, AND GOODS CHARGEABLE AT THOSE RATES.)
(1) In addition to the first, second and third rates of purchase tax provided for by section twenty of the Finance Act, 1948 (which are respectively one-third, two-thirds and one hundred per cent. of the wholesale value of the goods), there shall be a first intermediate rate and a second intermediate rate which shall be respectively one quarter and one half of that value; and in Part I of the Eighth Schedule to the said Act the words "First intermediate," and "Second intermediate" shall be construed accordingly.
(2) In the said Part I the word "intermediate" shall be inserted in the second column after the word "First" throughout Groups 1 to 7 and after the word "Second" throughout those Groups and in Group 9.
(3) In paragraph (a) of subsection (1) of section twenty-one of the Finance Act, 1948 (under which the Treasury have power by order to alter the classes of chargeable goods and the rates at which they are chargeable), the reference to the rates of purchase tax provided for by the enactments relating to purchase tax shall include the rates provided for by this section, and subsection (2) of this section shall have effect subject to any order made by the Treasury under the said section twenty-one after the passing of this Act.
(4) This section shall have effect as from the fourteenth day of May, nineteen hundred and fifty-two.—[Mr. R. A. Butler.]
Brought up, and read the First time.
The Chancellor of the Exchequer (Mr. R. A. Butler): I beg to move, "That the Clause be read a Second time."
This Clause gives effect to the reduction in the rates of tax on all goods covered by the D Scheme from 33½ and 66⅔ to 25 per cent. and 50 per cent. respectively, which I announced a fortnight ago during the Committee stage. The Committee will remember that there was a Ways and Means Resolution which paved the way for this Clause. There was a considerable number of Amendments, as hon. Members will remember, during our long Sitting dealing with the D levels, but we announced that we would consider them later—that consideration would be given them at the next stage.
Apart from that the Government felt that to move in that direction was wrong, and decided the better course was, if we had revenue to spare, to lower the rates on this range, which does not only include textiles, but includes all the different articles in the D Scheme, including the particular difficulties of the boot and shoe industry. I should like to make it clear to the Committee that we are really following the best possible advice in this move, since I hope that we will give the greatest possible assistance we can to the higher qualities in textiles. That was one of the main reasons for suggesting these particular alleviations.
9.15 p.m.
It has been said outside that to make this concession on Purchase Tax was a mistake. I do not think that it has been realised that it has always been in the minds of the Government to consider this particular alleviation in introducing the

1275
D scheme. I was only too glad to do it after listening to the views of the Committee, and I, therefore, fulfil my promise by moving this new Clause.
It is based on this opinion. I would like to remind the Committee that the Douglas Committee recognised the difficulty of quality goods in the following terms. They said:
"These terms of reference are, however, so tightly drawn as to make it virtually impossible to propose any change in the present Purchase Tax Utility arrangements which would significantly reduce the heavy burden of taxation on the products of the industries concerned. and in particular"—
and I am still quoting the views of the Douglas Committee—
"on the better quality goods which are of such importance to our export trade."
Therefore, there was much sympathy, strange to relate, in the whole attitude of the Government towards this reduction, and we had particularly in mind the effect on the quality of goods, on the export trade and on the balance of payments which still remain our most pressing problem.
The Report went on to say, in paragraph 130:
"We are conscious that a D Scheme such as we have proposed…perhaps offers less assistance to the production of high quality goods."
The right hon. Gentleman the Member for Farnworth (Mr. Tomlinson), who succeeded me as Minister of Education, and who has sat for a Lancashire seat for many years, although he was referring partly to the needs of the working people in Lancashire for cheaper prices, also referred, most movingly, to the necessity of making high quality goods available not only for export butt also for purchase at home, and to his "one opportunity in life of purchasing some of these high quality goods." So it is with this in mind that we move this new Clause to fulfil our earlier undertaking.
I should have liked, in answer to the representations made, in particular by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) and others representing Lancashire constituencies, to have given even more help to textiles. From the start, however, I took the view that a reduction in Purchase Tax was not the one and only solution of the depression in Lancashire. However, I hope that
1276
this small concession will help textiles, just as much as boots and shoes and the other articles in the D Scheme in this list.
I hope that the Committee will be able to accept this new Clause without undue delay, because it fulfils a pledge which we have fully discussed, and which I hope, for the reasons I have given, is in the national interest.
Mr. Gaitskell: I agree with the Chancellor of the Exchequer that we have had already a lengthy discussion of this matter. I do not, of course, agree with the arguments which he repeated this evening as to why this particular method of assisting Lancashire had been chosen, and I still feel that it would have been better, as do a number of other hon. Members, to have removed the Purchase Tax from textiles in the present circumstances.
I am quite sure that if we are to maintain an economy with full employment we must get used to applying fiscal methods, such as Purchase Tax, and varying them from time to time. I quite agree that a lot of people in industry and trade still think of this tax as being mainly a Revenue tax, and because of that the Government have great difficulties about any changes that may be made in it. Yet I believe it can be a very valuable tax from the point of view of maintaining employment and switching demand from time to time, as circumstances require, if only the Government will have the courage to do that.
I am sorry, therefore, that, in these circumstances, which clearly demand the encouragement of the purchase of textiles at home, in contrast with circumstances in the past which called rather for a reduction, at any rate, so far as luxury textiles were concerned, that the Chancellor has not seen fit to remove the tax
I do not propose to repeat all the arguments as to why we think the method that the Chancellor has chosen to give away some £17 million is not the right one. We recognise the point about quality goods, but we do not think it outweighs the important point of equity which arises, and that, in our view, by raising the value of D we should have helped the poorer consumers a good deal more than they will be helped under the Chancellor's new Clause.
We have discussed this at great length, and I do not think there is much point

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in discussing it further this evening, unless my hon. Friends may feel that they have some further contribution to make. We do not, of course, propose to divide against this new Clause, because it is, as I have said on other occasions, better to have one-fifth of a loaf than no loaf at all.
Clause read a Second time and added to the Bill.

New Clause.—(INCOME TAX ALLOWANCE—MERSEY TUNNEL.)
The undertakings described in paragraph (b) of subsection (1) of section eight of the Income Tax Act, 1945, and in paragraph (b) of subsection (1) of section two hundred and seventy-one of the Income Tax Act, 1952, shall include and shall be deemed always to have included the Mersey Tunnel undertaking otherwise known as Queensway.—[Mr. Bevin.]
Brought up, and read the First time.
Mr. J. R. Bevins: I beg to move, "That the Clause be read a Second time."
This refers to a relatively parochial matter and I will put the case as briefly as possible. As hon. Members know, the Mersey Tunnel is one of the finest pieces of engineering in this country, besides being one of the most remarkable examples of municipal enterprise. I resist the temptation to say which political party conceived and executed it. This undertaking between the years 1934, when it was first opened, and 1950, was not liable to Income Tax. In 1950, however, two factors—notably the increase of traffic revenue and also the increase in interest of investments—combined to produce a taxable surplus for the undertaking.
When that occurred about two years ago it was discovered for the first time that, according to the strict letter of Income Tax law, the undertaking was not entitled to the normal depreciation allowance on buildings and structures of 2 per cent. Many hon. Members of the Committee will know that, according to Section 8 of the Income Tax Act, 1945, industrial buildings and structures are defined by these words:
"… The expression 'industrial building or structure' means a building or structure in use … (b) for the purposes of a transport, dock, inland navigation, water, electricity or hydraulic power undertaking …."
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It was definitely the view of the Board of Inland Revenue that, for certain reasons which were considered good by them, the Mersey Tunnel did not fall within this definition. When the matter was referred to the Treasury, it was suggested that the undertaking should make representations to the Millard Tucker Committee which was then sitting. I should like to quote two sentences from the Report of that Committee on the subject matter of this new Clause. They reported that:
"The Mersey Tunnel does not strictly come within this description"—
that is, the description of an industrial structure or building under Section 8 of the Income Tax Act—
"and accordingly no depreciation allowance is due under existing law. Its exclusion appears, however, to have been due to an accident of drafting rather than deliberate intention. The Mersey Tunnel is, in our view, as much entitled to an allowance as many of the concerns which fall within the definition …. We recommend that the same treatment should be given to the Mersey Tunnel as is given to buildings and structures which fall under the definition of industrial buildings."
The purpose of this new Clause is not to absolve this undertaking from the liability to Income Tax, but merely to remove what we regard as an untenable anomaly.
Mr. John Tilney: I rise to support what has been said by my hon. Friend the Member for Toxteth (Mr. Bevins). The ratepayers of Merseyside have suffered for a long time through laws which are more of a sleight-of-hand in drafting rather than of the underworld, but they have robbed them of allowances which other similar bodies of an industrial and transport nature have been given in the past.
The odd situation arises whereby the ratepayers of Liverpool may have to pay rates to a body which is itself exempt from rates, but which may use the rates of Liverpool to pay national taxation in the form of Income Tax, Profits Tax and even the Excess Profits Levy. All the ratepayers of Merseyside hope that the Chancellor will see fit to accept this Amendment.
Mr. Mitchison: I believe that the great event of a reply from the Minister of State for Economic Affairs is about to take place, and I would not delay such an auspicious moment for long, but I should

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like to know one thing. Does the Merseyside Tunnel levy tolls and is that how this question has arisen? Also, do not other tunnels depreciate and why should the Mersey Tunnel be singled out in this way and not the Blackwall Tunnel, for instance? Perhaps that is purely a financial question, but again might I ask, is it certain that tunnels do depreciate or do they not improve by keeping?
Mr. William Keenan: I only rise because of the remarks made by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). The local authorities at Birkenhead and Liverpool undertook a tremendous task in making this great tunnel. It was an outstanding engineering feat and proved invaluable to the country during the war, saving many millions of pounds. There is a difference in the case of the Mersey Tunnel compared with some others, because of the liability of both Birkenhead and Liverpool, which paid a 4d. rate right up to the war. Surely it is desirable thing that such a public asset, provided by the initiative, foresight and national outlook of the local authorities in Liverpool and Birkenhead, should no longer be called upon to pay Income Tax from the rates.
Sir A. Salter: My hon. Friends and the hon. Member for Kirkdale (Mr. Keenan) have put up such a clear and convincing case that I do not think it is necessary for me to take up the time of the Committee on the subject. As to what the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) said, I think the Committee would be satisfied to be reminded that this was a case which was gone into very fully by the Tucker Committee, and they recommended that treatment given to the Mersey Tunnel should be the same as that given to buildings which came under the definition of an industrial building.
We are convinced by the case which has been put before the Committee. We cannot accept the Clause in the precise form in which it is drafted, and we cannot make any arrangements for it to be retrospective. We will, however, undertake on the Report stage to introduce a Clause which in substance will give effect to the recommendations of the Tucker Committee.
Mr. Keenan: As the matter has been looked upon in the way it has, I am sure that the authorities will be very grateful.
Mr. Bevins: In view of the very full assurances given by the Minister, I beg to ask leave to withdraw the Motion.
Motion, and Clause, by leave, withdrawn.

New Clause.—(PURCHASE TAX RELIEF FOR TAX-PAID STOCKS.)
(1) The Treasury may by regulations provide for mitigating the financial loss to persons who own goods for the purpose of resale where purchase tax has become chargeable in respect of those goods prior to, and of an amount exceeding the tax (if any) chargeable in respect of goods of the same description and wholesale value by reason of, effect being given to any changed provisions whereby—

(a) goods of that description cease to be chargeable goods; or

(b) the rate at which tax is chargeable in respect of goods of that description is reduced; or

(c) goods of that description become included in a prescribed list for goods of that class; or

(d) the amount specified in such list in relation to goods of that description is increased.

(2) Regulations under this section may contain incidental or supplementary provisions and may in particular provide—

(a) for defining the classes of persons qualifying for payments;

(b) for computing the quantity of goods of any description or wholesale value in respect of which payments are to be made;

(c) for paying, to those persons and in respect of those goods, out of monies received by the Commissioners of Customs and Excise on account of purchase tax, sums not exceeding the amount of tax which was chargeable in respect of those goods less the amount of tax (if any) chargeable in respect of goods of the same description and wholesale value under the said changed provisions;

(d) for requiring, as a condition precedent to receiving payment in respect of any goods, an undertaking from the recipient that he has reduced the price at which he offers for sale goods of the same description and wholesale value by an amount not less than that by which the tax chargeable in respect of goods of that description and wholesale value has been reduced;

(e) for the imposition of penalties in respect of any contravention of or failure to comply with the regulations, so, however, that no person shall by virtue of this paragraph be liable for any offence to imprisonment for a term exceeding twelve months or to a fine exceeding five hundred pounds.

(3) This section shall be construed as one with Part V of the Finance (No. 2) Act, 1940.—[Mr. Osborne.]
Brought up, and read the First time.
9.30 p.m.
Mr. Cyril Osborne: I beg to move, "That the Clause be read a Second time."
The Clause has been supported by more than 100 hon. Members. It proposes to give the Treasury power to grant a rebate on goods that are in stock and on which Purchase Tax has been paid, when Purchase Tax is altered or taken off. This is a matter upon which shopkeepers feel deeply. The justice of their claim has been admitted by previous Chancellors, and they want reassurance from the present Chancellor.
I would remind him that there are about 750,000 shops in the country of which about 425,000 sell goods that are subject to Purchase Tax. There are about half a million people affected by the proposal. My right hon. Friend will remember that shopkeepers are unpaid, and very often unthanked, tax collectors. Many of them find trade more difficult now than they did two years ago, and they feel that if they are not given reassurance in this way it may not be merely a matter of justice but of survival for some of them.
They are in a special class among taxpayers. I suppose there are no other local taxpayers who not only pay taxes in advance but actually go to the bank in many cases to do so. I plead very hard with my right hon. Friend to look favourably upon my proposal. If Purchase Tax were taken off or reduced, the public would expect prices to be reduced at once, and therefore if the shopkeepers have no rebate a reduction of the tax means a dead loss to little men who can ill afford to face it.
I should like to give one example from my constituency. About three months ago one of my constituents came to my political surgery and said he had goods in his shop on which he estimated he had paid £2,000 Purchase Tax. He owed the bank about £5,000. I assume that Purchase Tax will not come off straightaway, but if it were to do so that man would suffer a £2,000 dead loss which he could not afford. He is by no means an isolated case.
May I remind the Chancellor of the history of this case? In January, 1949, a deputation of four Members of Parliament and four trade representatives saw the then Financial Secretary to the
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Treasury the right hon. Member for Battersea, North (Mr. Jay), and they put their claim to him. He saw them on behalf of the then Chancellor, Sir Stafford Cripps. He was very sympathetic, and said that the Chancellor had promised that something should he done.
Mr. Jay: For the sake of accuracy I must point out that, as far as I remember the case, we said we would consider the matter and see whether something could be done. I do not think we made a promise of something positive.
Mr. Osborne: I propose to quote both the late Sir Stafford Cripps and the right hon. Gentleman. I shall not mislead him. He promised something to be done. It was a very definite promise three years ago. It is no good the right hon. Gentleman shaking his head because I have his words here.
These people were taken over the Customs and Excise to find a solution. The late Sir Stafford Cripps said:
"I recognise that there is a problem about retail stocks, when the time comes for a reduction in the level of the Purchase Tax."
This is the definite promise:
"I shall do my best, therefore, to work out during this year"—
Is that definite enough?
"some means for meeting this problem, and thus getting rid of, or at any rate diminishing, whatever hold-up of trade in articles subject to Purchase Tax can be attributed to the financial effect on traders of changes in the tax."—[OFFICIAL REPORT 6th April, 1949: Vol. 463, c. 2095.]
I ask the present Chancellor to keep the promise made three years ago by the late Sir Stafford Cripps to the small traders. The justice of the claim is in no doubt. The then Chancellor merely said that we had to find ways and means of bringing it about.
As a result of that interview, the trade representatives went away rather hopeful and rather satisfied. They took the promise made to them in good faith. There were a series of meetings between the trade representatives and the Customs and Excise representatives, and two schemes were produced. One was the A scheme which the Government said it was prepared to accept. But the A scheme affects only articles bearing separate numbers or distinctive marks which can quite freely be traced individually and it covers only about 5 per cent.

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of the total trade and does not affect the real problem facing the trader, although the traders were very grateful for the promise under the A scheme.
Scheme B was rejected by the right hon. Gentleman. He said that he had made no definite promise, but when the right hon. Gentleman the Member for Battersea, North (Mr. Jay) was Financial Secretary, he said:
"Discussions have shown that over the greater part of the field the arrangements necessary for a rebate on the tax would be excessively complicated and would involve an inordinate amount of work for all concerned. Even when the task had been undertaken the results would bear no precise relations to the circumstances of individual traders and would give rise to many inequalities and complaints. There is, however, a limited field in which there seems to be a better chance of finding a practical solution."
He was referring to the A Scheme, and I would remind the right hon. Gentleman of this when he says he gave no definite promise:
"The possibilities as well as the justification for a rebate are in my view to be found in this limited field."
That is watering down very considerably the definite promise made by Sir Stafford Cripps to the traders and to the House in his Budget speech covering the whole field. The right hon. Gentleman went on:
"My right hon. Friend will await the outcome of further discussions before coming to a final decision."—[OFFICIAL REPORT, 20th October, 1949; Vol. 468, c. 53–4.]
That promise was made three years ago, but nothing at all has been done. In the meantime the traders feel that this danger overhangs them and that it is something which threatens their very existence.
My complaint about the previous Chancellor and the previous Financial Secretary is that they accepted the justice of the claims of the traders but that they said that no scheme for carrying out that claim was feasible; and that they threw the onus of producing a scheme on to the traders.
My contention—and I put this to my right hon. Friend—is that once the House has admitted the justice of a case, a Department have no right to say that they cannot find a way of carrying out that justice. Departments will always say, "It is not easy." They are always conser-
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vative, they do not want changes. They are no different from the executives of many private businesses. They would rather have the devil they know than somebody they do not know.
The House having accepted the justice of the case, a Department have no right to override the decision of the House. It is their job to find a way. I am told that some years ago, when P.A.Y.E. was first discussed in the House, there was the same reaction by the Gentlemen at the Box, that "It is not possible."
Mr. Assheton: That was the Revenue.
Mr. Osborne: I do not care whether it was the Revenue, or what it was. The Departments' point of view was, "It is too difficult. We cannot find out equitable way of carrying out the decision of the House." Then one day, when the then Chancellor of the Exchequer was told that he had got to find a way of carrying it out, they found a bright boy in the Treasury who produced a scheme. The Chancellor ought to find another bright boy now who can find a way of carrying out the justice of the scheme for the small trader.
Again, following the discussions with the Customs and Excise, the Chairman said to the trade representatives that Scheme B was unworkable and, therefore, must be excluded for the time being. He added, however, that the then Chancellor did not exclude the possibility of finding a satisfactory solution to the whole problem. That was on 9th November, 1949. Again, however, he threw the onus of finding a proper scheme back on to the traders.
I submit to my right hon. Friend that scheme B, which is really the ante-dating scheme, could be worked. It does not give absolute justice it does not give perfect justice—there would be anomalies under it between one class of trader and another and between trade and trade, but at least it would be rough justice, and what the traders feel is that rough justice is better than no justice at all, and that once the Treasury were told that they had got to find a way of making rough justice into perfect justice, they could do so.
Because the traders were dissatisfied with the treatment they had received from the previous Financial Secretary to the Treasury, a Clause very similar to the

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present one was put down in 1950. Unfortunately, however, it was ruled out of order and was not discussed. Then, last year, there was put down an identical Clause except for the difference of the word "shall" for "may." I am fortified in my submission to the Chancellor in that no fewer than five Members of the present Government, including the Financial Secretary, supported that Clause. Unfortunately, it was not called, otherwise I should be quoting a much more brilliant speech from my hon. Friend in support of the Clause than I could make myself. To some extent I am, as it were, fathering his stepchild.
And so I ask the Chancellor to take these powers, so that when he thinks the time is appropriate—I am not asking him to reduce Purchase Tax at the moment—and when he can afford it, he will have the power to do justice to this small group of people.
9.45 p.m.
Mr. Joseph T. Price: The hon. Member is doing very well indeed. He is putting up a good case. But will he explain, when telling us about this formula which a bright boy in the back-woods—who has to be discovered—is to produce for the Government, how he is to draw the line between the small trader and the large trader? I understand that the hon. Member is directing his remarks to the case of the small trader.
Mr. Osborne: If I mentioned the small trader only I am sorry; I meant all traders, because I understand this Clause is supported by representatives of the Cooperative Society, and I should never call the Co-op a small trader. I am pleading for all traders, and I would remind the Committee that in the negotiations with the right hon. Member for Battersea, North, there were 26 national associations represented. They are still pressing today for what they consider to be justice for their members whether they are big or small traders.
I would plead especially for the little man, because he can least afford the financial danger. He has not the resources to meet the difficulty which faces him. I would beg the Chancellor to take the powers to do for traders both big and small what the previous Chancellor promised he would do three years ago.
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I am certain that if he does that he will be doing justice to a very good set of people who ought to be helped when he has the financial resources available to assist them.
Dr. Horace King: I wish to support the principle of the Clause. It does a simple act of justice to a group of citizens. The chamber of commerce in my own town and most of the associations of traders have been concerned about this for the past two or three years. I raised the case of these men with the Financial Secretary in the last Government and I must confirm the statement made by the hon. Member for Louth (Mr. Osborne). My impression of my conversation with the Financial Secretary was that he accepted the justice of the case, and that the problem was one merely of the technique of carrying it out.
It would seem to me manifestly unfair that a group of people who have acted as unpaid tax collections for quite a long time should be penalised when the Purchase Tax is removed by having had to pay Purchase Tax and then having to sell goods later at a cheaper price, because the Purchase Tax has been removed. If, as seems likely, we are moving into a time when Purchase Tax may be reduced, hon. Members on both sides of the Committee should persuade the Chancellor to make preparations for that day, and to treat these people justly.
Captain J. A. L. Duncan: I support this new Clause. This is a standing grievance among both small and large traders in these days when Purchase Tax is tending to be reduced, rather than maintained. The position arose a couple of years ago when Purchase Tax was more or less static, but it arises more and more now, when Purchase Tax is tending year by year to be reduced, and when we hope that it will be further reduced in future years.
My hon. Friend the Member for Louth (Mr. Osborne) made an extremely able and persuasive speech, but I do not think he explained how the Purchase Tax works on the retail trader. Purchase Tax is payable by the wholesaler, and the goods purchased by the retailer have to be bought by him plus the Purchase Tax. If he can sell at the price plus Purchase Tax, he can get his tax back, but, if

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the goods are unsaleable, or if they have to be reduced in price, or the Purchase Tax itself is reduced after the goods have left the wholesaler, then it is almost impossible for the retailer to get the tax back. It is for those reasons that we are most anxious that a scheme should be found for compensating the retailer for what is the unavoidable loss which falls on him through no fault of his own.
I would add that the new Clause provides that the Treasury may by regulation provide for
"mitigating the financial losses to persons who own goods for the purpose of resale where Purchase Tax has become chargeable….
It leaves the matter open to the Treasury and the Government to approve a scheme and issue regulations. It is not obligatory on the Treasury to do so if they cannot find a scheme. It still leaves it open to the Treasury to produce a scheme in consultation with the National Chamber of Trade and other retail organisations. If one can be found, only in that case will the regulations be necessary to put it into immediate effect. We do not want to wait until next year before we get it; we want to get it as soon as possible, and as soon as a scheme can be worked out which will be practicable, fair and just to all sides. It is on those grounds that I support the new Clause.
Mrs. Barbara Castle: I wish to support the Clause moved by the hon. Member for Louth (Mr. Osborne), and to say, first, that I am very grateful, despite my unobtrusiveness, that I have managed to catch your eye, Mr. Thomas.
I support this Clause because it seems to me to be based upon common justice, and also because this is an appropriate moment at which the Committee should think very seriously on this matter. During the proceedings on the Finance Bill, we have been discussing Purchase Tax in a context which was much more than a purely fiscal one. We have been discussing Purchase Tax in terms of all kinds of social and economic considerations, and particularly the problem of unemployment and how Purchase Tax might be reduced as a step towards relieving unemployment. In fact, we have in our discussions on Purchase Tax been giving one of the main arguments in favour of the demand for a tax rebate,
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because we have been proving that the Purchase Tax is in a special category.
It has sometimes been asked why a rebate scheme should be given in connection with Purchase Tax when it is not given in connection with, say, the beer or tobacco duties. The answer is that those duties are levied for purely revenue considerations, whereas very many other considerations affect the levying of the Purchase Tax. We therefore have a situation in which at any time and for all kinds of reasons a Chancellor may be compelled to alter the rate of the Purchase Tax, with disastrous effects on retailers.
We have recently had an example in the shops of what happens when we do not have a rebate scheme. The grave uncertainty as to what was going to happen regarding the Purchase Tax has meant that retailers have been afraid to carry stocks of any size because, failing the introduction of a rebate scheme, they stood to lose very heavily if Purchase Tax were suddenly to be decreased. We have had an absolutely ridiculous situation which we in the textile areas particularly deplore, a situation in which manufacturers' stocks have been piling up while stocks in retail shops have been very low.
Anybody who has visited retail shops recently to buy textile goods knows that, despite the so-called glut of textiles in this country, there has been a very poor choice in the shops. The possibility of stimulating demand has been reduced. Why? Because every retailer in the country knew that a great battle was going on in this Committee over Purchase Tax in relation to the unemployment problem in Lancashire, and that if that battle was won they stood to lose heavily in terms of the tax they had already paid on their stocks.
Just because I am one of those who has pressed both on social and employment grounds for Purchase Tax to be reduced in this Budget, I feel I have a special responsibility to those retailers who would have stood to suffer had I been successful in exerting the pressure which I and my colleagues have been bringing to bear. I therefore suggest to the Financial Secretary that we in this Committee have a special responsibility towards retailers.
If Parliament is to play about with the Purchase Tax, as we do play about with it, altering it a bit here one year and a

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bit somewhere else another year, and if Parliament is going to use this tax for other than revenue purposes, then Parliament is under a moral obligation not to place on the retailers the burden of always carrying the financial effects of such changes.
We know that Purchase Tax is not only changed in every Budget, but that it is sometimes changed even in the middle of a Finance Bill itself. What state of mind must retailers be in at the moment when they do not know whether some further change will even be made on the Report stage of this Bill? How can we get any confident buying in by retailers, and how can we hope to clear the pipeline as long as this uncertainty hangs over the heads of retailers?
I suggest that in the interests of the community as a whole we ought work out a scheme whereby if Parliament for its own purposes suddenly decides to make a change in the Purchase Tax, the retailer does not feel the draught of that sudden change. The introduction of the D Scheme also means that in every Budget we shall have new arguments about the level of the D line. There will be manoeuvres for changes here and there, and this will protract an uncertainty which will be extremely dangerous for the manufacturers, on the one hand, and unpleasant for the consumers on the other unless we give the retailers this safeguard.
10.0 p.m.
There is one other consideration. We are now very much in a buyers' market. We are now very much in a situation in which clearly it is quite impossible for any retailer not to pass on immediately to the consumer any reduction in tax which this Committee and the House may make. He must do it. He is already compelled to reduce charges here, there and everywhere, and in a buyers' market it is impossible for him to hope to recoup himself for the taxes he has paid on stocks he has already bought.
We are now in this dilemma, that any substantial relief we can give on Purchase Tax as a result of efforts on both sides of this Committee spells ruin for many retailers. I had a case brought to my notice by the chamber of trade in my own constituency in which it was pointed out that one member of the chamber had
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£5,000 worth of stock on 1st February. That was not a very large stock because of the uncertainty, but the tax he had paid on it amounted to nearly £2,000 and if our campaign to have Purchase Tax on textiles abolished had been successful he would not have been in a position to recoup himself.
Frankly, it is not fair to an important section of the community to chop and change on Purchase Tax and to put retailers in that position. I know that my right hon. Friend the Member for Battersea, North (Mr. Jay) always accepted the justice of the principle that the argument has been about the administrative possibilities. The advisers of the Treasury say it is administratively impossible. I suggest that the Committee should give one word in answer to that—"Nonsense." Civil servants are always being asked to do the administratively impossible. It has been done time and time again, and must be done. Three-quarters of government is the mastery of the impossible. It could be done here if this Committee insisted upon it.
During the war we had many examples of public officials paying out public money under conditions of great stress and urgency and having to do it without incurring too many abuses. The National Assistance Board had to make vast payments to thousands of people as the result of bomb damage. It was done successfully, though it might have been said that it was administratively impossible to avoid abuses in those cases.
If Parliament gave the word the administrative answer could be found to this problem, as it has been found to many other administratively difficult problems. The hon. Member for Louth has told us of the distinguished support that a Clause similar to this had in the debates of 1951. I turned up the Clause put forward in a debate on the Finance Bill of 1950 which, as the hon. Member for Louth said, was almost identical with the one we are pressing now. Of the six names put to that Clause in 1950 five are now very prominent members of the present Government.
The six were the right hon. Gentleman the Secretary of State for the Colonies, the right hon. Gentleman the Leader of the House, the right hon. Gentleman the Minister of National Insurance, the right hon. Gentleman the Minister of Works,

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the hon. Gentleman the Under-Secretary of State for Air, and the hon. and gallant Member for Lewes (Major Beamish). What a distinguished array of talent. Now they are enthroned in the seats of power and office and we can confidently ask the Financial Secretary today to do what he believed in yesterday.
Mr. Boyd-Carpenter: First of all, may I congratulate my hon. Friend the Member for Louth (Mr. Osborne) upon his good fortune in securing that this new Clause was actually moved on this occasion? I, of course, agree with him, and with a good many other hon. Members who have spoken, that this matter arouses outside the House of Commons a great deal of strong and very understandable feeling, because it is a fact that in the event of any substantial reduction being made in Purchase Tax, a considerable degree of hardship can follow to the retailers concerned. The difficulty which has so far prevented any action in the matter has been that to which several hon. Members have referred—of devising a practicable scheme for dealing with it.
As I understand it, the basis of the difficulty is the different turnover period which exists in respect of different types of goods, or in respect of the same type of goods in different periods. It is that difficulty that has so far eluded the capacity of the many people who have given their minds to consideration of the difficult matter of how to evolve a scheme which was not, in fact, so riddled with anomalies, injustices and unfairnesses as to make its application somewhat difficult to justify.
That has been the practical problem with which a good many people have been concerned over the last few years and that is the difficulty with which the hon. Lady the Member for Blackburn, East (Mrs. Castle), in her previous incarnation as Parliamentary Private Secretary to the President of the Board of Trade, must have come into contact in connection with her official duties.
As my hon. and gallant Friend the Member for Angus, South (Captain Duncan) pointed out, the Clause this year is not mandatory but permissive in its form. It does not compel the Treasury to make Regulations; it merely empowers them so to do. As I understand it, that
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would impose no obligations upon my right hon. Friend to make any Regulations at all and that, indeed, was my hon. and gallant Friend's argument, as I understood it.
On the other hand, it would be rather less than frank with the Committee to accept powers if one really had a serious doubt as to one's capacity to make use of them. It would be a little lacking in the honesty with which any Government ought to confront this Committee, to say, "We will take the powers. We do not believe that we can do anything with them: but we will take them." I do not think that would be quite the way in which a Government should conduct itself because, although there would be no legal obligation, many people in this Committee and outside would think there was a moral obligation.
All the same, my right hon. Friend is not content simply to leave the matter as it now stands. He has given a good deal of thought to this difficult problem on which—as hon. Members on both sides of the Committee are aware—a considerable number of representations have been made to us both by hon. Members and persons outside. Faced as he is with the practical problems to which I have referred, my right hon. Friend would like to deal with the matter in these ways; he would like to refer both the principle and the possibility of devising a satisfactory scheme for examination by an independent committee.
He has been considering the matter, and the committee's terms of reference—though I am not in a position to announce them tonight—would be so drafted as to cover both aspects of the matter to which I have referred, namely, the principle and the possibility of working out a satisfactory scheme. My right hon. Friend has had in mind the appointment of a wholly independent chairman. He is considering possible names, but I am afraid I cannot make a statement at the moment because the matter is still in the formative stage; though the decision to appoint a committee has already been taken, which is why I am in a position to make this statement to the Committee tonight. As soon as the precise terms of reference have been drafted and the selection and acceptance of their appointments by the independent members of the committee have been gone through, my right hon.

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Friend will take the earliest opportunity to make a statement.
Faced as he is with this very difficult issue—faced, also, with the real feeling on the matter and, indeed, with many of the aspects of the merits of the matter and with the difficulties which have been encountered over the last few years—my right hon. Friend considers that the best thing to do is to get it reconsidered in a fresh way by an outside committee under an independent chairman.
Mrs. Castle: The hon. Gentleman says that he wishes to refer to this committee both the principle and the administration sides of the problem. Does that mean that he does not accept the justice of the demand?
Mr. Boyd-Carpenter: Unless my right hon. Friend wanted to do something about this he would be wasting his time and that of this Committee in appointing the committee at all.
Mrs. Castle: What about the principle?
Mr. Boyd-Carpenter: The principle involved is somewhat complex in its applications, as the hon. Lady will know from her own official experience. We feel that it is much better to have the whole matter put before an independent committee, because, as the hon. Lady will appreciate, solutions cannot be arrived at independent of the principles of the problem which it is desired to solve. Indeed, if they were, they might be wholly irrelevant to the issue. It seems better that the whole matter should be before an independent committee. I can assure the hon. Lady that she is not on a good point there.
Mr. F. Harris: Could my hon. Friend say how long it will take this committee to report? Is it a matter of a few months or a very long time?
Mr. Boyd-Carpenter: Naturally, we want a solution as quickly as possible, but my hon. Friend, who is familiar with the problem, knows that it is not one to which it has been possible to find a snap solution.
Mr. Coldrick: In the first place, I should like to thank the Financial Secretary for the assurance he has given that something will be done in this matter. I was somewhat surprised by the great enthusiasm which seems to
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be displayed in certain quarters this evening, having regard to the fact that there was such a lack of enthusiasm in years gone by.
Mr. Osborne Mr. Osborne rose—
Mr. Coldrick: I am not referring to the hon. Member for Louth (Mr. Osborne).
Mr. Osborne: At least our enthusiasm has produced some result, which is what the hon. Gentleman's enthusiasm failed to produce.
Mr. Coldrick: The hon. Gentleman misunderstood me. In the first place, it is very seldom that I am in agreement with any proposition which he makes, but on this occasion I am in hearty agreement with the proposal which he has submitted. During his speech he spoke of the small trader and seemed to imagine that the Co-operative movement was something totally different. The only fundamental difference is that, whereas he was speaking of small traders, we are small people in big business. We have as much interest in this proposition as he has.
I admit that I have taken many deputations on behalf of the Co-operative movement and private traders' associations to our own Chancellor of the Exchequer and Financial Secretary upon this matter. In the assurances which they gave, as I understood them, they were prepared to admit the justice of our claim but they constantly indicated that the responsibility rested upon us of evolving a scheme which would be satisfactory. Unfortunately, we never succeeded in finding one which was generally acceptable.
The position, briefly, has been this. This is a tax upon the consumer, but in practice the retail trader proceeds to pay the tax to the wholesaler at the time when the wholesaler transfers the goods. We often find the anomalous position in which payment is made, but by the time the goods are received the tax has either been diminished or abolished, so that the retailer suffers and is compelled to pay the tax without the remotest possibility of re-claiming it.
10.15 p.m.
In addition, it has been abundantly clear to us that the trader, whether he is a large or a small trader, on a large number of goods upon which tax has been paid loses from the point of view

1295
of recovering the tax because the goods have been damaged or soiled, or fashions have changed. For some reason of that description it has been impossible to recover the tax from the consumer. Very often, as the hon. Gentleman pointed out, when the tax was paid it was impossible to sell the goods before the tax was removed or reduced.
I expect the Chancellor knows perfectly well that it is estimated that in the country there are about £60 million worth of goods that are carrying Purchase Tax, and in the Co-operative movement there are about £3 million worth of goods that are carrying Purchase Tax. Therefore, we are substantial losers. I would endorse this claim at this particular moment because the difficulties have been accentuated by the acceptance of the D line or the Douglas Scheme, because a large number of goods that have hitherto carried the full Purchase Tax have had the tax reduced by virtue of the new scheme.
I have made inquiries from Co-operative societies—small ones, medium ones. and comparatively large ones—and find that they sustain losses because of the adoption of the D Scheme ranging from £380 to £3,500. I submit that no Chancellor is justified in imposing this burden on the distributors when the distributors are not supposed to be the object of the tax.
The Financial Secretary has indicated that it is administratively difficult to carry this out, but it would be a very dangerous thing if that principle were applied to the criminal courts, because I could well imagine a judge saying that, although he did not believe in hanging innocent people, as it was difficult and cumbersome to prove innocence it would be easier to hang a man. It would seem to me that everybody is agreed that a grave injustice is being imposed on trade, and I sincerely hope that the Financial Secretary will be guided not only by people who deal in the abstractions of the Treasury when he sets up the committee—not merely by theoreticians—but by people who have found difficulties in carrying out the tax—difficulties far greater than those they would find in removing the difficulties of administration.
Mr. Assheton: I rise to congratulate my hon. Friend the Member for Louth
1296
(Mr. Osborne) in bringing forward this admirable new Clause, and I should like to congratulate the hon. Lady the Member for Blackburn, East (Mrs. Castle) for having the wisdom and good sense to add her name to such a sound Conservative new Clause. I should, finally, like to thank the Financial Secretary for what he said on behalf of the Chancellor.
Mr. J. Hudson: Will the committee that is to be set up in its findings take the evidence of the Co-operative movement into account? Will any attempt be made to include the Co-operative movement in the committee?
Mr. Sidney Marshall: Is it different from anybody else?
Mr. Boyd-Carpenter: I cannot say anything more about the membership of the committee, but, obviously, the Cooperative movement is concerned in this matter.
Mr. Osborne: In view of the submission made by the Financial Secretary, and on the understanding and in the hope that, if it is to be done, it is done quickly, I beg to ask leave to withdraw the Motion.
Motion and Clause, by leave, withdrawn.

New Clause.—(AMENDMENT AS TO WHOLESALE VALUE FOR PURCHASE TAX.)
For subsection (1) of section twenty-one of the Finance (No. 2) Act, 1940, there shall be substituted the following subsection:—
"(1) The wholesale value of any goods in respect of which tax is chargeable shall be taken to be the price which in the opinion of the Commissioners the goods would fetch, on a sale made at the time when the tax in respect of the goods becomes due by a person selling by wholesale in the open market in the United Kingdom to a retail trader carrying on business in the United Kingdom only, if no tax were chargeable in respect of the sale and it were made in the circumstances specified in the Eighth Schedule to this Act:
Provided that, where goods are bought under a chargeable purchase from the manufacturer thereof, being a manufacturer who normally sells such goods to retail traders in the circumstances specified in the Eighth Schedule to this Act, but who does not regularly sell them to wholesale merchants or to retail traders registered by virtue of section twenty-six of this Act (which provides for retail traders purchasing on a wholesale scale to be treated as wholesale merchants) or to buyers other than whole-

1297
sale merchants or retail traders, the wholesale value of the goods shall be taken to be the price (excluding any amount due from the buyer to the seller by reference to tax for which the seller may be accountable in respect of the purchase) at which that manufacturer is normally selling such goods to retail traders at the time when the tax in respect of the goods becomes due."—[Mrs. Castle.]
Brought up, and read the First time.
10.15 p.m.
Mrs. Castle: I beg to move, "That the Clause be read a Second time."
This is a small technical matter, but its purpose, I think, is quite clear and straightforward. It is one which ought to appeal to all hon. Members of this Committee, because the purpose of this new Clause is to prevent consumers from paying more tax than they ought to pay. I am sure that we all agree that taxation is high enough in all conscience, and here is a chance for the Government, who have always declared themselves to be opposed to excessive methods of taxation, to prevent taxation from being higher than it need be.
Under the arrangements which at present operate, the consumer is giving a nice little gift to the Revenue authorities of an extra tax because of the way in which the wholesale value on which Purchase Tax is based is at present calculated. The present position is that the wholesale value for the purpose of calculating Purchase Tax, under Section 21 of the Finance No. 2 Act, 1940, is the open market wholesale value of chargeable goods.
Clearly where goods are sold to a wholesaler no argument and no difficulty arise. The wholesale value in that case is obvious. Nor did difficulty arise when the Utility price control was operated, because then the maximum wholesale price fixed by the Utility scheme was the highest price on which Purchase Tax could be calculated. It is when the manufacturer sells to a retailer direct that the trouble starts, because at that point Customs and Excise come into the picture with their calculations as to what the wholesale value is in such a transaction.
I suggest that what has gone wrong under the present arrangements is that Customs and Excise have assumed that a normal sale to a retailer by a manufacturer is through a wholesale merchant
1298
and, therefore, when goods go direct from the manufacturer to the retailer they are by-passing the normal channels; as though, in fact, something naughty was being done. Therefore, in order that the retailer who buys through the wholesaler may not be penalised, Customs and Excise laid down that the price at which the manufacturer sells direct to the retailer must be uplifted by prescribed percentages supposed to correspond with the wholesalers' market.
The result of this arrangement which Customs and Excise make is that Purchase Tax in this case is levied not on the price at which the goods are actually sold to the retailer, but on the notional wholesale price which Customs and Excise reach by uplifting the actual price. The justification which is given for this action is that it prevents the big buyer from by-passing the wholesaler and getting a tax advantage over the small man who buys through the wholesaler's merchant. I want to make it clear at the outset that this Clause gives no advantage to the big buyer over the small buyer. In this respect my Clause differs from that in the name of the hon. Member for Gillingham (Mr. Burden), which has not been called.
My Clause seeks to free both the big buyer and the small buyer from the unfair disadvantage from which they both suffer as a result of the interpretation at present placed on Section 21 of the Finance Act, 1940. I suggest to the Chancellor that Customs and Excise fail to realise that for a whole range of goods the normal channel of sale is direct from manufacturer to retailer. The obvious and outstanding example is furniture, but it is also true of a wide range of textiles, in particular men's and boys' outerwear and women's outerwear.
In the case of a large range of other textile goods the position is that the highest quality branded goods are always sold direct from manufacturer to retailer whereas the cheaper unbranded goods are usually sold to a retail merchant. These two extremes of trade run parallel and do not usually overlap. The main examples where this takes place are men's shirts and pyjamas and women's underwear, corsets and brassieres, and also knitted underwear and stockings, where branded goods are normally always sold direct from manufacturer to retailer.

1299
In these cases uplift does not have the effect of preventing discrimination between the big buyer and the small buyer. It merely has the effect of discriminating against the consumer, who is forced to pay more in Purchase Tax than he would otherwise have to pay as a result of the actual selling prices being uplifted to a notional wholesale figure.
My Clause adds a proviso to the existing arrangements whereby in cases where goods are normally sold direct by the manufacturer to the retailer their wholesale value shall be taken, for Purchase Tax purposes, to be the price at which the manufacturer normally sells them to the retailer. The effect of this would be that where a manufacturer supplies, for example, women's clothing direct to the retailer, whether he be a large one or a small one, the Purchase Tax shall be levied on the price at which he actually sells and not on that price plus 7½ per cent. uplift as at present.
I suggest this is the only reasonable and sensible arrangement to make in those cases. Where the normal practice of the trade is direct sale from manufacturer to retailers of all types and sizes, we can justly say that the manufacturer is, in effect, doing his own wholesaling, carrying all the normal wholesale costs, having to employ travellers to go round the shops, having to carry sufficient stocks to repeat orders quickly, and paying the delivery charges to the retailer. In effect, he is running his own wholesale concern, and all those wholesale costs are reflected in the price at which he sells to the retailer.
It is monstrous that the cost should be reflected in the selling price of the retailer and that Purchase Tax can be levied upon that. It is monstrous for the Government through Customs and Excise to say, "You must add another 7½ per cent. on top of the selling price for the purpose of calculating Purchase Tax." All that that means is, in effect, that the Government are pinching a few more shillings or pence from the pockets of the already hard-pressed consumers.
10.30 p.m.
The problem has not risen acutely up to now because it was not so urgent when Purchase Tax was payable only on a very small and narrow range of non-Utility textile goods. With the introduction of
1300
the D Scheme, however, Purchase Tax is now applying to a wide range of goods which, as Utility, were formerly tax-free. We now have the ridiculous situation that goods which, as Utility, were formerly free of Purchase Tax, now are not only carrying Purchase Tax, which is bad enough in this situation of unemployment in the textile industry, but are having what was formerly their maximum wholesale price under the Utility scheme, and the price controls which went with it, uplifted by this addition of 7½ per cent.
This means that there is in some cases a quite substantial increase in Purchase Tax, sufficiently substantial, at any rate, to be extremely alarming to those who are concerned with the recession in the textile industry. At the moment when we are trying to lift this burden of Purchase Tax to the maximum extent, the addition of even an odd shilling or two is, clearly, a tendency in exactly the wrong direction.
I should like to give one example of how the tax operates. Take, for instance, a woman's cotton dress which was sold formerly under the Utility scheme, under which its maximum price, up to 17th March, was £3 3s. When the D Scheme was introduced and the Utility scheme was abandoned, it still continued to sell at £3 3s. But along come the Customs and Excise, and say, "Oh, no. That is not good enough. Your Purchase Tax must now be calculated on that price plus 7½ per cent." That means a selling price of £3 7s. 9d. That frock is now taxed at 33½ per cent. on the excess of the wholesale value over the D figure of £2, and the result of the operation of the 7½ per cent. uplift is that the tax which is charged becomes 8s. 1d., instead of 6s. 7d. if Purchase Tax was levied on the actual wholesale price.
That is an absolutely ridiculous situation. If the Government allow it to continue, what they are in effect saying is that following the abandonment of price controls, which they justify by saying that there is now a buyers' market, there has been an increase in the open market wholesale price of that frock of 7½ per cent. Clearly, the Government would not argue that as a result of their beneficent operations there has been an increase of 7½ per cent. in the wholesale value of these garments; but if they do not argue in that way, how can they justify the uplifting of the wholesale price in this manner? It cannot be justified.

1301
This is one of those administrative anomalies which have come into the operation of the admittedly complicated Purchase Tax arrangements, but it is an anomaly which is now serious because it spreads over a wide range of goods instead of over the narrow range which formerly it influenced. It is because the incidence of this uplift is now so much wider that manufacturers are so much more concerned and are taking so much more notice of its effects. That is why it is important that the Committee should consider it.
We have spent many days urging for the maximum amount of Purchase Tax relief for textiles. What I am asking is that the Government, having been unable to give us the concessions in the Purchase Tax rates and the D lines for which we hoped, should agree not to take more than they are entitled to.
We now have a situation where in some cases goods whose wholesale price is below the D level are now, as a result of the uplift, carrying Purchase Tax. An example was brought to my attention of children's frocks bought by retailers at 39s. That is below the D level of 40s. for these garments, yet, as a result of this uplift of 7½ per cent., these frocks below the D line carry 3½d. Purchase Tax. That is an obviously absurd situation.
I therefore suggest to the Committee very seriously that, in view of the new situation, the textile recession, which makes it imperative for us to examine the effect of Purchase Tax on textiles, in view of the buyers' market, and the D Scheme spreading the uplift problem over a wide range of essential articles, the Chancellor should be asked to look at the problem and, at least, to say that, although he may have to be very rapacious as far as taxation is concerned, he will not take more than he is entitled to.
Mr. Gerald Wills: I should like to follow the hon. Lady the Member for Blackburn, East (Mrs. Castle) in dealing with the uplift of prices and the discrimination between the large and small trader on rather a narrower and different point, in that the Clause does deal with many questions which affect the wholesale price of goods.
In this Clause, there is an anomaly which arises out of the provision which
1302
states that, for the purpose of computing the wholesale price of goods on which Purchase Tax is charged, the cost of such things as postage, insurance, packaging and other things is to be brought in before the percentage is charged. That is another form of uplift and extra charge which is really anomalous, and which should be done away with. It means, in fact, that the tax is not based on the true price of the goods, but on a price to which is added the cost of carriage between wholesaler and retailer, and I think this is a false basis. It places the small shopkeeper who is at some distance from his wholesaler at a disadvantage against one living close to his wholesaler.
I have had many examples of people who live a long way from their wholesalers, to whom they send for goods, on which they have to pay the cost of packaging and postage, which can add up to a fair amount, and on which is charged the Purchase Tax at 33½ or 66⅔ per cent. This is added to the price which the purchaser has to pay, and there are many examples. Either the extra cost is added to the burden of the small shopkeeper or to the burden of the person who buys the goods.
This seems to me to be unnecessary and anomalous, and I think that the true wholesale price should be used as the basis for the charging of Purchase Tax. It was in 1950 that I asked the then Chancellor if something could be done about this, and he said that the practical difficulties were great and that the majority of traders liked the present system best. That may be, but there is a minority of small traders who find it most unhappy for them, and who do not like it.
It seems to me that it would not be impossible, and, indeed, it might almost be easier, to make this charge on the true wholesale cost rather than on the cost to which is added the charges for insurance, packing and postage. I do not think that it would mean a tremendous loss to the Treasury, but I am sure a number of small traders would be very much happier about it. It may not be a large point, but perhaps, when considering all these things, the Chancellor would bear it in mind.
Mr. Grimond: I wish to support the purpose of the new Clause, and I also agree with what was said by the hon.

1303
Member for Bridgwater (Mr. Wills). Surely it cannot be intended that Purchase Tax should be raised when freight charges, for instance, are increased. On the last new Clause the Government, seeing the hardship caused to retailers when Purchase Tax was reduced, have promised some action to rectify it. I do think that the Committee should press the Government for similar action to rectify other anomalies in this tax. It may be that in the long run the arguments advanced on this, and the previous Clause are arguments against the nature of the tax altogether. It is an extremely difficult tax to administer, and we all hope that sooner rather than later it may be totally removed.
But, in the meantime, there are these serious anomalies. Now the Chancellor of the Exchequer has been offered enough work for the coming year. He has been asked to look into all the proposals in the Budget to see whether they cannot be changed for the next year. His own supporters have been as anxious as anybody on this side about it. This particular point concerning uplift may be a point on which it is difficult to do anything immediately, but he might be able to say that he agrees with the substance of what has been said. There are of course difficulties: justice between big businesses and small businesses if you remove uplift and there are difficulties in disentangling the costs of freight and insurance from the wholesale cost of goods.
But I would suggest that at least if the Government cannot accept this Clause, or something like it, might not the Committee they are going to set up to consider the effects on retailers when Purchase Tax is reduced, look into this point as well? I do not know whether this will place too great an additional burden on that Committee, but these are similar points. It is sometimes argued that Purchase Tax can be used as a means of stimulating or reducing consumption, that is an argument used by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell).
But it is to some extent invalidated by the fact that if it is intended to reduce Purchase Tax so as to increase demand some of the effects of the reduction may be cancelled by fortuitous circumstances, such as traders holding back from purchasing because they see a change
1304
coming, or because of increases in freight charges or an alteration in the scheme such as the introduction of the D Scheme, in which many goods not chargeable are brought within the provisions of purchase tax. These are reasons which can stultify the intentions of the Government if they wish to reduce the tax. I would ask them to look at these points as matters which the proposed committee, or a similar committee, might review.
Mr. R. A. Butler: I am the last one to try to stop hon. Members from talking, but I think it might help if I intervene now. The hon. Lady the Member for Blackburn, East (Mrs. Castle) and others have explained the nature of the system of uplift, and, therefore, I do not want to go into it in detail, except to say that this method of assessing the tax was widely discussed with all sections of the trade before it was introduced in 1940.
It was accepted that the differences which existed, for example, between the big store and the village draper in their methods of acquiring articles for sale should be evened out by assessing the tax on a common price level, which as the hon. Lady suggested was called the wholesale value, that is, the price as between the wholesaler and the retailer at which smaller shopkeepers typically buy. There is a basis for the system, and on the whole I would not say it was working extremely badly, but I am coming to some of the points of principle which the hon. Lady and others have raised.
Tomorrow is the Derby, and it is normal, when all horses carry the same weight, that the lighter jockey shall be uplifted. I only wish we could finish the Bill tonight—but I do not want to be cruel to the Committee—so that some of us could go to the Derby. This system of uplifting prices is not dissimilar to the objects of that great horse race, in that it ensures all traders start level and carry the same weight.
The hon. Lady and others have failed to point out that there is a deduction in certain cases. A deduction occurs in certain cases. Instead of always having uplift, there is also, if I may use the term, a "downfall"; and in a revivalist significance, the uplift follows the downfall. I have, today, between more important

1305
and lesser matters, spent odd minutes in having training in uplift, and I hope that it has done good for my soul.
10.45 p.m.
Therefore, as in the D scheme, this is a minimum on which the selling prices are based. Reverting to the analogy of the Derby, instead of 30 runners, we have about 70,000 registered traders, and that is why there is a system of standard uplifts—to which the hon. Lady referred—of 7½ per cent., which evens out the scheme and makes it easier to operate. A number of associations of the textile trades have claimed that many of these uplifts are out of date and the Revenue authorities have been in consultation with those associations.
But let us look at her suggestion. This proposes to continue the present rules for assessing Purchase Tax and introduce a special rule for cases where the goods pass direct from the manufacturer to the retailer. The hon. Lady brought out a good point in indicating that where a manufacturer does his or her own wholesaling there is a case for a different system because there is a duality of function. So there is a germ of an idea here, but I do not think that her suggestion would work.
The Clause excludes retailers like the chain stores, which buy in wholesale quantities, and they would continue to pay tax on the uplifted prices. We consider that the Clause would give rise to practical difficulties, even if its principle were accepted. Assessment should be on "normal" prices, but, as in so many other things, normality in price is not always easily recognised.
Mrs. Castle: Might I point out to the right hon. Gentleman that, clearly, a reference to "normal" sales is a reference to the level at which the manufacturer sells to all types of retailers and this is an attempt to avoid discrimination between the large and the small; and, therefore, the big buyer getting a "cut" price would not be helped.
Mr. Butler: I am glad for the explanation, but I thought it would help the big stores. It is our interpretation that it would particularly benefit those, but if that is not the case, she will be interested, I think, to hear that the matter is to be further examined.
1306
Furthermore, there would be difficulty in dealing with imported goods; because goods bought direct from the foreign producer would be taxed at a lower level than the home supplies of the same article, and the home manufacturers would hardly be likely to welcome this intrusion which would result from the operation of the Clause.
The hon. Lady spoke about the D scheme, and I agree that, technically, it is possible under the scheme for the uplift to operate so that, if a price is just below the D level, the uplift would bring it just above the level, and tax would be paid just above that level. Therefore, there are certain sound points and, I think, certain deficiencies, about the proposal made in this Clause.
I am informed that in one matter the hon. Lady is not correct, and that is that children's frocks, when described as young children's garments, do not pay tax, or uplift, as was suggested by the hon. Lady. If I am wrong we can argue about it afterwards, but I think I am right. Leaving that aside, on the main issues raised it is clear to me that not only should these discussions take place with the associations mentioned, but that we should follow up the point raised by the hon. Member for Orkney and Shetland (Mr. Grimond), and have this matter properly investigated in the light of the circumstances prevailing at the moment.
I have said enough to show that the Government support the main idea of equalising out the selling price and the tax on it. But we consider that we should appoint an independent inquiry, and I do not think that the hon. Member for Orkney and Shetland is right in suggesting that it should be the same inquiry as we have already decided on. Therefore, I propose to appoint an independent committee, under an independent chairman, to look into the question in the immediate future and to consult the different interests.
To give an outline of its terms of reference, its functions will he to examine the need for ensuring equality of treatment for comparable goods, with particular reference to the question of uplift. If there are any other matters which I feel have arisen in this debate I will enlarge the terms of reference, and that is not a drafting version of them. If the committee of inquiry can pay attention to all

1307
the arguments raised, not only in this debate, but also among the trade associations and the traders concerned, we might find a system which not only was fair, but seemed to be fair, as between large and small traders, and as between manufacturers performing their own wholesaling and others, and really take into consideration all the matters mentioned.
The hon. Member for Gillingham (Mr. Burden) will, I daresay, have a word in this debate himself, and the hon. Member for Bridgwater (Mr. Wills) who also has something on the Order Paper, might like to know that the question of carriage can also come under the consideration of the committee which we have decided to set up. Under the circumstances, I hope that the Committee will agree that the Government realise there are points to be looked into on this important question, and that that is the best way of dealing with the matter.
Mr. Gaitskell: We are all indebted to my hon. Friend the Member for Blackburn, East (Mrs. Castle) for raising this matter, and I think we should congratulate her on the response which has come from the Government. As the Chancellor says, it is a very difficult issue and takes some time to master. The Chancellor has spent several hours today being instructed about uplift and I am sure he would agree that my hon. Friend must have spent several days, because she showed herself a mistress of uplift in the exposition which she gave to the Committee.
The real issue is primarily one of equity. As I understand, the difficulty has always been that if Purchase Tax is charged simply on the price charged by the manufacturer when selling direct to the retailer, then in fact, the retailer who bought direct paid a smaller absolute tax on the same article than the small retailer who bought from the wholesaler. Whether that is a very important argument in favour of the principle I am bound to say I rather doubt.
Unquestionably, the whole system of uplift involves a great deal of administrative trouble, and if we can get rid of it on those grounds it is strongly to be supported. As my hon. Friend pointed out, we have to consider the interests of the consumer and undoubtedly the addi-
1308
tion of uplift is imposing an additional burden on the consumer. It is, indeed, discouraging to more efficient methods of distribution if there is to be a special uplift imposed.
On these grounds, I am sure that my hon. Friend was right to raise this matter. I think that she made a good case, and I am glad that we are to have this inquiry. I take it that it will be an inquiry by a Departmental committee, or something of that kind, which will hear evidence and publish its report in the normal way. We would all wish, as in the case of the other committee, that its report should be made as quickly as possible. In the circumstances, I hope that my hon. Friend does not feel too downcast by this debate, and possibly she may feel that it is not necessary to press the matter further.
Mr. F. A. Burden: I should like to congratulate the hon. Member for Blackburn, East (Mrs. Castle) on having the Clause selected, and on her manner of putting over a case which most hon. Members on both sides of the Committee felt ought to be aired. We all agree that the Chancellor has taken the right course in setting up a committee. It is a difficult question. It has been made more difficult by the changes in the market situation. There has been abolition of price control, and there is now a buyers' market again. That, in effect, must make more difficult the question of fixing the uplift level. At best, I think that most people in many trades consider it to be a hit and miss procedure; and it even caused a High Court Judge in 1949 to remark that evidently an opinion must be reached by some method. He also remarked, "They are not spinning a coin, or anything like that."
I think it is wrong that power should be delegated in many cases to some junior officials of the Customs and Excise to fix the notional values, which after all, are purely imaginary wholesale values. I believe that it has been an example of delegated legislation at its worst. It cannot be said that it has been, or can be, in the least clear, or capable of exact definition. I feel sure that the industries concerned with uplift will welcome the Chancellor's offer to set up a committee. Will the Chancellor now take steps to ensure that if there are any cases in which uplift causes tax to be charged on goods which are below the D level, that tax will

1309
be relieved? It clearly is not the intention that anything below the D level should be charged Purchase Tax, either through uplift or direct tax.
Mr. Harold Davies: As the case has been put so well by my hon. Friend, I do not want to weary the Committee by iterating some of the arguments; but despite the fact that some hon. Members want to come to the next Clause, I must emphasise that this also affects the narrow fabric industry and the rayon industry. I specifically studied the problem from the point of view of those industries. Because of the reasonable approach of the Chancellor, I would only ask him, when he sets up the committee of inquiry to see that opportunity is given to the narrow fabric and rayon industries in the Leek area to present their views on the administrative anomalies which may exist so far as this Clause is concerned.
11.0 p.m.
Mrs. Castle: In view of the Chancellor's offer of a very full inquiry into the matter I beg to ask leave to withdraw the Motion.
Motion and Clause, by leave, withdrawn.

New Clause.—(RELIEF IN RESPECT OF WAR-DAMAGED PROPERTY.)
(1) in this section—
"war damage" and "developed hereditament" have the meanings assigned to those expressions respectively by section five of the War Damage Act, 1943;
"the body corporate" means any body corporate (including any unincorporated society or other body falling within the scope of section fifty-six of this Act) whose functions consist wholly or mainly in the holding managing and developing of property comprising developed hereditaments and which by reason and in respect of such functions is chargeable with the excess profits levy; and
"the damaged hereditament" means any developed hereditament that has sustained war damage in respect of which a payment of cost of works or a value payment has been paid or is payable to the body corporate under Part I of the War Damage Act, 1943.
(2) In any case where during the whole or any part of the standard period no net income was capable of being derived from the damaged hereditament owing to its being unfit for occupation by reason of war damage or the net income which was capable of being derived from such hereditament was less than the net income which it would reasonably have been expected to yield in the absence of war damage the standard profit of the body corporate shall
1310
be calculated upon the assumption that during the whole or the said part (as the case may be) of the standard period the net income of the body corporate from the damaged hereditament was the amount of net income which that hereditament would reasonably have been expected to yield in the absence of war damage:
Provided that if a value payment was made during the standard period in respect of the war damage the amount of any interest accruing on or earned by such value payment so far as it is attributable to the whole or the said part (as the case may be) of the standard period, shall for the purpose of the calculation of the standard profit of the body corporate be deducted from such amount of net income reasonably expected to have been yielded.
(3) For the purpose of the calculation of the standard profit of the body corporate or the amount payable by the body corporate by way of excess profits levy in respect of any chargeable accounting period in any case where the amount paid or payable to the body corporate in respect of war damage to the damaged hereditament is a value payment interest on the value payment at the rate specified in subsection (5) of section ten of the War Damage Act, 1943, shall be deemed to have accrued from year to year over the period from the time of the occurrence of the war damage to the time of payment of the amount of the value payment and to have been payable by yearly payments from the time of the occurrence of the war damage.—[Sir J. Mellor.]
Brought up, and read the First time.
Sir John Mellor: I beg to move, "That the Clause be read a Second time."
This is a matter of great importance to property companies, and I must disclose a private interest in that connection; but it also raises a matter of considerable principle. I think it is possible that the Committee may take the view that the Clause is drawn too narrowly, and that its provisions ought not to be confined to what are known as property companies, but ought to apply to companies in general. If that should be the view of the Committee, I should say that it is one that could be implemented on Report stage.
The matter arises like this. There were many blitzed properties which, owing to the difficulty in obtaining licences, were not rebuilt or repaired in time for occupation before the standard period; but some of those properties were or will be rebuilt or repaired and either are or will be in occupation before a chargeable accounting period. The Committee will see that in those cases the Excess Profits Levy will be charged, under the Bill as it stands now, upon the whole of the net

1311
income of those properties. I hardly think the Committee would agree that that is just or is desirable.
The Clause proposes—I quote a few selected words—that
"…the standard profit of the body corporate shall be calculated upon the assumption that … the net income of the body corporate from the damaged hereditament was the amount of net income which that hereditament would reasonably have been expected to yield in the absence of war damage."
In other words, the notional net income will be estimated in the standard period—not the net income earned in the period of charge but what can be estimated as the probable income in the standard period if the property had not been blitzed. I submit that that is a fair proposition. There is a proviso to secure that any interest upon a value payment which is attributable to the standard period shall be set off against such estimated net income. That would be only fair to the Revenue.
Subsection (3), which, I hope the Treasury will agree, is desirable in itself, quite apart from the merits of the Clause as a whole, provides that interest on value payments shall be deemed to be spread over the whole period from the occurrence of the damage to the date of payment.
The Chancellor of the Exchequer has assisted the rubber companies by enabling them to select, as their standard period, the years 1949 and 1950. I am asking the Chancellor to give us a different remedy, although, I submit, our claim is identical, in principle, to the claim of the rubber companies. The owners of blitzed properties, which were earning nothing during the standard period, were deprived of their income, through no fault of their own, in precisely the same way as proprietors of the rubber companies.
I do think that the method which I am proposing in this Clause is better than the one the Chancellor has used in connection with the rubber companies. It may be true that his new arrangement, by which companies can select, if they choose, the years 1948 and 1949 as their standard period, may be helpful to a number of companies with blitzed properties, but it certainly does not go very far and, in the case of many companies,
1312
will not help at all. That is a general matter in the Finance Bill, and I am asking the Chancellor for direct assistance, in the case of these companies with blitzed properties, so that like may be compared with like. I think that should appeal to the Treasury.
In the idea of this Excess Profits Levy, it is essential that there should be some comparable conditions in the period of charge and in the standard years. Unless there are some comparable conditions, the tax cannot possibly be just. In the cases I have mentioned, it was impossible for these properties to earn anything at all in the standard period. Therefore, with the Bill as it stands, they will have to pay Excess Profits Levy upon the whole of the net income in the chargeable accounting period. I hope very much that the Treasury will agree and will be prepared to give the remedy I seek.
Mr. Maudling: I suggest that this new Clause should be considered in the light of the concessions introduced by my right hon. Friend in the course of this Committee stage, some of which will give very considerable relief to the type of property my hon. Friend has in mind. Particularly, I am referring to the new standard period, whereby companies are given the option of choosing two out of three standard years. In this case they will automatically choose 1948 and 1949. It should also be considered in the light of the other concession, the new net asset basis as at 31st December, 1951, which will go a long way towards assisting in this case.
The Clause, as drafted, would, I am advised, cover the case of a trading company as well as that of a property-owning company. As it is to the property-owning companies that my hon. Friend has directed attention, I will deal with them. Regarding a property-owning company, I understand that, in the case of value payments, they commenced to be paid by the War Damage Commission in November, 1947, so that most companies should have received money during the standard years.
Where this is the case, then the whole of the interest payment, and not only part of it, as I understand it is proposed in the new Clause, will fall to be included in the company's profits for the standard years, and the company's profits will also

1313
receive the value payment from the War Damage Commission. In an exceptional case where the value payment was not received until after the end of 1949, the company may now elect to have the standard basis of their capital or net assets at 31st December, 1951.
With regard to the cost of works, in the type of case where property was repaired before 1st January, 1948, of course, there is no problem because the Chancellor has given the companies the opportunity of choosing the years 1948 and 1949 as their standard. Where the property was not repaired until after the beginning of the year 1948, I suggest to the hon. Baronet that any hardship cases which have arisen or may arise will also be met by the proposals to which I have already referred, which enable companies to take an alternative standard based on the net assets of the company as at 31st December, 1951.
My right hon. Friend did consider carefully the proposal contained in this new Clause. He considered it, as I have said, in the light of the Amendments he has introduced. While they may not have gone the whole way to meet the hon. Baronet, he feels in the circumstances that they meet the substance of his point. Therefore he feels that he cannot accept this Clause.
Mr. Cyril W. Black: While my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor) and other hon. Members may feel obliged for such concessions as have been made in the course of our debates, and to which reference has been made, it is quite clear these concessions do not meet fully or adequately in any way many companies which would have been relieved under the terms of this new Clause.
I wish to draw the attention of the Committee to one particular case which, I suggest, is typical of a great many other cases of a similar kind. I should like to make it clear at the outset that I happen to have a personal interest in the company whose case I am going to mention. I mention it simply because I have the figures relative to that particular company. I am quite certain there are many other cases whose circumstances would be more or less similar.
1314
This is the case of a property investment company owning quite a wide range of property in the Greater London area. Four properties were so seriously damaged by enemy action during the war as to produce no revenue until the time when they were repaired. These four properties were all classified, not as value payment cases, but as "cost of works" cases, and in no case was it possible to obtain a licence to repair the properties during the three years on which the standard profits are to be based.
The total loss of net revenue from those four properties in the case of the company amounted to £17,600,—that is an average of £5,800 a year. In the particular circumstances of this company—and I have had this matter looked into very carefully—none of the concessions to which reference has been made would relieve the position at all. The position of the company is that its standard profits are reduced artificially by £5,800 a year on an average as a result of merely fortuitous war damage which overtook four of the properties of that company.
11.15 p.m.
The Chancellor has justified the Excess Profits Levy on what he has described, I think, as the moral case in its defence. In the kind of circumstances which I have outlined there can be no moral justification whatever for imposing an excess profits levy on the revenue of a company which in the standard period has been artificially reduced as a result of war damage to properties which could not be repaired until after the three standard years were over, and I should like to ask him to look at this matter again. The case is not met in any of the concessions, and I suggest that very much less than moral justice is being done by allowing this type of case to go unrelieved.
Mr. C. N. Thornton-Kemsley: Had I not such a great regard for my hon. Friend the Parliamentary Secretary to the Ministry of Civil Aviation I might have reminded him of some words contained in Chapter 18 of the Book of Proverbs—
"He that answereth a matter before he heareth it, it is folly and shame."
I am sorry the hon. Gentleman rose so early to give an answer obviously prepared beforehand for him, for I feel that

1315
my hon. Friends the Members for Sutton Coldfield (Sir J. Mellor) and Wimbledon (Mr. Black) have made an unanswerable case.
Like the hon. Baronet, I ought to disclose an interest, in that I direct a company which owns property and which would derive benefit if this new Clause were accepted and incorporated in the Bill. I should like to add that my one regret about it is that it is not drawn wide enough. It might well have been drawn to cover the great number of companies who own properties which themselves would not fall within the narrow definition of the Clause.
Let us take an entirely fictitious example which comes to my mind, that of a company which owned a block of offices or perhaps shops which were blitzed during the war and which have, for one reason or another, not been rebuilt. The licences were not forthcoming or there had not been co-operation, perhaps, from the authorities or permission to rebuild and so during the standard period there was no income at all from what was in effect a vacant site. One would think that it is quite unfair in comparing one year with another, assuming that these offices were rebuilt last year and produced a large income this year, to compare this year with the standard years when these properties were nothing but a hole in the ground. That seems so obvious a case that I think it is worth consideration by the Treasury.
I cannot really think that in the answer which we were given a little too glibly tonight the Treasury have considered the implication of cases like this. Therefore, I would ask that the matter be looked at again, because there is a genuine need for amendment on these lines, and I beg to support the plea that has been made.
Sir J. Mellor: I must express great dissatisfaction with the reply we have
1316
received. My hon. Friend who replied on behalf of the Government made not the slightest attempt to deal with the principle involved. He merely held out some hope that some of these companies which are affected might, perhaps, if they were lucky, get some benefit from some of the other reliefs which the Chancellor has now produced.
I raised this as a matter of principle, and I asked for it to be dealt with as a matter of principle, but as a matter of principle it has been ignored. Therefore, I cannot possibly withdraw the Motion and must leave the Committee to decide its fate.
Question put, and negatived.
Mr. R. A. Butler: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
It hardly seems worth starting a new Clause now at this hour. I have been very anxious about the time we should have to spend tomorrow on finishing the Bill, and I must warn hon. Members that it will be essential to get the Bill so that none of us is inconvenienced in any other way by leaving it standing over.
I understand that there are now one or two discussions, about which I was not clear when I made my decision about finishing at this time tonight, on entertainment allowances, which are likely now to lead to a debate. My decision was taken without that information, but I think it is too late to go back on it now. I think we shall be able to get through tomorrow, but I was anxious to divide up the work so that we sat late neither tomorrow nor tonight. In the circumstances, I think we shall get through if we all carry on in the same sensible spirit.
Committee report Progress; to sit again Tomorrow.

ATOMIC WEAPONS
Motion made, and Question proposed, "That this House do now adjourn." —[Mr. Butcher.]
11.23 p.m.
Mr. Emrys Hughes: I have given notice that I would draw attention on the Adjournment to the statements that the Prime Minister has made about the atom bomb, but I find that no Prime Minister and no Member of the Government Bench is present, and I presume that they have deserted the field. But that makes it no less imperative that I should do my duty and discuss the matter of which I have given notice.
The Prime Minister has made many statements about the atom bomb. His statements can be divided into two categories: those that he makes when he is in office, and those that he makes when he is in opposition—and, of course, they are very different. I suggest, however, that the time has come when the question—
Mr. Hugh Gaitskell: I understand that my hon. Friend is raising on the Adjournment the matter of atomic warfare. Do I understand that the Financial Secretary to the Treasury is to reply on the subject?
The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): I am sorry to disappoint the right hon. Gentleman, but my hon. Friend the Parliamentary Secretary to the Ministry of Supply, who is already in his place, is to do so.
Mr. Gaitskell: The hon. Gentleman should have said that his hon. Friend has only just arrived.
Mr. Hughes: I have the utmost sympathy for the hon. Gentleman who is to reply on behalf of the Prime Minister. It is a very difficult task at any time to reply for the Prime Minister for his innumerable lapses and the case that he makes, but I am quite sure that the hon. Gentleman who has just arrived will do his best with the difficult case he has to defend.
I was pointing out, before the arrival of the hon. Gentleman who is to put the case for the Government, that the Prime Minister's statements can usually be divided into two classes—those that he
1318
makes when in office and those he makes when in opposition—and they are usually different. I believe that, even at this late hour of the night, I am doing a service to this House and to the country by drawing attention to the statements which the Prime Minister has made about the atom bomb, and in asking for some statement of policy on behalf of the Government.
The statement to which I mainly wish to draw attention is the one which the Prime Minister has made about the explosion of the atom bomb that is to take place shortly in Australia, and, in order to see this in its proper perspective, I want to refer to a statement which the Prime Minister made two years ago. In opposition, he has warned us several times about the great danger with which this country, is confronted as a result of the establishment of the Anglo-American atom bomb base in East Anglia, and he has pointed out that this has, possibly, terrible consequences for the people of this country.
On three occasions, I have heard him give this warning that, by bringing American atom bombers to East Anglia, we put the people of this country in the position in which they may be the victims of terrible reprisals as a result of a possible enemy—and there is no doubt who the Prime Minister thinks is the enemy—delivering a counter-attack with atom bombs upon this country as a result of these bases being established here. I believe that, in this matter, the Prime Minister has been perfectly justified, and that history will possibly say that he has been right.
I wish to recall the warning that he gave on three occasions in this House. The first was delivered on 28th March, 1950, when he argued:
"If, for instance, the United States had a 'stock-pile' of 1,000 atomic bombs—I take the figure as an illustration merely; I have no knowledge of any sort or kind of what they have—and Russia had 50, and we got those 50, fearful experiences, far beyond anything we have ever endured, would be our lot."—[OFFICIAL REPORT, 28th March, 1950; Vol. 473. c. 201.]
I do not believe that the Prime Minister was under-estimating his case. If, by any chance, 50 bombs were dropped on this country, if we had atom bombs on the London area or on the industrial dis-

1319
tricts of Scotland or the Midlands, Lancashire and other parts of the country, then I believe that it would result in an enormous casualty list among the civilian population of our congested industrial districts and of our practically defenceless towns.
To think, as the Prime Minister did, of 50 atom bombs with a possibility of 200,000 casualties with each bomb, it would perhaps result in making this country untenable, which some military strategists have recently argued. I am not thinking of this country as a base for American atom bombers. I am thinking of the social consequences to the civilian population with millions of people living under these terrible conditions and practically unable to be defended in such circumstances.
There is hardly a town in this country with anything like an air-raid shelter capable of housing a very large number on the civilian population. Of course the Government cannot possibly do it. Everyone knows that they have neither the materials nor the labour to carry out a gigantic housing programme at one time, and, on the other hand, go forward with building elaborate air-raid shelters. So, I submit that the following policy of leaving the majority of the people in these congested islands in almost defenceless position and faced with what might happen in air raids with atom bombs is the most serious problem with which we are faced now.
I believe that the Prime Minister was absolutely justified in giving this warning when he was in opposition, but I regret to say that when he took over the responsibilities of office he did nothing more than the previous Government did to reverse this situation. The position of this country as an aircraft carrier for American atom bombers in Western Europe is such that the only solution is to make some agreement with the Americans to take these atom bombers back where they came from. If this were done this country would not be in danger of air attack. In fact, one of the safest countries in the world now is the one without atom bomber bases or airfields, and that is Ireland.
The very fact that Ireland is regarded as safer than this country in the event of war is proved by the fact that large
1320
numbers of strong supporters of the present Government are emigrating to Ireland because they think so. One of the gentlemen, whose name has figured in political controversies, Sir Oswald Mosley, has retired to Ireland to become an Irish landlord, because he believed that in a future war Ireland would be safer. I understand there are prominent members of the Conservative aristocracy, dukes, who have taken the same point of view.
I do not accept the view that the stronger the air force is the more secure are the people who live in that country. I know that that view is not shared by the Government I support. It will be no answer to me if the answer is that which the Prime Minister usually gives; that the hon. Member for South Ayrshire must give credit to his own Government.
Brigadier Terence Clarke: Which Government does he support?
Mr. Hughes: This is a serious discussion.
Brigadier Clarke: The Moscow Government.
Mr. Hughes: Everybody here knows that I do not represent the Moscow Government, and I am not as the hon. and gallant Member opposite; I have not spent most of my time in a Communist institution known as the British Army, which is the worst possible institution for understanding a serious political argument of this kind.
But let me return to the serious argument; I want to know, now, what the Prime Minister has done in order to relieve the anxieties of those of us who believe that there is a terrific danger to this country in the atom age; a danger expressed so very vividly last week by Lord Russell, who said that in his more gloomy moments he saw Western Europe becoming a terrible rubble heap. Those who find a fatal fascination in wandering around places like Berlin do not want to see this country ending in the way that that city has ended.
What is the present Government's policy towards the atom bomb? When the Prime Minister fought the Election, he stressed then, as in this House, the urgency of this matter by saying that

1321
there should be a meeting at the highest level with Premier Stalin. As far back as 1950, the Prime Minister made a famous speech at Edinburgh in which he argued that the time had come to discuss the whole future of our foreign relations and their implications, with Premier Stalin. He said on 28th March, 1950, that we could not go on with a policy of drift and hesitation.
But that is more than two years ago, and the policy of the Prime Minister has been to carry on no kind of conversations at a high level with Premier Stalin. Instead of such conversations, the first announcement from Downing Street in the new reign there, was the statement that the British Government had decided to explode an atom bomb in Australia. I should like to ask for some clear explanation of why it is considered necessary at the present time for the British Government to have an atom bomb of its own. Were there not certain discussions between the Prime Minister and President Truman when the Prime Minister last visited Washington?
Why is it necessary, if we are on such cordial terms with the United States— which has such a large stockpile of atom bombs at its disposal and is regarded as having an overwhelming strength in atom bombing power—that we should have an atom bomb explosion of our own? Why could this not be left, from a large number of points of view, in the position where America has full power over the atom bomb, so far as our relationship with her is concerned?
If America has had the opportunity of developing the atom bomb and experimenting with it in the desolate places of America, why is it necessary for us to say to the Americans, "That is not good enough for us, we must have an atom bomb of our own"? Is Western civilisation to be safer or more secure as a result of every industrial and scientific nation developing the atom bomb on its own? Is France to be allowed to have an atom bomb, or the new Germany? What sort of co-ordination of policy is there to be between the Western nations?
I do not believe it in the interests of this country to go into the atom bomb business, especially when we realise the position in which we are, and that we are in danger of possible attack. I do
1322
not see that this country, in its present industrial position, can afford to indulge in this new kind of armaments race, which can be very costly indeed, and will divert away from constructive industry the brains of our technicians and the labour and experience of our industrial workers.
We should have some kind of clear statement from the Government. We should know how much we have spent hitherto on producing the atom bomb, and what this experiment will cost. The Government should tell us exactly what they are up to in going to Australia in order to carry out this experiment. I do not believe that atom bombing will solve the problems of the modern world. I do not believe it is in the interest of the people of this country to go forward with development on these lines of warfare.
When the Prime Minister made his famous speech at Fulton he talked about the atom bomb being the means of the West holding its position against the East. But we now find that the East has the atom bomb. We might find that time is not on our side, and that as the years go on the Russians and the Communist countries might be able to produce more atom bombs than can be produced in the West. What a prospect. What a future that will be for civilisation.
I also believe it is a bad thing. It is not in the interests of this country as a leader of civilisation that we should be prepared to contemplate using the atom bomb, which can only be used to destroy big industrial centres in other parts of the world. From every point of view I believe that this policy should be examined now. We should have some statement from the Government explaining the position which the Prime Minister has taken up, which is quite contrary to the line he has taken during the last few years.
11.44 p.m.
The Parliamentary Secretary to the Ministry of Supply (Mr. A. R. W. Low): As he does on many occasions when he addresses the House on matters of defence and foreign policy the hon. Member for South Ayrshire (Mr. Emrys Hughes) has ranged somewhat widely. I do not think he would expect me, in the few minutes in which I have to reply, to speak on some of the broader issues

1323
which he raised in the first three-quarters of his speech. In any case, I think that the hon. Member, and the House, will agree that these short debates on the Adjournment are not suitable occasions for discussing some of the great issues to which he referred. I do not think he will expect to hear from me about matters of foreign policy, about matters of strategic policy, or even about what is perhaps the basis of his whole argument, namely, the pacifist approach which he brings to these matters when we are discussing them.
I will try, briefly, to give him the answers to some questions which he raised at the end of his speech. On the question of this country having the atomic weapon, I am sure that everyone deplores as much as the hon. Member the necessity of directing the great scientific advance represented by the development of atomic energy to armaments rather than confining it to peaceful uses; but it is generally agreed, though I know that he is one of the exceptions to this general belief, that the world situation compels us to do so.
If we are to develop atomic weapons we must test them, just as we test other weapons. The hon. Member asked me, I thought rather naïvely, what would happen in the test. That, I thought, ought to be clear to him from the announcements made on two occasions by the Prime Minister, and from the answers which he has given to Questions put by the hon. Member and by other hon. Members of the House. Perhaps I might digress for a moment to express gratitude to Mr. Menzies, the Prime Minister of Australia, for his help, and our warm appreciation of the help of his Government in connection with this test.
The hon. Member also asked me about the amount of money which has been spent on this matter. He knows that I cannot answer that question. It is not in the public interest to give those figures. I see the former Minister of Supply (Mr. G. R. Strauss) is present. I remember the right hon. Gentleman and his right hon. Friends giving similar answers to similar Questions put by the hon. Member and other hon. Members.
The hon. Member referred to relations with the United States on this matter.
1324
He asked why it was necessary, when the United States had already tested and proved their atomic weapons, for us to test such weapons. I think he is aware that the United States Government is prevented, by domestic legislation, from exchanging information on atomic weapons. Therefore, we have no alternative but to proceed independently with the development and testing of our own weapon.
I think the hon. Member will agree that in those circumstances, also, it might well be considered necessary for the sake of our national prestige and safety for us to acquire and practise the technique of the manufacture of atomic weapons, and to produce some operational weapons. This is not just the view of this Government, but was, of course, the view of our predecessors, who laid the foundations of this test which is to take place in the course of this year.
I do not remember that the hon. Gentleman raised this point with the former Government, but I have no doubt that, if he thinks the matter out, he will appreciate that everything he said about the policy of the present Government in connection with this test applies in full measure to the policy of the Government of which he was on some occasions a supporter.
Mr. Leslie Hale: What about the promised Four-Power meeting?
Mr. Low: As I indicated at the beginning of my few remarks, which are limited by time, I do not feel that the House will expect me to reply to the very broad issues which the hon. Member for South Ayrshire raised in the course of the first three-quarters of his speech.
Mr. Hale: That is an immediate issue.
Mr. Low: I came to this Box to answer the hon. Member for South Ayrshire on the points which, I understood, he was going to make in connection with the forthcoming test of the atomic weapon by the United Kingdom. I do not think that there is anything else I can add, but I hope that, on the points I have dealt with, he, and, if not he, the rest of the House, will be satisfied with the answers I have been able to give.
Mr. Hale: Could the hon. Gentleman tell us how the atom bomb is to get to Australia? Is it going by air? If so, over what countries will it pass? If it is going by sea, what is being done to prevent possible tragedy?
Brigadier Clarke: I hope that my hon. Friend will not give any such information. The hon. Member for South Ayrshire (Mr. Emrys Hughes), who has just returned from Moscow, will probably transmit the information straight there.
Mr. Hale: On a point of order. May we, in the last 10 seconds, express our resentment at this McCarthyism in this House? The hon. and gallant Gentleman the Member for Portsmouth, West (Brigadier Clarke) speaks with the mind and temper of Senator McCarthy and the manner and mood of Charley MacCarthy.
Adjourned accordingly at Eight Minutes to Twelve o'Clock.

  Z RESERVE (A.A. TRAINING CAMP, WALES)
  Z RESERVE (A.A. TRAINING CAMP, WALES)
TRADE AND COMMERCE
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  RIVER TEIFI (CORACLE FISHERMEN)
  ICELAND (FISHING DISPUTE)
  ICELAND (FISHING DISPUTE)
NATIONAL HEALTH SERVICE
  Central Advisory Council (References)
  Central Advisory Council (References)
  Cost Accounting
  Cost Accounting
TELEPHONE SERVICE
  Accounts
  Accounts
  Wallington
  Wallington
  Swindon
  Swindon
  WIRELESS AND TELEVISION BROADCASTS (MEMBERS)
  WIRELESS AND TELEVISION BROADCASTS (MEMBERS)
  POST OFFICE ROBBERY (MAIL VAN)
  POST OFFICE ROBBERY (MAIL VAN)

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
The Lord Wardington—Sat first in Parliament after the death of his father.
The Lord Fraser of North Cape—Took the Oath.

BUSINESS OF THE HOUSE
2.35 p.m.
EARL FORTESCUE: My Lords, before we come to the Business on the Order Paper, I should like to inform your Lordships that my noble friend the Secretary of State for the Co-ordination of Transport, Fuel and Power will be interrupting the proceedings at about 3.45 p.m. to-day in order to make a statement on Civil Aviation.

MANCHESTER SHIP CANAL BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
CANTERBURY AND DISTRICT WATER BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
LONDON COUNTY COUNCIL [MONEY] BILL
Read 2a, and committed.

CENTRAL LONDON ROAD SURFACES
2.37 p.m.
LORD MONTAGU OF BEAULIEU: My Lords, I beg to ask the Question which stands in ray name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government when the replacement of wooden blocks with non-skid surfaces in Central
1450
London is expected to be completed, and whether they will give an undertaking to see that such repairs to main roads in and leading to the centre of London are completed before the Coronation.]
THE EARL OF BIRKENHEAD: My Lords, on behalf of my noble friend Lord Leathers, I should like to inform the noble Lord that the metropolitan borough councils and the Common Council of the City of London, who are the highway authorities for these roads, replace the wood paving with non-skid materials as and when re-surfacing is necessary. I regret that I cannot say when all such replacements will be completed, and unfortunately I cannot give the undertaking asked for in the second part of the noble Lord's Question. Steps will, however, be taken, with the advice of the London and Home Counties Traffic Advisory Committee and the Commissioner of Police, to ensure that selected routes are kept clear of road works during the period of the Coronation.
LORD MONTAGU OF BEAULIEU: I thank the noble Earl for his answer. I appreciate that this is not a problem which can be solved in one year, but I believe that we should pay particular attention to the fact that the wood block surfaces near zebra crossings are a menace to public safety. Would the noble Earl give the highest priority to seeing that the wood blocks are replaced by non-skid surfaces at the zebra crossings as soon as possible?
THE EARL OF BIRKENHEAD: My Lords, I am extremely pleased that the noble Lord has asked that supplementary Question, because I should like to express our opinion about these wooden blocks more fully than I did in answer to the original Question. We are fully aware that these wood blocks are very dangerous indeed, and liable to cause skidding. Any of your Lordships who has ever driven a car, or even ridden a bicycle—as the noble Viscount, Lord Hailsham, told us the other day he does—must have found them dangerous. The need in the interests of traffic safety to permit or encourage highway authorities in London to replace wood blocks by non-skid surfaces is fully recognised. I assure the noble Lord that we fully recognise the danger of these surfaces. But with the economy in the use of

1451
capital resources which the Government have found necessary to impose for the benefit of the country as a whole, the Minister is obliged to limit authorisations under Defence Regulation 56A so as to keep expenditure on roads generally within the sum allotted by the Government.
I should like to remind the noble Lord—I am sure he knows already, but I have one or two facts which may help him—that in recent years wood blocks have been replaced on a number of important roads, such as Parliament Square, Park Lane, Oxford Street, the Strand and Hyde Park Corner. This year's programme includes the resurfacing of sections of Buckingham Palace Road, Grosvenor Place, Grosvenor Road, Pall Mall, Baker Street, Marylebone Road, Grace-church Street, King William Street, Bishopsgate and a further considerable stretch of Oxford Street. As I think the noble Lord will agree, it indicates that steady progress is being made, and we are fully aware of the urgency of the problem. Finally, I ought to tell the noble Lord that as it is impossible to foresee what rate of expenditure on road maintenance will be permissible in the years ahead no estimate can be made of the date when all wood paving will have been replaced. Therefore, I cannot say any more than that if present restrictions continue it will probably not be for several years yet.
LORD SHEPHERD: My Lords, may I ask the noble Earl, when he addresses the House, not to turn his head, because we could not hear most of the things he said?
THE EARL OF BIRKENHEAD: I am extremely sorry. I was attempting, as a matter of courtesy, to address my remarks to the noble Lord who asked the Question. If your Lordships would like me to repeat my observations in extenso I will—I am a glutton for punishment!

COPYRIGHT LAW
2.42 p.m.
LORD LUCAS OF CHILWORTH: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government when it is anticipated that the Report of the Committee set up by the President of the Board of Trade on April 10, 1951, to consider and report on any changes desirable in the copyright law will be ready and published.]
THE EARL OF BIRKENHEAD: My Lords, I understand that the Copyright Committee are engaged in drafting their Report, but I cannot at present say when it will be published.
LORD LUCAS OF CHILWORTH: My Lords, while I appreciate some of the difficulties which the noble Earl is experiencing in this matter, I should like to ask Her Majesty's Government whether they are aware that the Report of this Committee will have great bearing upon subjects which are of considerable moment to your Lordships' House at the present time. During your Lordships' debate upon the B.B.C., for instance, it was pointed out by my noble and learned friend the Leader of the Opposition that the question of copyright is of great moment in the matter of broadcasts of great sporting events. The noble Marquess, Lord Reading, was appointed Chairman of this Committee but, unfortunately for us all, he had to retire from the Chairmanship seven months ago, after, if I may say so, outstandingly good work in getting through a mass of evidence in a very short space of time. I should not have thought it would take seven months to compile the Report, and I press the noble Earl to have this Report submitted to Parliament at the earliest possible moment.
THE EARL OF BIRKENHEAD: I am certain that no one would more resent his judicial prognostications being interrupted by constant mosquito stings of this kind than the noble and learned Earl. This is a very important and extremely complex subject, as the noble Lord, Lord Lucas, knows, and we are fully aware of the ramifications which it involves. I say with due humility that I have as much to complain about in the copyright law, in a literary way, as any noble Lord in this House. I assure him that I shall watch this matter with an attention and avidity which is second only to his own, and possibly greater.

CLEANING OF WHITEHALL FAÇADES
2.45 p.m.
LORD HAWKE: My Lords, on behalf of my noble friend Lord Rennell, I beg to ask the Question which stands in his name on the Order Paper.
[The Question was as follows:
To ask whether Her Majesty's Government will consider cleaning the Whitehall façades of the Admiralty, the Horse Guards, Dover House and Treasury Chambers in time for Her Majesty's Coronation next year.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE COLONIES (THE EARL OF MUNSTER): My Lords, the question of cleaning the façades of these historic buildings has been considered very carefully from time to time, and various experiments have been tried; but these have not been uniformly successful, as your Lordships may have noticed. The view is held by many authorities that the methods so far discovered do not ensure that the appearance of buildings which have weathered over centuries is improved by cleaning. My right honourable friend the Minister is, however, having further experiments carried out before deciding whether to take any further action. I might add, in conclusion, that parts of the façades of Dover House and the Horse Guards have recently been restored.
LORD REA: My Lords, arising out of the noble Earl's reply, may I ask whether there is any possibility of the scaffolding on the Palace of Westminster being removed in time for Her Majesty's Coronation? I should appreciate an official reply, because when I recently asked a policeman at the Palace he said he had no idea. When I further asked him how long the scaffolding had been there he replied, "I have no idea, my Lord: I have only been here seventeen years."
THE EARL OF MUNSTER: My Lords, I myself have been a member here only a little longer and I would not dispute the views of the policeman.

NEW TOWNS BILL
2.47 p.m.
Order of the Day for the Second Reading read.
THE LORD PRESIDENT OF THE COUNCIL (LORD WOOLTON): My Lords, the New Towns Bill, to which I now ask your Lordships to give a Second Reading, has two chief merits: it is brief, and, I believe, is non-controversial. But these two facts do not in the least diminish its importance, since it is primarily concerned with one of the most important of the social services—the provision of new houses, in healthy and good surroundings, for the people of this country. Your Lordships will remember that the New Towns Act of 1946 set out to create machinery for the establishment and development of new towns, and that it provided a sum of £50,000,000 for advances to development corporations to enable them to meet expenditure chargeable to capital account. This sum is now approaching exhaustion and that is the reason for the present Bill which, in its two clauses, seeks the consent of Parliament to the advance of a further £50,000,000 for the development of these new towns. Your Lordships will be familiar with the action that has been taken under the Act of 1946—and none more so than the noble Lord, Lord Silkin, who is to follow me in this debate. Nevertheless, I think it proper that I should give some slight progress report, some survey of the stages we have reached in the development of these new towns.
During the past five years, fourteen areas have been designated as new town sites. Of these fourteen, eleven are in England, one is in Wales, and two are in Scotland; and they are expected to provide accommodation for just under 500,000 people. Eight of the English new towns are intended to serve the Greater London area. Thirteen development corporations have been set up, one of which serves the two areas designated at Welwyn and at Hatfield. Twenty-six million pounds—that is, about half the £50,000,000 provided for in the 1946 Act—has already been advanced to these corporations; and, in addition, schemes costing over £20,000,000 have been approved. Thus, the total commitments against the Consolidated Fund now

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stand at some £46,000,000; and at the present rate of development the whole of the £50,000,000 will be committed by July of this year.
Upwards of 90 per cent. of the expenditure approved is for housing and for main services such as sewerage and water. The remaining 10 per cent. is for industry, including the provision of the site works necessary to open up the new industrial areas which are essential for the balanced development of these new towns. Inevitably, any corporation set up to undertake a major task needs a period for planning and preparation before major construction work is undertaken in any quantity. Your Lordships will be glad to know, however, that most of this preliminary work has now been completed, and the corporations' programme is gaining momentum and making a small but useful contribution to the housing programme.
At the end of April of this year, 5,179 houses had been completed and 7,144 were under construction. The total number of houses in contracts then current was about 13,200. By the end of October of this year, it is estimated that about 9,000 houses will have been completed, and the contracts that will be current at that time will be for something in the neighbourhood of 19,000 houses. Every effort is being made to induce or entice industries into the new towns in order to provide employment for the increasing number of people taking up residence there, and already in the new towns around London—and I think this represents satisfactory progress—thirty-four factories have been completed, while nineteen others are under construction. It is hoped that industrialists with suitable industries will take full advantage of the facilities which are about to be provided for them. Meanwhile, it is essential to maintain, and indeed to accelerate, the progress that is at present being made in the fourteen areas already designated under the New Towns Act. The authority of Parliament is therefore sought for a further expenditure of £50,000,000. It is expected that this sum will be spent within the next two years, and that in 1954 it will be necessary to seek authority for a further sum to enable the programme to be continued.
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The total cost to the Exchequer of the new towns cannot be forecast with any certainty, since much depends upon the extent to which local authorities and private developers take part, as well as, of course, the other problem of what is going to happen to prices. It has, however, been estimated that the cost to the Exchequer will be somewhere between £225,000,000 and £250,000,000 spread over a period of at least twenty years. The money is repayable under terms which have been fixed by the Treasury in accordance with the provisions of the 1946 Act. I hope that I have said enough to commend this Bill to your Lordships. I beg to move that it be now read a second time.
Moved, That the Bill be now read 2a—(Lord Woolton.)
2.53 p.m.
LORD SILKIN: My Lords, I can assure the noble Lord that no impediment will be placed in the way of the speedy passage of this Bill. Indeed, as the proud father of a very large progeny, I regard this Bill as setting the seal upon what is a very valuable and most important social movement in this country. The new Towns Act of 1946 was an innovation, and I am proud of the fact that it was welcomed both in this House and in another place. The Bill went through without a Division. I am delighted also to find that this has become, broadly speaking, a non-controversial activity and that both sides are determined to do their best to further the cause of new towns. By this Bill, the Government are firmly committing themselves to the policy of going forward with the new towns. At some time I should welcome a discussion in this House of the working of the Act, just as we are to have later in the afternoon a discussion on the working of the Town and Country Planning Act of 1947. I believe that the New Towns Act has been working smoothly, but I should be the last to say that it is not capable of some improvement, either from the point of view of further statutory requirements or from the point of view of administration. I think it would be helpful if at some time in the near future we could have a debate of that kind. If no other noble Lord takes the initiative, I may take the initiative myself in putting down a Motion.

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The noble Lord who introduced this Bill was quite right in his catalogue of the different types of new towns that have so far been set up. Eight of them have been established to deal with the dispersal of population from London. Of the others, one in Scotland is for the same purpose so far as Glasgow is concerned. The remaining new towns are all being created for the purpose of providing homes for workers in existing industrial areas where at present the workers have to travel long distances to and from their work, In the term "industry," I include coalmining, because two of the new towns are particularly devoted to housing people engaged in coal mining, so that the new towns that exist have a diversity of purposes.
In creating the new towns, one had in mind particularly those concerned with dispersal, and they served a dual purpose. They were set up not only to provide accommodation in the best possible conditions for a number of people who were living in overcrowded conditions in the large towns, but also to help in the redevelopment of those towns by thinning out the existing population. It was the intention in 1946, at the time of the introduction of the New Towns Bill, that these processes should go side by side; that the housing of people in the new towns and the redevelopment of the old towns should be synchronised. Unfortunately, owing to the great housing need, it has not been possible to synchronise these processes, and the provision of houses in the new towns has assumed a somewhat different character from what was originally intended, in that, to a certain extent, we are all looking to new towns for the provision of houses, regardless of the redevelopment of the existing towns. That is unfortunate but, nevertheless, if care is taken to ensure that housing and industry go from the existing towns to the new towns, so that the new towns do not become, in effect, dormitory towns, they will still, to a certain extent, be serving a useful purpose.
I would emphasise here, however, that these new towns were intended to be a very small part of the great movement which we regarded as necessary in the next half century or so of rebuilding the existing towns which grew up at the time of the Industrial Revolution and which were badly in need of renovation. Whereas, as the noble Lord said, possibly half
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a million people will eventually be housed in the new towns, it is nevertheless necessary to provide new accommodation for the millions of people in the old towns. We have always regarded the new towns as constituting something of a laboratory and an opportunity for experimenting in a new way of living, so that they would be of assistance when the time came for redeveloping the existing towns. That requires a certain amount of courage. We are all politicians. Noble Lords know that when an experiment is successful, well and good; but when, for any reason, an experiment is not successful, it becomes the cockpit of Party politics. I would ask that we accept a self-denying ordinance as regards the new towns, and allow them a certain amount of free play to try out for themselves new designs and new ways of living. Such experiments will be of value, and possibly, in the long run, be an economy to us when we come to redevelop on a much bigger scale in the existing large towns. But that means a good deal of restraint on the part of both politicians and the Treasury.
If I have one criticism to make of the administration of the new towns, it is that they have been kept too much on leading strings, that they have been too much interfered with, both by the Ministry and by the Treasury. They have not been allowed to develop as freely as I should like, or to try out new ideas, even though some of us may not always have liked those ideas. In saying this I am not being critical of noble: Lords opposite. In this respect I feel that both Parties are tarred with the same brush. We have appointed people of all types to serve on development corporations, but we have not been prepared sufficiently to trust them. I hope that in the future development of the new towns the corporations will be given considerably more freedom. I do not suggest complete freedom, of course, but considerably more freedom to try out different ways of arranging their towns, different types of construction and different types of building. I am sure that out of all that—out of this "laboratory," as I have described it—we shall find something well worth while. At the present time, there is a great danger that in the new towns we are merely creating housing estates on a large scale. I say, quite frankly, that if that is all we are doing, then the new towns movement is

1459
not worth while. They justify themselves only by this much greater freedom that we can give them to develop along new, modern and up-to-date lines.
I fear that at the present time there is a danger that we are looking to the new towns solely as a means of providing houses, and as nothing more. I want to pay my tribute to the present Minister of Housing and Local Government. He appears to be greatly interested in the new towns. I understand that he has visited a large number of them, and that his visits have been greatly appreciated. I understand that he has even met the chairmen of the corporations and discussed with them the progress of their towns, and that he has held himself out as being willing at all times to be approached by them when necessary. All that is to the good. But if we are to stress and overstress housing alone, then we shall not get the kind of new towns that we want. These new towns must be complete entities. They must be places where people live, work and enjoy their recreation, and we cannot afford to neglect any side.
The noble Lord, Lord Woolton, referred to industry, and to inducing industry to come to the new towns. I speak with some knowledge of the matter, and I can assure him that industry requires no encouragement to come to the new towns; industry would gladly come to them. Industrialists in London and other over-crowded places realise the great advantages which the new towns have to offer. They are eager to come. The difficulty is the policy of the Board of Trade, which I can well understand. Quite naturally, the Board of Trade have a bias in favour of the development areas. This is an inheritance from the days when there was vast unemployment in the development areas and it was necessary to steer industry towards these places. But it is possible to overdo that attitude. It is possible to direct or to steer industry to those places where industry cannot possibly be so efficient as if it were situated in a new town; and there has been a feeling that the Board of Trade have perhaps not been as enthusiastic as they might have been in assisting industry to go to the new towns. If the noble Lord will look into this question and see that industrialists who can play a part in the development of the new towns are freely
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allowed to go there, I think he will be helping considerably. I could say a good many more things about the new towns, but I think perhaps it would be more appropriate if we were to spread ourselves on this question on another occasion. Therefore, I content myself with saying that we on this side welcome this Bill very much, and noble Lords opposite can be assured that no difficulty will be placed in the way of its very speedy passage.
On Question, Bill read 2a: Committee negatived.

AGRICULTURE (POISONOUS SUBSTANCES) BILL [H.L.]
3.7 p.m.
Amendments reported (according to Order).
LORD DOUGLAS OF BARLOCH LORD DOUGLAS OF BARLOCH moved, after Clause 9, to insert the following new clause:
Restriction on sale of other poisonous substances
" .No person shall manufacture and offer for sale or import and offer for sale any poisonous substance or any preparation containing a poisonous substance, other than the substances to which this Act applies by virtue of Section 9, unless he has previously delivered to the Minister and the Secretary of State particulars of the nature and contents of such substance or preparation, of the name or trade mark under which it is intended to be sold and of the grounds upon which he considers that it may safely be used in agriculture:
Provided that this Section shall not apply to any substance or preparation which was in economic use in agriculture prior to 1st January, 1935, or which is intended to be used solely for research and experiment."
The noble Lord said: My Lords, I can best introduce this Amendment by referring to two observations which were made by the noble Lord, Lord Carrington, during the discussion upon the Committee stage of the Bill. First, he said (OFFICIAL REPORT, Vol. 176, col. 1199):
"Obviously, it is the duty of a manufacturer of a new weed-killer to see that its properties are well known. He should carry out the necessary tests and trials and state clearly on his tins and containers what danger there is in the use of the poison."
Then, at a later stage, in reply to an inquiry which I made as to what means of information the Ministry of Agriculture had of the introduction of new poisonous substances, he said (col. 1200):
"We have most excellent contacts and relations with the manufacturers of these substances, and we are not entirely ignorant of what goes on."

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However, I am not satisfied that that is completely the case because, as I have already pointed out to the House, one of the poisonous substances against which this Bill is directed is one which was well known to be a poison. It had been used as a drug for medicinal purposes, but its use had been discontinued since it was found to be poisonous and a number of people died as a result of its being prescribed for them. That is a substance for which, in fact, there is no known antidote. Now that substance was put into use for agricultural purposes, and a number of people died as a result. It appears that neither the manufacturers nor the Ministry of Agriculture, in that case, were informed about the situation, otherwise this regrettable series of accidents would not have taken place.
The object of this proposed new clause is to make certain that the manufacturer will be under not merely a moral obligation but also a legal obligation to consider the nature of the substances which he is offering for sale; that he will be under an obligation to deliver particulars to the Ministry of Agriculture, so that they may also direct their attention to it, and may be in the position to consider whether or not they should make an order, such as is provided for in this Bill, for regulating the means and the manner by which this substance is used. That is the purpose of the Amendment: to improve the machinery of the Bill, to increase the facilities for enforcement and to provide an additional safeguard for workers in agriculture whose health it is the object of this Bill to protect. I therefore have very much pleasure in moving this new clause.
Amendment moved—
After Clause 9, insert the said new clause.—(Lord Douglas of Barloch.)
LORD TEVIOT: My Lords, I view the whole of this Bill with great apprehension. Undoubtedly the use of these very strong poisons, as the noble Lord, Lord Douglas of Barloch, has said, has already caused damage to the health of a considerable number of people, and in some cases has even caused death. I hope that my noble friend Lord Carrington will be able to accept this Amendment, and so tighten up any orders or regulations that may be necessary to implement the whole question of protection in the use of these poisons. I am sure that my noble friend
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appreciates the danger of them, and if he possibly can tighten up whatever are necessary in the way of regulations or orders, I am sure that it will be greatly to the benefit of a great many workers who deal with these poisons. I have great pleasure in supporting the noble Lord's Amendment.
3.13 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE AND FISHERIES (LORD CARRINGTON): My Lords, I fully appreciate, and indeed have some sympathy with, the Amendment which the noble Lord has moved and which my noble friend Lord Teviot has supported, although I am sorry that neither the noble Lord, the mover of the Amendment nor my noble friend will accept my view that we can give the agricultural worker adequate protection under the provisions of the Bill as it now stands. I do not think, however, that this Amendment would be at all suitable. If it were accepted it would be bound—although I realise that that is not the noble Lord's intention—to seem to the public that substances notified to the Minister under Statute had been approved by him. But, as I said on the Committee stage, any idea of approval by the Minister is not acceptable to Her Majesty's Government. As the noble Lord emphasised this afternoon, when he repeated the words I used on the Committee stage, it is the manufacturers' job and not the Government's job to see that the properties of these substances are known, and it is their duty to carry out the necessary tests and trials. I can see no reason why this duty should be lifted from them at the expense of the taxpayer. The function of the Government in regard to poisons generally is to see that, where poisons are used, suitable safeguards are adopted; and it is not their function, I submit, to approve or disapprove of poisons for particular uses.
I doubt whether the arrangements necessary to put the noble Lord's Amendment into effect would be practicable. It would mean that Government Departments would have to set up an organisation to investigate anything which manufacturers might put forward. Furthermore, the word "poisonous," in the way it is introduced into this Amendment, is not used or defined in the Bill as it now

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stands. This would mean that the manufacturers would have to decide what was or was not poisonous, and there would be no control over the varying standards they might adopt. There would inevitably be long delays before products could be put upon the market, because of the need to make thorough tests which would either duplicate what manufacturers should already have done or would do at public expense what the manufacturers ought to do. In addition, there would be a serious risk of holding up development. I do not think, therefore, that we can accept the noble Lord's Amendment, and I am sure that the best way to achieve what we all wish for is to work closely with the manufacturers.
As the noble Lord, Lord Douglas of Barloch, will know, the Zuckerman Working Party considered this problem but did not recommend that statutory requirements should be imposed upon the suppliers in the way that the noble Lord's Amendment would do. They suggested only that the Agricultural Departments should satisfy themselves that their arrangements for obtaining information about new substances were adequate. In point of fact, as I said on the Committee stage, we receive prior information about most of the new substances which it is proposed to put on the market, although, of course, this information is not so much concerned with the precautions to be taken in using the substances as with their effectiveness as insecticides and weed-killers. Discussions on recommendations of the Zuckerman Working Party have taken place and are continuing between the Agricultural Departments and the manufacturers. The principle that there should be prior information about any new toxic products which it is proposed to market has been fully accepted by the manufacturers, and they are at present considering the detailed arrangements that might be made for notification of such new products, with a view to submitting a draft scheme for our consideration. There are still some problems, such as patent rights, to be solved, but I am confident that the voluntary arrangements on the lines recommended by the Zuckerman Working Party can and will be made. I therefore hope the noble Lord will agree with me that this is the best way of tackling the problem and, in view
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of what I have said, will withdraw his; Amendment.
LORD DOUGLAS OF BARLOCH: My Lords, I am afraid that the noble Lord has quite misunderstood my Amendment. It says nothing at all about imposing an obligation upon the Ministry of Agriculture to test or to certify or to examine any of these substances. All it does is to impose an obligation upon the manufacturer to notify the Ministry of Agriculture of the nature of any substance which he proposes to place upon the market. That is the only purpose of the Amendment—there is nothing else in it at all. There is nothing in it which requires the Ministry to make any tests; there is merely an obligation to communicate some information to the Ministry of Agriculture—that and nothing more. The noble Lord therefore is quite wrong in saying—
LORD WOOLTON: My Lords, I am sorry to interrupt the noble Lord, but this is a Motion on Report, and I do not think the noble Lord has the right to speak a second time—I am sorry, I am now informed that he has. I beg the noble Lord's pardon.
LORD DOUGLAS OF BARLOCH: My Lords, I moved an Amendment and I am entitled to reply.
LORD WOOLTON: That is quite right. I beg the noble Lord's pardon.
LORD DOUGLAS OF BARLOCH: My Lords, before I was interrupted, I was saying that there is nothing in this Amendment which imposes any obligation upon the Ministry of Agriculture to do anything. It is designed merely for the purpose of ensuring that the Ministry of Agriculture has information, and I have made this proposal purely as ancillary to the purpose of the Bill. As noble Lords will recollect, the Bill applies especially to two classes of substance, and contains a provision for it to be extended to others. It is in order that the Ministry may have an opportunity of considering at the earliest possible moment whether they should or should not extend it to other substances, that I wish to make certain that the Ministry are informed. The noble Lord, Lord Carrington, says that in practice the Ministry are informed, but he has never explained the regrettable circumstances connected with the use of

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D.N.O.C., which was a well-known poison, about which they were not informed.
LORD CARRINGTON: My Lords, if I may interrupt the noble Lord for one moment, the regrettable circumstances with reference to D.N.O.C. are exactly the reason why we have introduced the present Bill.
LORD DOUGLAS OF BARLOCH: Precisely; after the event, because it was not known. That is the whole purpose of the Amendment which I have proposed.
THE LORD CHANCELLOR (LORD SIMONDS): My Lords, does the noble Lord seek to withdraw his Amendment?
LORD DOUGLAS OF BARLOCH: My Lords, I do not, as a matter of principle.
On Question, Amendment negatived.

CORNEAL GRAFTING BILL
3.22 p.m.
Order of the Day for the Second Reading read.
LORD HADEN-GUEST: My Lords, I beg to move that this Bill be now read a second time. It has already been passed in another place and supported there by members of all Parties, including two former Ministers of Health. It may be accurately described as an all-Party measure. The cornea is a glass-like window which covers the coloured part of the eye. Most of us take it for granted, but in some people, as the result either of disease or of accident, the clear cornea of the normal eye is replaced by an opaque tissue, so that the eye is blind. This form of blindness can be cured and the sight restored if it is possible to get the cornea from another human eye which can be grafted on to the blind eye. But in present circumstances it is only in exceptional instances that such corneas are available.
In other countries at the present time corneas are taken from dead bodies, but under the law as it stands at present in this country that is not allowed. The Anatomy Act allows post-mortems to be made and bodies to be used for scientific purposes. It is essential to medical education that this should be done. But the Act does not allow the eye to be used in
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the way I describe. As the law stands at present, even if an individual leaves his eyes to be used for the purpose of restoring sight to the blind, this cannot be done. The purpose of this Bill is to allow the eyes of the dead to be used for this beneficent purpose. It is a use which has already been made of eyes of the dead in other countries, including France, Spain and South Africa. I hope that your Lordships will agree to give this Bill a Second Reading, so that hope and light may be offered to those who at present live in darkness.
3.25 p.m.
THE EARL OF ONSLOW: My Lords, it is a great pleasure to me, particularly after speaking from this Box on the last Bill on this subject—namely, the National Health Service Bill, on which we ranged in battle from the procedure of this House to what was good for our health—to be wholeheartedly in support of the Bill the Second Reading of which has been moved to-day by the noble Lord, Lord Haden-Guest. It is also a great pleasure to me to congratulate him and the honourable Members of another place who were responsible for the Bill. This is more than an all-Party Bill; it is an all-citizens' Bill, a Bill to produce something which will be a great asset, and a growing asset as the matter develops, to all those who suffer from this form of blindness and who will be helped by this operation. I do not think it is cadging interest for the Government, if I may so express it, when I place on record that the Ministry gave all assistance to the honourable Member in another place who introduced this Bill, and also helped with its drafting. I should like to give my own personal support and concurrence to this measure. If I can help in any way, in anything which may crop up between now and the finalisation of the Bill, I shall be only too pleased to do so. I am only too delighted that both laymen and doctors seem to be at one with the politicians and all types of citizens in the unanimous welcome for this Bill.
3.27 p.m.
LORD WEBB-JOHNSON: My Lords, I rise to prove that in the profession of medicine there is unanimity in this House to-day—that is to say, among qualified doctors. I also wish to emphasise to your Lordships that the need for this Bill is

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very great. I believe that the need will be a diminishing one, for the control of diseases which lead to blindness owing to the production of opacity of the front window of the eye is becoming firmer and firmer every year. I want it to be realised that the need is not confined to this country. It is even greater in countries which depend on Britain for guidance in medical matters, and often for medical service—those Colonies for which Britain has assumed some responsibility, although they may not actually be Dependencies. The need in these Colonies can be counted in thousands. There are in the Middle East thousands of cases of trachoma which lead to complete opacity of the front window of the eye. That opacity is remedied by grafting in again a clear window. I think it would be a failure on my part if I did not inform your Lordships that this wonderful advance in therapeutics is mainly due to research by British ophthalmologists. I might almost go so far as to say that the pioneer work was entirely due to the labours of British research workers and ophthalmologists. I have the greatest pleasure in supporting the Bill.
3.29 p.m.
LORD LLEWELLIN: My Lords, while fully in support of this measure—I think the whole House is in support of it—I should like to raise one small drafting point. Clause 1 says:
"If any person, either in writing at any time or orally … during his last illness, has expressed a request that his eyes be used for therapeutic purposes … "
and so on. The ordinary person would say, "I should like my eyes to be used to help some blind person." It would only be the noble Lords, Lord Haden-Guest and Webb-Johnson, and other members of their profession, who would say, "for therapeutic purposes." I wonder whether these words are apt to deal with all the cases which might arise. Do they cover the cases of people who wish to have their eyes used for this purpose when they are dead but who will certainly not express this request in the words we find in the clause as drafted?
3.30 p.m.
LORD SALTOUN: My Lords, I also have two small drafting points to submit to my noble friend, Lord Haden-Guest, and one other point, which I hope he will
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consider before the next stage of the Bill. The first drafting point refers to the words "in writing" in subsection (1) of Clause 1. I wonder whether that is specific enough. I suppose "in writing" covers typewriting; but I do not know whether it means a typewriten document signed, or with a typewritten signature. In the interests of the Bill, it might be worth while looking into that point before the next stage. The second drafting point is even less important. In reading the Bill I should have found it easier to apprehend the meaning instantaneously in line 20, on page 2, had it read:
"… as rendering unlawful any dealing with the body or any part of the body,"
thus repeating the words "the body." It may be my stupidity but I suggest that may be important. The third point is rather different. Possibly I shall not receive an answer to-day, but I should like it to be considered. I note that in Clause 1 (8) the position of the procurator fiscal is guarded in Scotland. It is not entirely unknown for a person who has executors to be murdered in England. I should like to know whether, under this Bill, there will be a conflict of rights between the coroner and the person entitled to the eyes at the wish of the deceased. That is all I have to say on the Bill, and I wish the noble Lord great speed and success in getting it passed into law.
3.33 p.m.
THE EARL OF LUCAN: My Lords, it may be appropriate if I say a few words on this Bill, speaking as a person who might have a direct personal interest in its passing, due to having a defective cornea in one eye. It will be gratifying to a great many people that this Bill is passing with such unanimous approval. It will gratify not only thousands of people who have defective vision, or who are completely blind, but also many well-intentioned people who would like to leave their eyes for the benefit of other people. I know of elderly people who have long had the wish that their eyes should be used for this purpose. I should like to support my noble friend in this Bill.
3.34 p.m.
LORD HADEN-GUEST: My Lords, I am glad that this Bill has received such a welcome on all sides of the House. With regard to the point raised by Lord Llewellin, as to the words "therapeutic

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purposes," he will no doubt have noticed that the noble Lord opposite said that the Ministry of Health had taken part in drafting this Bill. I have no doubt that these words were carefully considered. However, I will look into the matter to see whether any adjustment is necessary. The same observation applies to what was said by the noble Lord, Lord Saltoun, with regard to the words "in writing"; and to his further point as to the grammar in subsection (7). With regard to the question of the coroner in England, and the person who is murdered, I am afraid that someone who was murdered would be excluded for another reason: that it would not, presumably, be possible to use the eyes, in any event, in the short interval of time after death. For that reason, I am afraid that it would be impossible to use his eyes. I am to have had the support of my noble friend Lord Lucan and his assurance that many people will be willing to leave their eyes. I think this will be a reform of the greatest benefit in this country, and I hope, as has already been suggested, that it will give a lead to the Commonwealth arid the Colonial Possessions overseas.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

CIVIL AIR TRANSPORT POLICY
3.35 p.m.
THE SECRETARY OF STATE FOR THE CO-ORDINATION OF TRANSPORT, FUEL AND POWER (LORD LEATHERS): My Lords, perhaps I may be permitted to intervene at this point to make a statement on civil air transport policy in similar terms to one that has just been made in another place by my right honourable friend the Minister for Civil Aviation. As I told your Lordships recently, it is the policy of Her Majesty's Government for air transport to combine the activities of the Airways Corporations and the independent companies in the way which will best serve the interests of British civil aviation and of all users of their services.
We recognise that the Airways Corporations have established themselves well in the international field. We shall do all we can to encourage this. They
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are important earners of foreign currency. They are up against intensive competition from foreign air lines and we are determined that the competitive strength of the Corporations to operate both first and second or tourist class services on their present established networks will not be impaired. On the other hand, we seek to improve the position of the independent companies, which with few exceptions lack long-term security and opportunities of expansion. They cannot establish their position if they cannot plan firmly ahead. We therefore intend to give them more scope and security, while at the same time not increasing the cost of civil aviation to the taxpayer.
We have therefore decided that the development of new overseas scheduled services shall be open to the Corporations and independent companies alike. Applications will be made to the Air Transport Advisory Council, which will administer a procedure on licensing lines. Associate agreements for new routes will normally be granted for seven-year periods with extension to ten years in special cases. This should give private firms sufficient security for capital outlay and expansion. In particular, we have hopes of independent companies, developing the all-freight market, which is a growing field with great possibilities. There are also opportunities for special types of service such as seasonal inclusive tours and services at cheap fares not directly competitive with the Corporations to places within the Colonial Empire.
Charter operations are in the main the domain of the independent operator. The Corporations will keep the right to engage in charter work in those cases where they have special facilities. They will not, however, maintain aircraft specifically for charter work. United Kingdom internal sere ices present a special problem. Their cost to the taxpayer is considerable. We are still examining the best way of dealing with this. At the same time we are considering how best to meet the needs of Scotland. The Channel Islands and the Isle of Man also present their special problems. In the meantime British European Airways will continue to operate their existing network. Internal services additional to those of British European

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Airways will be made available to private operators for long-term periods. The Air Transport Advisory Council will be ready to receive during this summer applications not involving subsidy for these and for new overseas services in time for the policy to take effect in 1953. The companies will continue to operate scheduled services as associates of the Corporations but under a modified form of Agreement. Terms and conditions of service must be not less favourable than those reached through the machinery of the National Joint Council for Civil Air Transport. Under this policy, which has been framed after consultation with the many interests affected, the public and private sectors of the industry can both make their best contributions to the development of British civil aviation.
LORD PAKENHAM: My Lords, I am sure that we have all followed with great attention the Statement of the Secretary of State. It is clearly one which will require debate in this House at an early date. To-day I shall confine myself to one or two observations only. It may be recalled that when the noble Lord, Lord Ogmore, raised this subject in your Lordships' House last December, we on our side expressed the opinion that it was possible to extend the opportunities for the charter companies (for whom we expressed our good will) without damaging the Corporations, but we said at that time that if the Government found that impossible and proceeded to damage the Corporations they would be resisted by every constitutional means in our power. I am afraid that this afternoon the noble Lord has unfolded a policy which constitutes a solid threat to the international activities of the Corporations and holds a sort of vague menace over their internal activities as well. It is a thin and at the same time a most unsatisfactory document. I intend to put only one question this afternoon, though I know my noble friends will wish to add others. Will the noble Lord, the Secretary of State, inform us whether legislation will be required to give effect to this remarkable and lamentable departure in civil aviation policy?
LORD LEATHERS: It is not expected that there will be need for legislation to give effect to the proposals I have outlined.
LORD BALFOUR OF INCHRYE: My Lords, arising out of the Minister's Statement, may I ask whether my noble friend can answer this one question? The plan he has unfolded, which as the noble Lord, Lord Pakenham, says needs further explanation, nevertheless seems to give that possible field for civil aviation which many of us desire, and I believe the proposal will be welcomed by large sections of your Lordships' House. But unless there are increased facilities for the production of new civil aircraft there is little hope of aircraft operators being able to take advantage of this new opportunity. That being so, is the Minister in touch with the Ministry of Supply as regards a greater allocation of resources for the development of modern types of civil aircraft?
LORD LEATHERS: Yes, we are in touch with the Ministry of Supply on this subject, being very conscious of the need to watch it carefully. At the moment, however, I am not able to say precisely what is the result of those talks. But we are very mindful of the need to provide, if we possibly can, the facilities to carry out the policy we are about to introduce.
LORD OGMORE: My Lords, arising out of the reply of the noble Lord, the Secretary of State, to my noble friend Lord Pakenham, that no legislation will be needed, may I ask the Minister how the Government intend to give authority to the Air Traffic Advisory Council to carry out the new duty which is imposed upon it? As I read it, it is doubtful whether they have such authority under Section 36 of the Civil Aviation Act. 1946. As the Government are now proposing to turn them from an advisory body into a licensing body independent of the Minister, who will no longer be responsible for them to Parliament, how does he propose to enable them to carry out that function under the existing law?
LORD LEATHERS: I have not the final answer to that question, but my information at present is that there will be no need for further legislation and that this can be done within the scope of the legislation which now exists. However, I am not absolutely satisfied that that is the final word, and the matter is, of course, having immediate attention.
LORD OGMORE: My Lords, I am grateful to the noble Lord for assuring us that he will inquire into the legality

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of the proposal. I should assume that he would have done that before making his statement. At all events, he will now inquire into the legality of this proposal. May I point out to him the constitutional issue which is involved? As my noble friend Lord Listowel said only yesterday on the proposal in regard to the B.B.C., here is another case where the Government propose to take out of the hands of Parliament any supervision of the running of this particular body. In other words, this body will have power to allocate charters and licences over a wide field of activity in this country, and yet no noble Lord in this House and no Member in another place will be able to put a single question to the Minister, who hitherto was responsible with relation to the activities of that body. This is a serious derogation of the powers of both Houses of. Parliament and of every member in this House or the other one, and it is a matter about which we should be convinced before we allow the Government to get away with it.
LORD LUCAS OF CHILWORTH: My Lords, may I, on behalf of the noble Lords on this side, ask the acting Leader of your Lordships' House whether Her Majesty's Government give time to debate this subject immediately after the Whitsun Recess, as it is obviously a question which noble Lords on this side of the House, and I take it noble Lords on the other side of the House also, will want to debate?
LORD WOOLTON: If the House wants to debate it, it would be improper of me to say "No." I am very glad to agree.
LORD LUCAS OF CHILWORTH: I am grateful to the noble Lord. Perhaps arrangements can be made through the usual channels.
LORD WOOLTON: Yes.

TOWN AND COUNTRY PLANNING ACT
3.47 p.m.
LORD LLEWELLIN LORD LLEWELLIN rose to call attention to the working of the Town and Country Planning Act, 1947; and to move for Papers. The noble Lord said: My Lords, I rise to move the Motion which stands in my name on the Order Paper. I do so with a certain amount of diffidence because I do not suppose that there is any matter upon which more disagree-
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ment exists between individuals, and indeed between individuals in the same Party, as on matters of town and country planning. As the noble Earl, Lord Jowitt, and the noble Lord, Lord Henderson, will certainly remember, we spent hours in this House in making Amendments to the Town and Country Planning Act, 1947. The Bill came from another place and we together did our best here to improve it. I think the time has now come to sere how it is working. I do not suppose that even the noble Lord, Lord Silkin, is completely satisfied with the way it is working out. Moreover, the time is shortly coming when under the terms of the Act the payment of the £300,000,000 for loss of development rights is due to be made to land owners, and one of the matters which must be looked into by the present Government and upon which they will have to decide is whether this is an appropriate time in our economic struggle to pay out so large a sum and thus quite substantially to increase purchasing power. If the Act is left as it is, that sum will have to be found next year by the Treasury.
We were told by the Chancellor of the Exchequer on February 26 last that approved claims amount to more than the £300,000,000; in fact, they amount to some £350,000,000. In passing let me say that if such a sum is paid out to land owners—and I am dealing with this matter, I hope, impartially—there is liable from the political angle, from the political Party standpoint, to be the same kind of misrepresentation as there has been in regard to the payment to the doctors of back pay involving a payment of some £40,000,000 to those persons this year. It is little good trying to, point out that either of these two things was an obligation incurred by the Socialist Government and wholly inherited from them, because the suggestion is sedulously spread around, "Look at the Tories taking an early opportunity of helping their friends."
LORD CALVERLEY: Hear, hear!
LORD LLEWELLIN: I am glad that I have support from the noble Lord, who is always, if I may so, one of the frankest noble Lords in your Lordships' House. If that is happening with regard to the £40,000,000 paid to the doctors, what will be said if some £300,000,000 is paid out to the land owners?

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The next point I would make is this: Will that sum be enough to pay people in full the amount of the agreed claims? If you take out of this £350,000,000 of agreed claims the £100,000,000 that is due to priority claims—to mineral owners and one or two other classes—that means claims to the value of £250,000,000 left, and some £200,000,000 with which to pay them within the three months. That works out approximately that the non-priority classes will get a dividend—if that is the correct word for it—of about 16s. in the pound. In private life, if one's debtor goes bankrupt one may think as a creditor that one is fairly lucky to get 16s. in the pound. But to me it is unthinkable that when as in this case, the Government's own officials have agreed the amounts of these claims, a Conservative Government at any rate can pay out less than 20s. in the pound.
We may as well face the fact that, unless the present Government decide to amend the Town and Country Planning Act at some time next year, the Exchequer in some way or another has to produce £350,000,000. I do not know, but it may be that the Government will decide to scrap these Parts of the Act altogether. On economic grounds alone they might well be justified in doing so. On political grounds, too, there is something to be said for it. Equally, they might well be justified in doing so on the ground that these provisions of the Act are now beginning seriously to hamper the housing drive, which otherwise is going well. Whatever any advocate of the provisions of the 1947 Act may say, it is undeniable that it is harder now, at any rate for the private developer, to acquire building sites than it was before the Act came into operation.
Further, it is also clear that, although in theory present user value plus development charge ought to equal and not exceed the price at which under the old conditions one could buy land, in fact in almost every case the man cannot buy a building site plus the development charge as cheaply as he could before. This is so for two reasons: first, the intending purchaser, in order to buy the right to develop, has to deal with a monopoly—a conception as dear to the hearts of modern Socialists as it was to King James I. That came out very
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remarkably in our Broadcasting debate of the last two days. This monopoly lies in the Central Land Board, from which there is no appeal. Secondly, the intending vendor, in other than exceptional circumstances, has no incentive to sell at mere present user value. So the purchaser offers more in order not to have to incur the delay and expense inherent in trying to get somebody to obtain a compulsory purchase order for him. It may well be, therefore, that the Government will decide to repeal these Parts of the Act altogether, and from the legislative point of view this is, of course, the simplest course. On the other hand—let us be honest about it—that will leave the problem that unwanted development cannot be stopped by a planning authority without someone paying compensation to a person (as, for instance, the owner of a piece of prospective green belt land) who is arbitrarily prevented from developing his land when his next-door neighbour is allowed to develop his. Compensation that such a man should have has to be paid by the local authorities. Let us face the fact that we are leaving open the way to further somewhat haphazard development of our countryside, and few will want to see that happen.
There may well be, of course, a "halfway house," a course which still retains the operation of Parts VI and VII of that Act in regard to some types of land but not to other types, and a "halfway house" which simplifies the changes of user provisions to which development charge now attracts. One of the factors which swells the claims total is that the Act of 1947 applies equally to areas already built up as to land which is ripe for development but on which at present no development has taken place. One cannot take a look around some of the small dwelling-house areas of our big cities without realising that a great part of those areas need re-development, and that nothing should be done to hamper it. Yet, under the 1947 Act, any redevelopment of these areas attracts a development charge, and in effect tends to perpetuate existing buildings and will eventually, I believe, give rise to new slums.
I know the difficulty of taking the centre of a city and drawing a circle round it at a mile radius, or a five or ten mile radius from that centre, and saying that

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all within the circle has to be considered a development area and all outside it an undeveloped area, because in practically every case there will be some developed land outside the circle and some undeveloped land inside the circle. That, therefore, is not a very satisfactory method, although it has been considered by persons concerned in planning from time to time.
How then, my Lords, do I suggest that we restrict the operations of Parts VI and VII of the Act to the districts where there are some goad and free areas—where, in fact, they do harm? I suggest that we say that the re-development of a developed site shall not attract development charge so long as the site is developed for a similar purpose; and, correspondingly, that the owners of such sites should have no claim for compensation under the other Part of the Act. If a man or a local authority pulls down slum cottages, and in accordance with the approved plan erects a block of modern flats in their stead, a benefit is done to the community; and whoever confers the benefit should not be penalised by the imposition of a development charge. Similarly, if a man pulls down old office or shop buildings and puts up modern buildings in their place, he, again, surely is a benefactor to the community and should not he penalised. Again, if a company pull down an old factory and erect a new one, with better layout, more floor space, better facilities for production, better accommodation for the workers and so forth, they are performing a service to the nation and should, in my view, not have to pay a development charge for doing so.
Therefore, under this head my suggested solution is that, where there is already a building, it should be possible to erect a new one in its place, for the same purpose, without the payment of any charge. And, as I say, the owner would not be able to claim on the compensation fund because he might have to get planning permission and pay a development charge to do so. Where there is a virgin however, development charge would still be payable. The effect of this, as your Lordships will no doubt realise, would be to help to prevent the spread of our towns over more and more of our countryside, taking more and more of our agricultural land; and it would
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encourage the re-development and the better development of those parts of our towns arid cities of which, I venture to suggest, nobody can be really proud. At the same time, I should allow extensions on homes and other existing buildings without development charge. I would also relieve of planning permission any internal change of a building which did not affect the exterior appearance. I do not see why a person should not re-plan the inside of a house or of a factory without having to go before a planning committee and get authority for doing so. That is quite a different case from the erection of a new factory or house or a new building of any ether kind.
To simplify the matter still further, I suggest that all changes of use of existing buildings should be exempt from development charge, and, correspondingly, that all such changes should be removed from Part VI of the Act as an element in a claim for loss of development value. The advantage of this would be that existing buildings could then again be bought and sold without concern as to what development charge might be incurred. Planning permission would still be required for a change of use of a residential building to factory or business premises of any kind, but no compensation would be payable when such permission was refused. Planning restrictions that do not exceed the obligations of good neighbourliness may be imposed, as they always were by land owners who developed their land well. That is what happened with density zoning before the Act of 1947, without the conception that a land owner was being deprived of his property. In order that matters such as these may not be decided finally, either in Committee or by an anonymous official in the Ministry, I should like to see a quasi-judicial tribunal set up to which could be referred certain planning provisions of the Act of 1947.
Before I suggest what the powers of such a tribunal should he, I would say that I would also widen greatly the definition of "change of user" of residential prernises—that is to say in the case of a building previously lived in by a family and then used as a hospital, an old people's home, a residential club or as a school or any place in which mainly people resided. Such a place should be in a category where it would not be regarded as having

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been subject to change of use. I am speaking, as I say, of a place that was mainly used for residential purposes. I am not talking about an office which has a caretaker living in it; I mean a building which is mainly residential in character whether a hospital, or a home or anything else.
LORD SILKIN: Would the noble Lord include an hotel?
LORD LLEWELLIN: No, I do not think I would. That would be on a slightly different basis from the cases that I have in mind.
Now I come to the powers that I should give to this semi-judicial tribunal. Let me say frankly that no civil servant would like this idea, nor would a number of people who have been Ministers of Health, Ministers of Local Government and Housing, and so forth. I should give this tribunal powers to decide appeals under Section 16 of the Act; that is to say, those made to the Minister against refusal of planning permission by a local planning authority, or against the granting of permission subject to unacceptable conditions. I should also send to it applications under Section 17 to determine whether planning permission is required or not; and probably also applications under Section 15 of the Act for application for planning permission to be referred to the Minister, on his direction. In cases under Sections 15 or 16, the procedure, I suggest, would be this. A tribunal would report to the Minister, who at that stage, and not earlier, and in the light of the recommendation of the tribunal, should take the administrative decision involved. Where the Minister disagreed with the decision of the tribunal, the report of the tribunal and the Minister's reasons for disagreeing with it should be published. That would allow either House to raise' questions as to why the Minister had acted in the way that he had, and would be a perfectly democratic process.
The tribunal that I should like to see appointed would be one chosen by the Lord Chancellor. It should have a legally qualified chairman and a panel of surveyors, architects and independent persons to sit with him. Hearings should be in open court, and all parties should be available for examination and cross-
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examination and should be entitled, if they wished, to be legally represented. I suggest that because there is too much "hole and corner" business about the present procedure. A local inquiry may be held, but the objector is not entitled to have the planning officer put in the box to be cross-examined, and I think he should. I think that where there is a dispute between the planning committee and one of Her Majesty's subjects, it should be possible for that dispute to be aired in public and for the planning officer to be asked why he selected the particular site and not another. I should preserve the right of the Minister to have the last word in the administrative decision, but if he disagrees with this tribunal—he may have to say, on general lines of public policy: "I have had to take a different view"—he should report to Parliament, and, no doubt, Parliament would support him.
If we are to get contentment about the working of this Act in the countryside, it is essential that there should be some new procedure such as I have just outlined. If a development charge is maintained in any shape or form, I am sure that the majority of your Lordships will agree that, whatever else is or is not done, an appeal against its assessment is essential if we are to get rid of the arbitrary nature of these charges. Your Lordships may remember that on May 5, 1949, we inserted a provision in the Lands Tribunal Bill when it was passing through this House. I believe, if my memory is correct, that it was sponsored by a member of Her Majesty's present Government. We inserted a provision that appeals on the amount of the development charges which were objected to when levied by the Central Land Board should go to the Lands Tribunal. Our Amendment was rejected in another place and we did not adhere to it, but if development charge is retained I hope that at any rate that will be one of the provisions that noble Lords will back as strongly in Government as they did in Opposition.
I hope that I have not spoken for too long, but in a debate of this sort speeches are not of much value unless they contain some constructive suggestions. I hope that some of mine may be put into that category. Whether or not those I have

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put forward will be acceptable to Her Majesty's Government is a matter, of course, for them. One merit of my suggestions is that, if adopted, they will materially reduce the amount which the Treasury will otherwise be called upon to pay out next year. Any Government would at this time have had to take stock of the way in which this complicated piece of legislation was working out in practice. We as a Party are pledged in our Election Manifesto to do something about this Act. I believe the words used were: "We shall drastically change the 1947 Act." That Act may be a popular Act with a few enthusiastic professional planners, but I can assure your Lordships that in its present form it is not so regarded in the minds of those who are affected by it. I have purposely put down this Motion at a time when I believe that Her Majesty's Government have not yet finally decided what to do, as it will thus give members of your Lordships' House—and there are some among us who know a great deal about planning and have given much of our time to it—the opportunity to let the Government know their ideas in advance. In short, this means that. I do not expect a pronouncement on Government policy in this debate to-day. I, for one, shall be quite happy if I can be assured that some of the things that some of us may say to-day will be found helpful to the Government in the complicated decisions they have to make. I trust that we shall be assured that a Government decision on this matter will be announced before very long. With those words, and in the hope that I have started a debate which may be of use to Her Majesty's Government, I beg to move for Papers.
4.19 p.m.
LORD MILNER OF LEEDS: My Lords, like the noble Lord, Lord Llewellin, I approach this subject, which is one of considerable difficulty and complexity, with some diffidence. The noble Lord has the advantage over me in that I think he has raised the same subject on at least two previous occasions. Indeed, I think I am not using too strong words if I say that the noble Lord is conducting something of a vendetta against the Town and Country Planning Act—
LORD LLEWELLIN: No, I would not say that.
LORD MILNER OF LEEDS: I hope he will forgive me if I say that the suggestions which he has made appear to me to be in the nature either of whittling away the provisions of the Act, on the one hand, or setting up a new and what appeared to me a rather fantastic bureaucracy, or an additional bureaucracy, on the other. However, I think the noble Lord is rendering a service to the House and the country in raising this question, because it is desirable that the attitude of the new Government should be known at the earliest possible moment. I hope that we can have some declaration in that regard before this debate closes.
That there is difficulty in operating some of the provisions of the Town and Country Planning Act, 1947, cannot be denied. That is especially so in regard to the compensation and betterment sections of the Act; and of course there is doubt, which I certainly hope may be cleared up to-day, in regard to the distribution of the global sum. I also think that the difficulty in regard to development charges is militating somewhat against private development and building, although I think that perhaps the objections there are rather exaggerated. There are other factors operating, but I think that perhaps these factors are becoming less marked month by month.
In the course of the last few years, there have been great difficulties in the way of obtaining raw materials and labour, but those difficulties are being gradually overcome. At the same time, in my view the provisions of this Act do militate against land owners' being willing to sell, certainly until their share of the global sum has been ascertained. There is little inducement for them or anyone else (for example, land developers) to go to the extent and trouble of obtaining all the necessary authorities and laying out capital moneys on estates. The restrictions on capital investments and on borrowing are also, of course, having their effect. At the same time it is difficult to see, except in detail, how the present law can be altered when so much has been done. I certainly should hope that the procedure might be made more flexible. In my view, the advantages of control can be too dearly bought, and that is the case if they exert an unduly restrictive effect upon the normal activities of the community. Therefore, one would hope that in some measure the procedure may

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be simplified. I know that my noble friend, Lord Silkin, when he was Minister, was only too anxious to consider any suggestions to that end.
Then, I think the country is entitled to know something more about the position with regard to the global sum. Have all the claims been agreed or settled? What dividend is likely to be paid; and how and when is that dividend likely to be paid? If it is intended to pay such a sum in cash, have the Government considered whether or not that will involve the question of inflation? Of course, that may not arise if the intention is to issue stock in some form.
In the next place, I think the procedure in regard to planning appeals should, without indulging in the set-up which the noble Lord. Lord Llewellin has suggested, be brought into conformity with custom and with the requirements of natural justice. For instance, I think that the planning authorities should give notice of the evidence they propose to adduce before the planning appeal tribunals. It seems to me that, whilst the planning authorities have the advantage of expert and professional advice and help, there are quite a number of small people whose appeals have to be dealt with without those advantages. Therefore, I feel that planning authorities should be under some obligation to give prior indication of the points they propose to make. I agree with something that I gathered was in the mind of the noble Lord, Lord Llewellin—namely, that written representations should not be received by planning tribunals or by appeal tribunals unless they are supported by oral evidence. It seems to me quite wrong and contrary to all the practice of the courts, that Government Departments, local authorities and so on, should be permitted to write letters, and that those letters should be produced in evidence without any oral witness being present and being subject to cross-examination.
There is another way in which the Minister can be of help—namely, in giving his decision promptly. From such little experience as I have had, I know that decisions on appeals may be given two, three, four, five or even more months after the appeal has been heard.
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In my view, that delay is quite unjustifiable. I can see no reason why a decision on the report of the appropriate inspector should not be given within a month, certainly within two months, of the appeal being heard. That would be of great value and would expedite procedure in all directions without a great deal of trouble. Then if, when he gives his decision, the Minister is proposing to lay down conditions additional to those originally in mind when the appeal was brought, I think that, before he lays them down, he ought to give an opportunity to the representatives of both sides, the planning authority and the appellant, to make representations to him in regard to those additional conditions.
I also agree that there is scope for simplification in regard to one or two items where the development charge is being paid at present. For example, I think that in cases where less than £100 is involved they might very properly and easily be freed from development charges. I also feel—and I gathered that Lord Llewellin also had this in mind—that old and already developed property which is obsolete or inconvenient should have some special consideration, so that the best possible use may be made of it in the national interest. In the case of that class of property it is not always possible for the owners to pay substantial development charges, and it would seem unnecessary for them to do so where property has already been developed, in some cases for hundreds of years, and in which there is a mere change of user—in one sense of the word, though perhaps not in another—which is in the national interest.
Having made those few comments, or it may be criticisms, I think one ought just to turn for a moment to consider at this stage, some four or five years' having passed, how far the general objects of the Town and Country Planning Act have been achieved. As your Lordships know, those objects were, first, to place planning on something of a national basis; secondly, to encourage active or positive development as distinct from mere restriction or regulation; and, thirdly, to solve the problem of compensation. I think we must all agree that the question of national planning, or of planning on a national basis, has made great progress. The general principles have been laid down. The preservation of agricultural

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land, the better planning of towns and cities, the division into areas, for various industrial and other purposes, has gone quite a long way, as I know from my own experience in the City of Leeds. The new towns, the trading estates, the decentralisation of industry, have also come about largely by reason of the Town and Country Planning Act and the other Acts which preceded or followed it. The national parks, the preservation of open spaces, the taking over of buildings of antiquarian or architectural importance are all matters which have been brought about largely by the action of the late Government, in the various Acts which they passed. And in my submission, the country is gradually being planned to the national advantage, though of course that is a very long-term project.
Delay has occurred, it is true. Many of these matters might have moved much more rapidly had it not been for the difficulties arising from the present situation. The diversion of effort in many directions, the necessity for rearmament and so on, Lave all had their effect on the results which might otherwise have accrued front the Town and Country Planning Act and other Acts of Parliament. I submit particularly that in the matter of new towns we have had evidence of positive planning which must be an advantage, and we must all hope that the general objects of the Act—though there may be criticism on matters of detail—will be achieved. And I believe they are being achieved. At the same time, in regard to the Town and Country Planning Act, 1947, as in regard to other Acts passed by the late Government, I feel that a fair opportunity must be given for us to obtain full benefit from its operation.
4.31 p.m.
VISCOUNT HUDSON: My Lords, I always thought, when I sat in another place, that any Member who began his speech by saying: "The honourable Member who has just sat down, will forgive me if I do not follow him," was guilty of transgressing the most important rule of debate. Nevertheless, in view of the extremely wide scope of the Town and Country Planning Act, I hope that I may be forgiven for once if, in effect, I do not follow everything that the noble Lord opposite has just said. I want to deal with a rather narrow but nevertheless, I venture to think, fairly
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important aspect of planning, especially national planning. It will not surprise your Lordships, knowing my past, to be told that I am particularly concerned with the use of land, and particularly with the possibility of saving as much agricultural land as possible from the ravages of the house builder.
Any of your Lordships who, currently or even occasionally, takes the train or drives to what is known as the Black Country, that conglomeration of towns and derelict slag heaps which comprises an area of land between Wolverhampton and Walsall, must have been struck with the dreadful waste that has been going on. Towards the end of the war, we undertook a fairly rapid survey to see whether or not it would be possible to use a great deal of this land, covered by derelict factories, slag heaps and so forth, and to restore it to useful purposes as housing sites, open places and towns, with a view to saving, if possible, the sprawl into the surrounding country. It was, I think, in 1945 that a survey was actually made of the Black Country, and it emerged from that survey that, as a minimum, over 6,000 acres of land were suitable for reclamation and could be used for rehousing the population,: providing schools and open places et cetera.
It was clear that the cost would vary. The cost in some areas, it was obvious, might be substantial. But, after all, compared with the days of 1929 to 1931, the days of unemployment, when men were engaged in digging holes only to fill them in again, enormous progress has been made, especially overseas, in the invention and use of earth-moving machinery; and the cost, therefore, both in human labour and actual money, is a very different thing to-day from what it was thirty years ago or even ten years ago. It is quite true, on the other hand, that much of this machinery is obtainable only overseas, and that a great deal of it costs dollars. Nevertheless, I think the time is here when this question should be looked at again in a more realistic spirit. A few weeks ago we had in your Lordships' House a debate on food production, and on all sides there was testimony to the urgent need of increasing to the maximum possible extent the production of food in this country. The farmers were urged to do their best. But when a farmer living, say, in Staffordshire or Shropshire,

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or parts of Cheshire or Derbyshire, drives through this area and sees this land still derelict, then goes a little beyond and sees good agricultural land being taken for houses, he would not be human if he did not say to himself, "Is the country really serious in this demand for increased food production, in this demand for the maximum possible use of land for this purpose?" Could not something be done to save these acres, in our crisis, by using this land which is at present an eyesore?
I think there is also something to be said for the psychological aspect. Speaking quite frankly and personally, I should hate to live in those towns. I can conceive nothing more dreadful than to be compelled to live all one's life looking at a slag heap or a derelict factory. Apart from the question of the saving in time and money brought about by obviating the necessity for people to live in suburbs instead of near their work, there is every reason to try to see that something is done. I am not overlooking the fact that several local authorities have, in fact, tackled parts of this question; but, not unnaturally, they have applied most of their effort to dealing with land that is most easily levelled. That is obvious.
The fact of the matter is—or at least this is what I was told at the time—that the real difficulty, apart from the financial one, lies in local borough boundaries. It may well be that when you are re-allocating this land you will find that particular spots are very suitable for a school and a playground, but the children who would use that school and that playground belong to the borough which is situated just across the street. The survey of which I have spoken, which was made for the Ministry, gives instances of borough boundaries running up the middle of a street. That, of course, prevents development on either side owing—it would, perhaps, be unkind to say, to the jealousies of the local authorities, but certainly owing to a very understandable reluctance in these days of high rates of one authority to spend a great deal of money for the benefit of an adjoining authority. Therefore, as I am informed, it is necessary that this question should be tackled in a comprehensive way, and one which is designed to meet the demands of the times. It will be necessary to make some arrangement for altering
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the boundaries of local authorities. There was, I think, an Act passed by the late Government to carry out some of these necessary readjustments, but circumstances into which I need not enter at present resulted in that Act certainly not being made use of, if, indeed, it was not repealed.
LORD SILKIN: My Lords, may I correct the noble Viscount? It was not passed by the Labour Government, but by the previous Government.
VISCOUNT HUDSON: It was not made use of by the late Government—I will put it in that way. I appeal to the noble Lord who is to reply to see whether something cannot be done to get voluntary organisation among local authorities, if there is not time for legislation, because, from the point of view of food production, of amenity and of the whole psychology of the people condemned to death in this Black Country, I am sure that the matter is ripe, and over-ripe, for action.
4.41 p.m.
LORD DOUGLAS OF BARLOCH: My Lords, I think we are all agreed upon the necessity for some form of planning and control of land use. Nevertheless, it is true that at present it seems to be difficult to secure permission for needed developments, not merely because of the need for planning permission but because of other permissions which have to be obtained—building licences, or, in some cases, consent of the Board of Trade to industrial user. When we cast our eyes back over the development of the idea of planning, it is evident that a great change has taken place. In its first conception as it began to be developed about the beginning of this century, the idea was to impose some kind of general rules by means of zoning, restriction of the height of buildings and similar regulations applying to an area, rather than by control of every building as an individual building. We have now come to a position in which for every development, even a mere change of use without any structural change whatever in the lands or buildings, it is necessary to obtain a planning permission. This has thrown an added obligation upon everybody, and in the early stages particularly, before the machinery began to be well organised and to work promptly, it involved serious

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delays. I do not say that there are not still delays.
We have not yet reached a stage under the Town and Country Planning Act of 1947 under which the development plans in each planning area have become finalised. Of course that helps to create additional uncertainty in the situation and makes the job of those who wish to develop land somewhat more difficult than otherwise it would be. I hope that some means can he devised to get away from the need for so many individual consents where the proposed development lies within a recognised scheme which has been settled by a planning authority or where it involves trivial changes which make no substantial difference to the neighbourhood. If the necessity for so many individual permissions and formalities which have to be gone through for quite trivial things could be overcome, it would certainly be a great improvement.
The noble Lord, Lord Llewellin, who initiated this discussion, devoted a good deal of his speech to the problem of development charges and the correlative provisions for compensation for loss of development value which form one of the novel features of the Act of 1947. We must remember that one of the great difficulties with which planning was always confronted was the requirement that compensation should be paid in respect of land which was reduced in value because of planning restrictions imposed upon it, quite properly, in the interests of the community at large. There is not the slightest doubt that the progress of planning in this country under the old law was very much impeded, especially in cases where the prospective charge upon the local authority was likely to be considerable. No doubt it was largely on that account that there was introduced a comprehensive provision which was intended to deal with this problem once and for all. The plan of taking away from owners the development value at one stroke, and compensating them for it, was intended to remove a difficulty which had hitherto been imposed upon planning authorities by the necessity of paying compensation, in some cases very large sums. On the other hand, I think it is not altogether untrue to say that under existing conditions, when that financial liability no longer lies upon the planning authority, in some cases they may be tempted to make more extensive reserves
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of land for non-productive uses than they would have done had they been obliged to count the cost of doing so.
I sympathise with the view that in this country we have to be economical in land use and that we cannot afford to have removed from productive purposes, whether for agriculture or other objects, any more land than is reasonably required to secure a good layout and amenity in our residential districts. Now we have the provisions which were intended to solve the question of betterment, and their inevitable correlative of the imposition of a development charge when a permission is given to develop land, with, of course, certain exceptions with which your. Lordships are quite familiar. Unfortunately, I do not think that this scheme has worked out in quite the way that was anticipated, because it appears that people who have land for sale are unwilling to dispose of it upon its existing use value, which in some cases, naturally, is negligible. Their inertia to do so is overcome by the would-be developer paying a price which, according to the theory of this legislation, he ought not to pay. To this, of course, there is a check provided in the Act in the power which is given to the Central Land Board to acquire land and to dispose of it for development. I understand that that power has been used in some cases, but on the whole it seems to be a clumsy means of trying to deal with the difficulty, and it does not appear to have been used very frequently or very effectively.
There is another curious feature which has arisen out of the system of development charges. The development charge naturally depends upon the particular kind of use which it is proposed to make of the land. If it is proposed to alter or improve the land to only a slight extent, the development charge is, or ought to be, correspondingly small, whereas if it is intended to develop the land to the full extent to which it might reasonably be developed, the development charge is correspondingly high. This may, in some cases at any rate, induce people to make a development which is not adequate to the site, and so prevent the full development of which the site is capable. That seems to me to be a somewhat unforeseen result of the legislation, and one which, when it takes place, is undoubtedly unfortunate.
I feel that the result which was aimed at by these provisions could have been

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obtained in another way, and much more simply, without the enormous amount of labour involved in calculating the sums payable in compensation for the restriction to the right to develop. It could have been achieved by simply making the compensation payable out of national funds in those particular cases where it was definitely decided to restrict the use of land in accordance with the town planning scheme. That would have relieved the difficulty of the poor local authority engaged upon a planning scheme which happened to involve considerable sums of compensation. That, in effect, by a roundabout route, is what has been done by the Town and Country Planning Act, 1947. But the method involves the payment at one blow of a lump sum of £300,000,000 of public money, which sum might have been spread over a great many years as planning developed and as restrictions were imposed in particular cases. It may be that in total, if that course had been adopted, the amount of public money to be paid out would have been less.
On the converse side, however, we have to remember that the orderly development of towns and the operation of planning is calculated to increase land values, and that in any event the development of a town is, in effect, a process which creates site values. I adhere to the view, which has been held by town planners since the early stages of the discussion of this subject, that the community is entitled to recover some, if not all, of the value which has been created by public activity and by the very presence of the community itself. Unfortunately, the development charge provisions do not achieve that object, because there can be large accretions of site value within the limits of the existing use of land. Indeed, all over London we can see street upon street which has been well developed which does not at this stage call for re-development, where at the time when the street was originally laid out the ground rent was £2 or £3 a year, representing approximately the site value at that time, and where, if the building were to be accidently destroyed and the site let again at this moment, it would undoubtedly command a very much higher ground rent. That is an example of an
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increase in site value within the framework of existing use and not subject to any development charge at all. On that account, I do not think the development charge system is comprehensive enough, because it does not achieve the object of recovering for the community in all cases some or all of the increase in the site value which has been created by the presence and activity of the community. I therefore feel that the theory which some of us cherished and adhered to, that this problem would be better solved, either by a national tax on site values, or by a local rate on site values, should be examined once more.
In this connection, let me refer to one other feature of the development charge system. The transaction in each case is a kind of negotiation or bargain which has to be made between the developer and the Central Land Board. Instances come to light in which the initial demand of the Central Land Board for development charge has, after negotiation, been reduced to a half, a quarter, or even, in some cases, one-tenth, of the amount originally proposed. That creates a fearful state of uncertainty. If the matter works out like that, it indicates that, in fact, the result depends to a very large extent, upon which party has superior skill in bargaining. I submit to your Lordships that that is an unhappy state of affairs, and it means that the strong will emerge out of this contest most successfully while the weak will be pushed to the wall. If there were some general valuation of sites in existence which formed a framework of reference by which these claims could be judged and settled, that would indeed be a very different story; and that again supports the argument that there is something to be said for dealing with this problem of compensation and betterment in a different way, by settling the compensation as and when it arises in individual cases and by recovering the betterment generally by a tax or rate upon site values wherever they occur.
5.0 p.m.
VISCOUNT GAGE: My Lords, others of your Lordships have indicated that they would like to see some amendment of this Act, and many other suggestions have been put forward by bodies outside this House. If it can be shown that there is a way of reducing unnecessary expense

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and complications under the Act, I, too, should like to see amendments made. I hope that your Lordships and the Government will not insist on amendments of such a sort that they will compel the local authorities to redraw the schemes that they are now engaged in submitting. I think I have reminded your Lordships previously that under the 1932 Act the planning authorities sent great stacks of documents and maps to Whitehall, all of which were put in the waste-paper basket, and now we are submitting a great many more. I think some 1,500 are going in from my own county. If all those are going to be scrapped, it will mean rot merely that there will be a great deal of frustration and waste of money in the local authorities but also that town planning itself will become somewhat of a farce. People will begin to say, with some justification: "If we are going to have planning, we might as well start with a little planning in Whitehall itself."
I do not believe that any of the schemes I have seen or heard has the intention of upsetting these plans. In fact, many very responsible people have said to me: "It is not the planning we want to alter, it is the financial part of the Act." I cannot see how planning can be divorced from the financial part of the Act. Up to a point, plans depend on finance and particularly on compensation being paid. The schemes now being submitted are being submitted on the assumption that compensation will be paid out of a national fund, and if there is going to be any change in that, it will mean some change in the plans themselves. Really a great deal depends on the question of justice, and I am fairly certain that whatever powers you give to the local authorities they will not be used in the way it may be intended that they shall be used if the result is to create obvious injustice.
And injustice does become greater the nearer you get to the people whose properties you are planning. In particular, I am thinking of the small plot-holders, of whom there are many thousands in the country, but unfortunately they are not organised. They are not represented by the Country Landowners' Association; they are represented in a small part by the National Federation of Property Owners. Yet I believe that they are more vulnerable than any other class to altera-
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tions in the town planning law. Many of them have sunk a considerable portion of their savings in buying plots often on the strength of past town planning schemes, and if they are now not to be allowed to build and if they are to be given no compensation they will simply lose their money.
Having said that, I do not for a moment intend to imply that I think that all town planning restrictions will lead to injustice unless compensation is paid in respect of them. I agree with a view expressed by my noble friend, Lord Reading: if a man has bought a house at a price appropriate to a house, and is subsequently prevented from turning it into even a block of offices, I cannot see that it is unjust not to pay him compensation. Because although he may have lost the power of making further profit, he still has his house and the value in the house. Surely it follows that if you can exclude such cases from compensation, you can also exclude similar cases where planning consent is given from the necessity to pay a development charge. Although I believe it is absolutely necessary to have a national compensation fund, I cannot see that it need by any bigger than is necessary to meet cases of hardship.
It is just at this point that we run into ideological difficulties. I believe that a great deal of unnecessary complication has arisen because, when the late Government introduced this Bill, they tried to kill two birds with one stone: they tried to combine the principle of compensation paid out of betterment with another principle—namely, that as a matter of policy, the Government ought to become possessed of all development values. The theory of compensation paid out of betterment is agreed to by many people outside the Labour Party, but the theory that the Government should, as a matter of policy, acquire all development values seems to me something different. It seems to me to be a sort of fiscal device designed not to redistribute building, but to redistribute wealth; and whatever its merits may be, it has the effect of pushing town planning into the forefront of Party controversy. By doing that, we run the risk whenever we have a change of Government of having a new Town Planning Act, and that is the surest way to kill town planning altogether.

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If we can afford to disregard this theory, and approach the financial angle simply from the point of view of the requirements of town planning, we can afford to examine how much compensation we can dispense with without injustice, and, by the same token, how much development charge we can also dispense with. Here I agree with my noble friend, Lord Llewellin, that it might be useful to re-examine the Uthwatt Report which your Lordships will remember differentiated between built-up and undeveloped land. I agree with him that there is certainly a case for cutting out altogether the development charge and compensation on all existing buildings. I would leave them subject to planning control; but if planning consent is forthcoming I believe an owner should be able to change the use of a building or, within limits, enlarge it or alter it, without any development charge being paid; and if planning consent is not forthcoming, I would pay no compensation. I think there are strong arguments for that contention.
In the first place, from all the evidence produced in this House and outside it, I think that about 75 per cent. of the cases of a vexatious, arbitrary and unintelligible development charge arose on a change of user. My noble friend Lord Llewellin produced the case of the Union Club, and there were various cases of small cottages, one where an old lady wanted to have a room for serving tea. That development was assessed. Then the noble Earl, Lord Halifax, produced a case of a derelict shack, and so forth. I think your Lordships may feel that, although there was a logical reason for a development charge, the logic was so pedantic and unrealistic that the general effect was just rather silly. I believe that the late Government themselves must have agreed, up to a point, with that way of looking at the matter, because they amended their original regulations out of all recognition. Secondly, I do not believe that great hardship would be caused by not paying compensation in regard to restrictions on existing buildings. I do not believe that many people have bought buildings at more than their existing use value, except in cases where they were derelict and the purchasers were certain that they would get planning consent.
I think the position is quite different from that which prevails with unde-
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veloped land. Doing away with development charge, as my noble friend has already said, would stimulate the re-development and modernisation of existing buildings, many of which are in sad need of something of the sort. I speak as a member of a Planning Committee. We are marking on town maps areas which should be replaced within the next twenty years. That is all in accordance with the rules, but I cannot honestly say that, going on as we are at present, there is likely to be the slightest chance of those areas being re-developed in twenty years. Very little is in fact being done to encourage the improvement, or even the repair, of existing buildings, let alone their redevelopment. We are told on the best authority that the rate of obsolescence of existing buildings is greater than the rate of building new houses. I have always thought that that was rather an alarming situation. Of course, where real slum areas already exist, the Act provides for their being treated drastically as areas of comprehensive re-development. I am not suggesting any change there, because where there is a multiplicity of ownerships of these obsolescent buildings I cannot see any alternative to public acquisition. But I hope we shall get on with those schemes, because just marking lines on maps will do nothing at all.
I am concerned chiefly with the prevention of the creation of new slums, and going on as we are there seems to be a real danger that new slums will be created. There is not much that we can do about it under this Act, or even by amendment of this Act, but at least we can stop fining people who want to modernise and improve old buildings. What I have in mind is the kind of proposition where a man wants to buy a row of derelict houses, possibly to put shops underneath and flats above. If anything, I think a man of that sort ought to be subsidised and not penalised. I have advanced what I believe to be strong arguments for the idea propounded by my noble friend of relieving all existing buildings of development charge. No doubt there are strong arguments against it, because no Back Bencher can be dogmatic on such a matter of such complication. All I hope is that the counter arguments are not purely technical ones, because it seems to be the rule that in all these stratospheric technicalities sur-

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rounding the higher thought on town planning what one super-expert says is almost certain to be contradicted by another super-expert.
With regard to undeveloped land, I would frankly leave the Act to operate as it was intended. I should perhaps declare an interest, because I have some claims, but I would have development charge levied for any building consent. Of course, if you cut out existing buildings you would have the development charge imposed only once and for all. I can see that there may be serious objections to that. I can see that a number of people would get unexpected windfalls. The case of Lord's cricket ground has been cited. I do not think the M.C.C. are any too well off, but I have not heard that they are likely to sell Lord's cricket ground for building—and the building value must be considerable. It would perhaps be rather absurd to present them with a large sum of public money, though no doubt they would be glad of it. It might have the unexpected but pleasing result of causing the noble Lord, Lord Silkin, as the originator of this scheme, to be remembered along with W. G. Grace and others as one of the great patrons of English cricket. I believe that, although there may be anomalies, having gone thus far, it would create more anomalies and cause a bigger mess if an attempt were made to divide all the claimants into categories, compensating them according to their hardship. When one thinks not only of the small plot owners, but also of trustees, mortgagees, death duty payers, charities and so forth, it seems to roe to be extraordinarily difficult to devise a scheme which will have any kind of justice about it. Even the chartered surveyors' very ingenious scheme of deferred payment certificates has certain technical difficulties which I do not think have ever been surmounted in theory.
As for the difficulty of obtaining land, I am well aware of the case which has been made out. I am equally aware of the contrary argument that far too much land has already been taken. I was glad to hear that that view had the support of my noble friend Lord Hudson. Certainly my experience is that in the Home Counties this question of protecting agricultural land is becoming a very acute one, and it is not likely to become any less acute when the Town Development
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Bill comes into operation. As we all know, local authorities have power to purchase land compulsorily for council housing and also to acquire land for private enterprise building. In present circumstances I believe that there is something to be said for councils' buying land in excess of their own requirements, servicing it, and selling or letting it out in building plots. In present circumstances this may often be preferable and more economical to the probable alternative—namely, the dotting about over the countryside of somewhat squalid bungalows, because under present conditions substantial buildings are not easy to build in isolation. I know that, in theory, this alternative, can be prevented by planning, but it is a pure illusion to think that planning can withstand prolonged pressure over a number of years Therefore I am not entirely unhappy that the Act has had this unintended result of making agricultural land difficult to acquire although I know that that is an unpopular view.
In dealing with such a large subject one can only touch on various points. I am not in favour of Lend Llewellin's idea of an appeal tribunal, because it seems to me that it would not be possible to have an independent tribunal without altering the whole idea of the Act, and particularly the position of the Minister. I am, however, in favour of his other idea of having an appeal orgy assessment of development charges, because, whether people are being equally assessed or not, no one will think he is until there is a central appeal body. It would be satisfactory to think that we were getting somewhere in all this planning, and that there was some chance of making plans and of carrying them out. But if that is to happen, there has got to be some continuity of policy, both in regard to legislation and in regard to the effect and administration of the planning, so that the plans can be not only made but also implemented. Since town planning really affects matters of geography and amenity it should not be beyond the power of our leaders to make this a non-Party subject; but if town planning is to be used as a theatre for other theories it will be very difficult.
5.22 p.m.
LORD WISE: My Lords, I have been looking at the list of speakers and I find that my position this afternoon is half-way

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down. That is a rather difficult position to occupy, because those who have spoken have stolen a great deal of the thunder and many of the points upon which I should have touched; and those who are following me are, I am certain, hoping that I shall be very brief. I noticed, in referring to the word "thunder" just now, that the noble Lord, Lord Woolton, pointed to the noble Lord, Lord Llewellin; and I must say that I thought the debate was opened with a great deal of vigour. I think it is a very good thing that we have had this debate.
There is one point which I should like to mention with regard to the speech of Lord Llewellin, and that is his remark concerning a note which appeared in the Conservative Manifesto to the effect that a Conservative Government would drastically change the 1947 Act. Well, my Lords, I hope that that will not happen. We have already gone through a few weeks of drastic changes and I therefore sincerely advise the Government (if I may use the word "advise") to go very carefully with this particular Act. I know it is a difficult Act. I think that those who come from another place and who had something to do with the passing of the Act in 1947, and, indeed, those of your Lordships who were in this House at that time, will realise that the Town and Country Planning Act was one of the most difficult Acts ever passed through Parliament. I am not at all certain that any of us, either in this House or in another place, with the exception of the noble Lord, Lord Silkin, knew what it was all about.
At any rate we have gone through a period of trial and error and there are many features in the Act which I think are worth continuing. Some people may think it a bad Act from their point of view; but I am convinced that 90 per cent. of the Act is good, and the other 10 per cent. is not bad. It may be irksome; it may present difficulties for one or another; but, by and large, I hope that if the Government see fit, as possibly they will, to amend it (and it can perhaps well be amended in one or two details) they will not touch the main body of the Act—which, in my view, comprises the few sections dealing with the development of land. We may have to amend the provisions regarding the compensation fund and the development charge.
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They have led us into difficulties which we never foresaw some three or four years ago. Already numbers of people have spoken of the difficulties of the practical application of the charges and how they have played a part in creating frustration and dissatisfaction.
Another point is that concerning the £300,000,000 compensation fund. The noble Lord, Lord Llewellin, informed the House that there were already claims to the extent of £350,000,000; so already, if that sum of £300,000,000 is used, the Government are on the wrong side to the tune of £50,000,000. Perhaps the noble Lord, Lord Woolton, can give us some information as to how much the Government have collected up to the present in development charges towards that £300,000,000. It may well be that already there is a fair amount of money available for redistribution. I hope the Government will see to it that people who have a legitimate claim on the compensation fund and are looking for payment will be paid.
LORD LLEWELLIN: On that point, may I say that I quite agree with what the noble Lord is saying, but I suggest that the Government have had to pay out considerable sums? If we could have those figures at the same time—I do not know whether they are available—we should get the whole picture. We should get the whole figure on valuation.
LORD WISE: I agree, and perhaps the noble Lord, Lord Woolton, can supply the figures before the end of the debate. There are some claims under the compensation fund which could, no doubt, very well be delayed. I myself have a claim under the fund, but the land in respect of which it is made will not be developed for some considerable time, if at all. Those people who are not likely to develop their land immediately should not have a claim on the fund at the present time. The noble Viscount, Lord Gage, referred to the plan of the Royal Institution of Chartered Surveyors in regard to certificates. That may be worth consideration; and, even if it is not, I think I may say that there is a committee already set up by the Royal Institution of Chartered Surveyors which is considering amendments which might well be put forward in regard to this Act.

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There are one or two complaints which have arisen in regard to the operation of the Act. I said I would he brief, and I will be, but I find that quite recently there has been a good deal of difference of opinion between the county councils and the borough councils in regard to development plans. It is admitted that, under the Act, the county council is the body which should produce its plans, but friction is likely to be caused, and in future it may be desirable, on the periodical revision of these plans, to delegate some of the powers to the local authorities.
LORD LLEWELLIN: You mean, to the smaller ones?
LORD WISE: To the smaller ones—to borough councils and people of that sort who are interested in their own borough development and who, at the moment, rather consider that the county councils are usurping some of their own particular powers. There are complaints that the machine is too slow and that development is held up. I think that complaint is justified. If I may say so from this side of the House, it seems to me that nearly every Government Department and nearly every Minister is concerned with town and country planning. There are the Minister of Local Government and Planning, the Minister of Agriculture, the Minister of Transport—
LORD WOOLTON: The President of the Board of Trade.
LORD WISE: —the President of the Board of Trade, the Minister of Education, and bodies such as the Central Land Board, the county councils—
LORD WOOLTON: And the Treasury.
LORD WISE: Well, I do not want to joke about it, but I wonder what the supreme commander of co-ordinators is thinking about it. At some time or another, we shall have another co-ordinator for the development of our towns and areas.
I have dealt with the question of the uncertainty of the compensation claim, and another point of complaint is the excessive development charges. I think that some of them are out of all reason and certainly not at all in the spirit of the Act. I was glad to hear the noble Viscount, Lord Hudson, refer to the question of the agricultural interests and
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the conservation of agricultural land. These matters are all provided for in what I call the good part of the Act. Under the first portion, it is possible to further the conservation of agricultural land. It is possible to assist the planning of new housing estates, the improvement of beauty spots, the preservation of beauty spots and of historical buildings, and so on. I came upon a matter which interested me very much only a few days ago. I happened to be attending an auction sale and, during the sale, a note was handed to the auctioneer informing him in regard to a certain area of parkland that a number of trees along the roadside was coming under the control of the local planning authority and could not be sold for the purpose of felling. That was an instance, which otherwise might not have occurred, where we were able to preserve our countryside.
I finish on this particular note: that if and when any amendment is required of this Act, I hope that the Government will bring into consultation all those professional and other bodies which have acquired practical experience of the working of the Act. There are many. We have had about four or five years of its operation, and there are already people considering how the Act should be improved to make it more workable and to establish it as a measure which we in this House and in another place can be proud to have carried on during the lifetime of this Government and in the years to come.
5.37 p.m.
VISCOUNT PORTMAN: My Lords, it is not my intention to delay your Lordships for long in this debate, in which many classes of opinion have been expressed and to which I find it difficult to add to what has already been said. I think the purpose of this debate is not to try to draw up legislative amendments for Her Majesty's Government: they are fully supplied with all the necessary technical information by the technical bodies with whom they associate every day. I feel that all that is necessary is to touch lightly on one or two of the major points of the administration of this Town and Country Planning Act as we find it as citizens of this country, and as we have to deal with it in the course of our daily lives.

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The first point is the planning part of the Act. Before I come to that, I should like to look back for a moment to the year 1947, when this Act came into force, to see what was the situation in this country at that time. The country was still suffering from the devastation of war and an unhappy peace. Nobody knew what was going to happen. Houses were short, office accommodation was short, and materials and money were also short. This Act came into force, and the first thing that happened was that controls were imposed. Government staffs grew to enormous sizes and the position became worse. From the planning side of the Act, I should like to point out that, although certain modifications of the used classes orders have been allowed, control of planning is still too cumbersome and detailed. For instance, in the used classes orders and the classification of buildings and properties, not more than four large groups should be necessary—I mean residential properties, business premises, industrial premises and places of assembly. That is the first point for a planning authority to consider. It is a basis which should help to clarify their minds.
The next problem, from the planning point of view, that I have come up against has been the long delays in obtaining planning permission. When we look around for possible reasons one of the first things that strikes me is that local planning committees do not meet often enough. It is generally the fact that the personnel of those Committees are busy with other engagements, and it is not always possible to get them together sufficiently often to meet the necessities of the times. There have also been too many alterations in area plans before final settlement. By that, I mean that one has gone to the local planning authority asking for a decision on whether such-and-such a street shall be residential or office property, or a mixture of both. I have run across cases where one answer has been given on, say, the 1st of the month and, by the 8th of the next month, the decision has been reversed. That is no good for planning. Those are the sort of administrative details which the Government would do well to look into.
One other matter, from a planning point of view, is the control by the Board of
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Trade on industrial buildings over a certain size. This is a very detailed and complicated matter, and the control is in addition to that held by the ordinary local planning authority. Industrialists have been asked to get on with production, and they should not be held up with the details of the erection of their factories to such an extent as to cause trouble to the production of this country. A definite time limit should also be set in regard to the time over which the Board of Trade have control of a factory building. Another point, which has already been touched on this afternoon, is that of planning appeals. I wish to endorse the opinions that have been expressed, especially with regard to planning authorities having too much advance information and technical advice and time for consideration. Government Departments and planning authorities should have to give oral evidence at a hearing, because such evidence takes on a very different appearance from written evidence placed before the Minister. There should also be a time limit of three months within which the Minister should be allowed to arrive at his decision. These are a few instances where I feel that the administration of the Act could be reconsidered to advantage.
From the financial side, the development charge and its application are really at the root of the greater part of the troubles of development during the past five years. It has become nothing more or less than a powerful form of penal taxation. Proper changes of use and development of property are being frustrated by this development charge liability, and developers who already own property will be unwilling to develop to the full ripe value on account of the charge to be paid at the time of the development. It has to be remembered that in the past development has taken place ahead of requirements, and so on a lower financial basis.
The other two points with regard to the development charge which I think it necessary to mention are, first, that existing buildings and houses should not pay a development charge on account of change of user. That has been a really bad aspect of the case, and has caused an enormous amount of delay in the rehabilitation of a considerable amount of residential and office building which might have been in use long ago. The

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other point, about which I am not of the same opinion as my noble friend Lord Gage, is that of appeal. This, I think, has caused a greater sense of frustration throughout the industrial and the economic world than any other point in regard to the development charge. A short time ago a mock court of appeal was set up, consisting of a mock tribunal, a practising barrister, a solicitor, and a member of the Institute of Chartered Surveyors. An imaginary appeal was heard; it went off perfectly smoothly, and it was agreed by all concerned that there was no hitch in the proceedings.
I hope that I have not taken up too many points. I do not wish to follow any further the ordinary general line of points taken in regard to the Act, but I want to turn for one moment to something rather out of the ordinary line of the discussion that we have been having this afternoon. I want to refer to the position of the National Trust in regard to the Act. It has been reported by the representatives of the Trust that the greatest possible trouble has been taken in deciding whether to declare as inalienable land which they held on the appointed day, and, as a matter of fact, any proposals for declaring land inalienable were first submitted to the Ministry of Town and Country Planning. Moreover, when the exemption of inalienable land from death duties was inserted in the Finance Act of 1937, the Treasury made it clear that they would watch with great care the policy which the Trust adopted about declarations of inalienability, and that, if they considered that the Trust were abusing their powers in that respect, the exemptions from death duties would be modified or withdrawn. The fact that neither the Minister of Town and Country Planning nor the Treasury has seen any reason to complain of the policy adopted by the Trust in this matter over a considerable number of years is strong confirmatory evidence to show that the Trust act with a very real sense of responsibility.
That being the case, it is suggested that it is a reasonable request on the part of the Trust that legislation should be introduced to extend the exemption from development charge, conferred by Section 85 of the existing Act, to land which is declared inalienable after the appointed
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date. This is something which I hope the Government will take into consideration in whatever changes they choose to make in the Act. The National Trust are doing a fine job of work in this country. Whatever development they undertake will, I am sure, be of such a nature that neither the country nor the Treasury will lose anything by it, because any development which the Trust bring about is not of an extravagant kind. I hope the Government will do their best to give them every possible help.
5.46 p.m.
LORD MESTON: My Lords, Aristotle said that thought was the only form of hard labour. Certainly a great deal of hard labour is required in considering the amendment of the Town and Country Planning Act. 1947. There is a great deal of loose talk about the desirability of amending this Statute. I am not suggesting that any of your Lordships has indulged or will indulge, in any loose talk on the subject, but throughout the country generally there is a great deal of very wide, unrelated talk about amending this particular Statute. Therefore, let me try and be as precise as possible, and see what portions of the Act, if any, require amendment.
Part I of the Act consists of four sections and deals simply with central and local administration. There is no cause for amending that part of the Act. Part II of the Act deals with development plans, and I think everybody will agree that development plans are preferable to the form of planning scheme which existed under the old legislation. The development plan is simple and flexible. It is simple because it marks out the broad pattern of development in the area in question, and it is flexible in the sense that it may be amended from time to time to meet changing circumstances. If that is the general concensus of opinion throughout the country, I do not see that any case is made out for any Amendment of Part II of the Act.
Part III of the Act is concerned with the control of development. We all remember that in days gone by there was a period of interim control between the passing of the resolution to prepare the scheme and the final making of the scheme, during which period application for permission to develop had to be made to the interim development authority.

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When the scheme was finally made (a great number of such schemes were never finally made) applications for development had to be to a responsible authority under the scheme. All that has now disappeared. Under Part III of the 1947 Act, permission for development must be obtained for any development carried out after July 1, 1948. There are certain operations and uses which are deemed not to constitute development, and it therefore follows that no permission need be obtained in those cases.
On the other hand, there are a certain number of operations and uses which do in fact constitute development, but which may be carried out without the necessity of obtaining permission, by reason either of the Town and Country General Development Order, 1950, or the Town and Country Planning (Use Classes) Order, 1950, or the Town and Country Planning (Use Classes for Third Schedule Purposes) Order, 1948. It may be that in the light of the past four years' experience the Government may extend the scope of those various regulations. There are also in Part III certain provisions enabling the serving of enforcement notices in order to carry out the orders on the planning authority. I think everyone will agree that unless these enforcement provisions exist controlled planning will become a farce. Broadly speaking, Part III of the Act requires no amendment, or no serious amendment, with the possible exception of extending the scope of the various regulations to which I have referred.
Part IV of the Act deals with the acquisition and disposal of land for planning purposes. Land designated for compulsory acquisition in a development plan may be acquired within ten years, or seven years in the case of agricultural land. I should like to know from the Government what effect that has upon sterilising land for purposes of development by private individuals. I do not know, and it will be interesting to get the views of the Government on that point. The Central Land Board are also empowered to acquire land for any purpose connected with their functions under the Act. The interpretation of the word "functions" has provided the Central Land Board with a kind of bludgeon which they may use against people who
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try to sell land at a price above its existing use value. I suggest that the Government might well look at this bludgeon which is exercised by the Central Land Board. On the whole, however, there does not appear to be any serious criticism of Part IV of the Act.
Part V of the Act contains amendments relating to compensation for compulsory acquisition of land. Some of these amendments relate to periods of time which are past history. Where the Notice to Treat was served before August 6, 1947, the compensation fell to be assessed under the old 1939 standard, subject to certain modifications. That is now past history. Where the Notice to Treat was served after August 6, 1947, and before July 1, 1948, land acquired during that period was valued for compensation by reference to its existing use at the time of the Notice to Treat in terms of prices current immediately before January 7, 1947. That is now past history. But now we come to something much more important. Where the Notice to Treat is served after July 1, 1948, the compensation is assessed by reference to the existing use value of the land as if it were sold in the open market.
The principle of "existing use" underlies the whole structure of the 1947 Act. The Act of 1947 without the principle of "existing use," would be like Hamlet without the ghost. No one has ever suggested shooting the ghost in Hamlet; therefore no doubt it is unlikely that any Government will ever abolish the principle of "existing use." Whether we like it or not, it must be remembered that the principle of "existing use" is responsible for Part VI and Part VII of this Act. Part VI of the Act, which deals with payment for depreciation of land values, and Part VII, which deals with development charges, exist solely and exclusively because the value of the land to the owner is restricted to its existing use value. As to Part VI—that is the part which, as I say, deals with payment for depreciation of land values—there seems to be a great deal of vague talk as to what are the correct figures in this connection. I do not propose to suggest any figures but I should like to hear from Her Majesty's Government the figures of the claims which have been admitted, and whether all claims have been adjudicated or some are still awaiting final determination.

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Further, I would ask what is the precise figure that will be available for what may be described as ordinary creditors in this case, after allowing for preferential creditors. The noble Lord, Lord Llewellin, said that we ordinary creditors might hope for a composition of 16s. in the pound. I think he is rather optimistic. I think that a figure of 14s. is nearer the mark. Still I will not argue that point with anyone.
LORD LLEWELLIN: I was taking my figures from the reply of the Chancellor of the Exchequer in the House of Commons on February 26. Some difference may have come about since.
LORD MESTON: I am very much obliged to the noble Lord for his intervention and I withdraw any suggestion that his figures are not accurate. As to Part VII of the Act—that is the part which deals with development charge—I think we are all agreed that development charge is a total mistake. I believe Thomas Carlyle said that 90 per cent. of the human race were mad. Personally I think that 95 per cent. must have been suffering under a delusion when they either agreed to or acquiesced in the passing of the development charge. Just let us relate ourselves to the facts of life. A man, we will suppose, has a factory. He is urged by the Government to increase the export trade. With that view in mind, he enlarges his factory beyond the 10 per cent. tolerance allowed by the Act. Having done that he has to pay a fine in the shape of a development charge, for having helped to further the export trade of this country. That appears to me to be absolutely nonsensical. I was going to say that in my view development charge was the invention of Satan, but perhaps that might give offence. As we know, development charge to-day is charged in respect of all operations or uses for which planning permission is required. To that general rule there are exceptions which are to be found in the Town and Country Planning (Development Charge Exemptions) Regulations 1950.
However, I suggest that if the Government, in the light of four years' experience, decide tot to abolish development charge, they should review these regulations to see whether or not their scope can be extended. As we all know, development charge is 100 per cent. of the
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difference between the value of land with the benefit of planning permission and the value of land without the benefit of such permission. Again, if the Government prefer to continue with the development charge I urge them to reduce the figure of 100 per cent. to a figure not exceeding 60 per cent. As to an appeal to the Lands Tribunal from the determination of a development charge by the Central Land Board, I agree with all noble Lords who are in favour of such appeal. As your Lordships know, at the present time the matter is determined in the first place by the district valuer, who, I think, always does his duty according to his lights. But he has a very difficult duty to perform. Anyone who is dissatisfied, and is physically capable of doing so, may ask to see the Central Land Board and put his case to that Board, and that is sometimes regarded as an appeal from the district valuer. Of course, it is nothing of the sort, because the Central Land Board are the authority who are charged with the determination and collection of this charge. There is no such thing as an appeal to the Central Land Board from determination of their own development charge. Therefore, I submit that there should be an appeal from the determination of development charge by the Central Land Board to the Lands Tribunal.
Let me summarise the position. Instead of wandering over the whole field, I make four suggestions to Her Majesty's Government in connection with amending the Act of 1947. The first is that all admitted claims for payments for loss of development value should be paid in full. The second is that development charge should be abolished; alternatively, if it is not abolished, the amount of development charge should be reduced from 100 per cent. to a figure not exceeding 60 per cent. The third is that the right of appeal from determination of development charge by the Central Land Board should be given to the Lands Tribunal. And the fourth is that the powers of the Central Land Board in connection with their functions under the Act and, in particular, with their function to purchase land, should be carefully reviewed. In conclusion, may I say that I was greatly struck by an observation of the noble Lord, Lord Wise, who said,

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I think, that only he and the noble Lord, Lord Silkin, really understood the Act of 1947.
LORD WISE: May I correct the noble Lord? I referred to my noble friend only and not to myself.
LORD MESTON: The noble Lord suggested that only the noble Lord, Lord Silkin, understood the 1947 Act. I think that is a view that was shared by Omar Khayýam. Omar Khayýam took a poor view of the 1947 Act. To adapt his quatrain, he said:
"The Moving Finger writes; and, having writ,
Moves on: nor all thy piety nor Wit
Shall lure it back to cancel half a Line—
Nor understand a single Word of it."
6.2 p.m.
LORD QUIBELL: My Lords, I feel almost like craving your Lordships' indulgence for speaking, it is so long since I have spoken in your Lordships' House. But I feel that I cannot allow a discussion on housing and town planning to proceed without saying a word or two. I agree that the author of the Town and Country Planning Act is a wonderful man, but I do not think he knows all about the Act. He knows a great deal about it, but by now I think I know some parts of it a great deal better than the Minister responsible. Town planning goes back farther than 1947. The first Act was the Prevention of Ribbon Development Act, which sought to prevent the building of houses along made-up country roads and in our villages. This Act was intended to ensure that we should have proper planning development and to compel owners of estates, big or little, to develop their back lands and make roads and sewers there, instead of exploiting the road-sides all over England and despoiling the best aspects of our countryside. That is all to the good and I do not think there is any member of your Lordships' House or of another place who for one moment would think of repealing the best provisions of that Act.
But when we come to what I call the planners, I hardly know what to say. We are planned to death. For a time I was engaged almost every week-end in developing an estate, which I thought was a very nice estate, and so did the planners. But they had one great objection to this
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estate—they objected to the colour scheme. The people for whom I was building the houses wanted red-tiled roofs or brindle roofs or blue roofs, so that they could identify their houses easily when they went homewards. That did not suit the planners. One of them came down and saw me. He objected to the different-coloured roofs. There was nothing at all wrong with the buildings or the streets. It was the colour scheme that he did not like. I never proposed to ask him. I was more concerned with suiting the people who were going to pay for the houses and live in them, and it was not long before I told him where I thought he "got off." And I did not see him again. I hope he found a more useful job of work than coming round to tell me how to paint a house and what the colour scheme should be.
A little bit of fact is worth a lot of theory about matters of this kind, and I want to give some facts about the development of a certain site. It was a derelict one, a large part of it consisting of sand dunes. Some of it was Crown Land, because it had been left by the sea and the dunes were the only embankment to prevent the sea invading the land again. The owner gave something like £550 an acre for it, put in roads and sewers, levelled it for development and made it into a proper building site. What happened when he wanted to build on it? He got plans passed and the district valuer came down, because the local authority wanted to purchase some of the land, to put a price on it. The valuer marked on a plan of the site what he was prepared to give for each part of the twenty acres, and the owner agreed that he would accept his valuation. The figure put down for compulsory acquisition was 7½d. a yard—for land valued by the district valuer at 12s. 6d. a yard. Was that ever intended? If that is not madness, I do not know what is.
The difference between these two prices on the same estate was the difference between ripe and near-ripe land. I have found no remedy for this problem. My noble friend Lord Silkin knows it, because he has seen the plans. What is the difference? Because you have plans passed for two houses on a piece of land, that land is ripe and is valued at 12s. 6d. a yard. But the next piece of land, which is an even better piece of land from the point

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of view of site value, is near-ripe, because plans have not been passed for it; and for this land you get only 7½d. a yard. That is my experience. It is a practical one, capable of proof and indisputable.
Let me take another example, sent me by a man in Northwich. I have had letters from all over the country about this kind of nonsense. This man in Northwich thought he would build himself a little house and bought a piece of land, for which he paid £450. He had to plan how he was going to develop it, so along came the town planning authority and assessed a development charge nearly as much as the man had paid for the site. Any noble Lord would consider that £450 for the site was sufficient for a man with a small income who wanted to build a cottage. What is the result? That man is landed with that site: he has parted with his £450 and he cannot build his house. He came to my home town to ask me whether I could get him out of his difficulty. But I cannot, because there is nothing in this Act which prevents the owner of land from selling it, despite the fact that there is a development charge. He can sell it at what he considers to be its full site value, without any hindrance whatever. Some of the poor people have paid out money for land and have been faced with a development charge which makes it impossible for them to build. It is no good anyone saying that that is not holding up building—it certainly is. If anyone is buying land at present, his lawyer, if he is any good, will advise him that he will have to face a development charge, and immediately on hearing that the prospective purchaser will not consider it further. Everyone in this House knows as well as I do that that is true.
I know of a case of a shop that was altered by a co-operative society. They wanted to turn the front part into a more convenient place for the people who went to bank their money—it is a co-operative bank. It was a development from one kind of room into another. All they put in was a counter, and the development charge for that was £400, because they altered the user. One example after another can be given. I had a conveyance shown to me by my own lawyer where an owner charged a man who wanted to Mild a small house £118 10s.;
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and the development charge was equal to the amount that the man paid for the land. I know of another case where the development charge for two houses was £450. It is no use noble Lords on this or the other side of the House, the town planners or the local authorities—who ought to know better—saying that that kind of thing is not holding up the building of houses. It most certainly is. I say quite honestly that it is time that some alteration was made in a state of affairs such as that.
I am one of those who believe in taking what I call the social value out of land and giving a portion of it to the community; but I am certainly not in favour of the development charge as it operates to-day, which allows an owner to charge the full site value of the land and the man who buys to be faced with a development charge equal to the amount he has paid for the land. I say that it is arresting development and preventing people from building. It also prevents some people from buying their own house. Why a man should not be able to buy his land and build his own house, I do not know. So far as I am concerned, I live in my own home, and I feel that every opportunity should he given to all men to buy their own land and have their own house. I have never subscribed to any philosophy that simply lays down the law that, because a man owns his house, or wants to, he is therefore an enemy of the country and ought not to be allowed to do so. I believe not only that he should be allowed to do so but that he should be encouraged to do so. I hope that, so far as this Act is concerned, something will be done about this problem.
With regard to the valuation, nobody knows what lie may have to pay. If you buy a piece of land now, what you pay is at the whim of the valuer. In one town he will take the 1947 value and say: "This is a developing town, and the increase in values has been so much more than it is in any other town." I know of one such case. The consequence is that you have one value in one town, which is rapidly developing, and another value in a town a few miles away which is not developing so rapidly. We have this uncertainty, and it is preventing building development in this country. I have a site—I have had it

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for ten years—which anyone can have at the district valuer's price. But nobody will buy it, or dare buy it—not even the council itself. There are fifteen acres, with sewers, roads, electricity and water all laid on. But not a brick has been laid there for ten years; nor will there be, because nobody dare attempt to buy it while the development charge is so undefined and unlimited. The amount of the development charge on the land is not known. The consequence is that nobody will build until there is some alteration in the development charge, so that a prospective purchaser knows the liability he will have to meet when the houses are built.
6.15 p.m.
LORD WOLVERTON: My Lords, in the few minutes that I propose to address your Lordships this evening I wish to deal with the position of the small man trying to build a house. I spoke on this matter in the housing debate in your Lordships' House in February last year. Like the noble Lord, Lord Quibell, I feel that certain provisions of the Town and Country Planning Act are detrimental to development for private housing. The local authorities have wide powers of compulsory acquisition to get land at the existing use value if they cannot agree a price with the seller, but the private developer has not those powers. It is true that he can apply to the Central Land Board and ask them to buy the land from him. But will every man trying to build a house apply to the Central Land Board to buy his piece of land at existing use value? The answer is that he will not. He buys at above the existing use value, but at what he considers a fair value, and he is most upset when he finds that the development value of the land is very high. I feel that something should be done for the small man, because the dead-ripe land and the near-ripe land is being rapidly used up. If something is not done quickly (and I hope that the Government will be able to do something to help the smaller people) as the noble Lord, Lord Quibell said, development will be held up.
I have recently talked to a number of architects and surveyors in the eastern counties; and they tell me that under Part III of the Act, which was referred to by my noble friend Lord Portman, it
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takes a long time to get planning permission before an owner can proceed to try to get an assessment of the development charge. Under a statutory instrument, which I believe was laid in 1950, two months were given for the local planning authority to approve the planning permission, if that was their intention, unless it was agreed that the period should be longer. Before then, the owner has to put his plans in front of the local authority, in accordance with the local by-laws—which may take a month, six weeks, or even two months if he misses a meeting. He may then have to wait another two or three months, or longer if the development plan has not been made for the whole area; and he does not hear finally for perhaps four or five months. And it takes, perhaps, two months more to find out what the development charge is. An owner can afford to have only a sketch plan made in the preliminary stage. He will not want to go to the expense of having working drawings made of the house if he is to be turned down, or if the development charge is going to be high. I think we shall have drastically to alter the financial provisions of Part VI and Part VII of the Act. It is extremely inflationary to pay out £300,000,000 at this time, and I think that those two Parts of the Act will have to be withdrawn. If these two Parts are withdrawn, Part IV, certainly in my humble opinion, will have to be amended, because that deals with the position where land has already been acquired from those people at the lower value; and if they are not to be given any betterment out of the £300,000,000 obviously they will have to be compensated.
I should have thought, as has been said earlier in the debate to-day, that something could be done for the small people in developing small houses. In Part VII of the Act, at page 82, it is said:
"Regulations made under this Act with the consent of the Treasury may provide for exempting from the provisions of this Part of the Act operations or uses of any description specified in the regulations."
I should have thought that under that provision a new statutory instrument could be laid to exempt people building small houses from, say, 1,200 square feet up to 1,500 square feet where at present, on an average, they would have to pay £150 development charge. That is a great

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deal of money for these small people. In a speech that I made in February, which was not contradicted, I said that the Eastern Building Board put up two experimental houses at Ipswich last summer, with the permission of the Ipswich Corporation, at a cost of about £1,106 per house, or 26s. 11d. per square foot. On top of that you have to add the purchase of the land, development charges, legal fees and so on—something in the neighbourhood of £435 all told—making a total of about £1,500 for a house of somewhere in the neighbourhood of 820 square feet.
This development charge represents a great deal of money for these small people, and I hope that something can be done. If it is not possible to amend fairly soon the whole Part of the Act which we feel should be amended, then something should be done to relieve these people. Most of the building that is going on today is domestic building, and that is what we all, on both sides of the House, want to see at the present moment. I am certain that this heavy development charge is a deterrent, and that a great many people are waiting to see what Her Majesty's Government are going to do about this matter. That is bad because we want to go forward. If something could be done to relieve the problem we should be grateful.
6.25 p.m.
LORD SILKIN: My Lords, we have heard a long debate with a considerable number of speakers. The Town and Country Planning Act 1947 has gone through a very close and searching scrutiny, and I Venture to say that, except for the provisions of Parts VI and VII, with which I propose to deal, it has come out not too badly. Indeed most of the criticism of the remainder of the Act is based on matters of administration (particularly administration by the local authorities) and partly on matters which can be remedied by administrative measures within the Ministry itself. There was criticism, for instance, of delays in giving decisions. I admit that in some cases that criticism is justified. The difficulty at the moment is that the country has not been fully planned. Development plans are still under consideration and each application for development has to be considered separately and independently,
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and very often without reference to a particular plan. Once plans have been approved it should be much simpler to deal with applications for development, and they should go much more speedily.
A suggestion was made as to altering the procedure on appeals. This is a matter about which none of us I imagine would fight in the last ditch. I think that on the whole the machinery for appeals is fairly satisfactory, and that is borne out by the fact that at any rate over the major part of the field—there is one aspect of appeals with which later I want to deal with separately—certainly in the time I had control of the Ministry, something like 40 per cent. of appeals were allowed. That is not a bad proportion and it so happens that it is roughly the same percentage of appeals as is allowed from decisions of inferior courts by superior courts. Therefore one can assume that, by and large, the machinery of appeals works out not too unsatisfactorily. However, if any better method can be devised which not only would be fair to the appellant but would also give him the feeling of fairness, I certainly should not object, and I am sure that the noble Lord who will be replying would not object either. Apart from that, I doubt whether any serious proposals have been put forward for the amendment of the Act otherwise than in Parts VI and VII, and I should like to say a word about those.
Incidentally, I think this debate has at any rate disposed of one bogy—namely, that there is only one person who understands this Act—because a considerable number of your Lordships have given clear evidence that they understand it. I should not for a moment suggest that the noble Lord, Lord Lewellin, or the noble Viscount, Lord Gage, did not understand the Act, seeing that the noble Lord, Lord Llewellin, has been concerned with it right from the beginning and the noble Viscount, Lord Gage, is administering it from day to day. If he did not understand it, I should be very sorry for the affairs of his county council.
May I make one other general remark before turn to Parts VI and VII of the Act, and that is that town planning has been somewhat of a cock-pit over many years? Uncertainty is fatal to planning. Local authorities who administer it want to know where they are, and every time

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there is a major change there is considerable disturbance in the field of town planning and it constitutes a major setback. I recognise that the Act of 1947 was a revolutionary change: it changed the local authorities who were responsible, it meant employing new officers and it meant teaching a great many people their job. To-day, after five years, when the new local authorities have settled down and know their job and, on the whole, are doing it well—if they were not we should have heard about it in this House to-day—it would be a great pity if any drastic changes were made merely because it was stated in an Election Manifesto that there would be drastic amendment of the Act. That is one of those pledges which I will forgive the noble Lord for breaking.
LORD WOOLTON: You would probably mention it later.
LORD SILKIN: I am sure the noble Lord would not desire to amend the Act merely because it was in the Election Manifesto. That is the appeal I am making to him.
LORD WOOLTON: You are quite right.
LORD SILKIN: The noble Lord, Lord Llewellin, was in some difficulty in dealing with the subject of compensation and betterment, because he first made out a very strong case for abolishing both compensation and penalty, but eventually came down on a middle course. He argued that this was not an appropriate time to pay out, £300,000,000 is a lot of money, and it would put a great deal of purchasing power in the hands of individuals. If he is right, I do not see why he should be prepared to entertain the so-called halfway house, which, in practice, would not mean a substantially smaller sum than £300,000,000.
LORD LLEWELLIN: I should have thought it would, because it would exclude a claim of anybody who has a site that has a house at present built on it. Those claims would be taken out completely, and a large body of them—unless I am misinformed—come from existing city or town property.
LORD SILKIN: I will come to that matter in a moment. The noble Lord also argues that 16s. in the pound is not
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good enough—that it ought to be 20s. in the pound. That would increase the claim. Accepting his own case, he would have to find more money for those who were entitled to be paid and, presumably, less for those who would drop out. I will not say a word about the amount of the distribution or dividend. I remember things which were said about the £300,000,000 in this House, in another place and outside. The noble Marquess the Leader of the House said that it was perpetrating a gross fraud on the public; that in his opinion—I do not know on what it was based—the claims were much more likely to be £1,500,000,000 than the £350,000,000 it has turned out to be. Other noble Lords talked of a dividend of 6d. in the pound, and to-day, on the admission of the noble Lord, Lord Llewellin, it looks as though there is going to be 16s. in the pound.
I would ask your Lordships to take into account that this makes provision for the element of float. There is in all the valuations which have been made an element of float which the Uthwatt Report stated to be about two or three times the actual valuations. In other words, according to Uthwatt, if you added up the valuations of all the land in the country and paid out on that basis, you would be paid two or three times as much. I recognise that in the valuations which have actually been made some account has been taken of this element of float. Valuers have adopted what is called a reduction for development. If land is not going to be developed for a number of years they have reduced the value by an appropriate figure. Therefore by their valuation they have reduced the element of float to a considerable extent, but not wholly. I would say that 16s. or 15s. in the pound is a perfectly fair figure, and I have heard no word of complaint from anybody as to the amount of the so-called dividend. I have heard some suggestion that they may not get it—that it is over-optimistic—but everybody to whom I have spoken will be delighted to accept this 16s. in the pound on the amount of claim.
The noble Lord, Lord Llewellin, talks about the inflationary effect. Will it really be inflationary? I do not pretend to be an economist. The payment will be made in stock. It will be a payment for a capital loss. Something has been taken

1521
from an owner; his land has been depreciated in value as a result of State action, and he has been compensated by the payment of stock. I do not accept the view that the moment people get this sum in stock they will rush out and try to spend it on consumer goods and bring about an inflationary state of affairs. Suppose they try to sell it? Who are the buyers? Only other people who are in exactly the same position. Other people will have the stock who formerly had the money. You will merely be exchanging money for stock. In better days it might have been possible for people to go to the bank and raise money on the securities, but the action which the Government have taken has virtually prevented that. You will not be able to borrow money, and if you did you would have to pay 5½ per cent. interest, which is fairly heavy. I doubt whether the Government will actually be paying interest at that rate. People who receive this stock will, at any rate for a considerable time and until the inflationary danger is over, have to keep it. I cannot see, therefore, that there is any serious danger of inflation if payment is made.
A point has been raised that the effect of the Act has been to reduce the incentive of an owner to sell his land, and that people are having to pay more for their land together with development charge, and this is holding up development. I deny that development is being held up at all. The Minister of Housing and Local Government is endeavouring to build as many houses as possible. Nothing has been put in his way—whether in regard to labour, material or money. He can go ahead as fast as he can. There is no shortage of available land, and the only thing which stands in the way of development is the limitation of labour and material. My noble friend Lord Quibell spoke about builders being held up. I agree that a young, enterprising builder like my noble friend, who is straining at the leash and anxious to develop as much land as he possibly can, must feel somewhat frustrated if he cannot build as many houses as he would like to build. I agree, too, taking the overall picture, that this country is building as many houses to-day and is carrying out as much development to-day as it can afford to do. There is no hold-up either of housing or of other kinds of capital
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development which are to-day in the public interest. There is a restriction of capital investment—that we recognise. There was a restriction by the previous Government. There a licensing system; but the licensing system was dictated not by the shortage of land, not by any particular developer being held up, but because it was necessary in the national interest.
And so I refuse to accept the doctrine that the imposition of the development charge is in any way interfering with or restricting development. What might happen in the future one cannot say. I do not know. But my own experience—and it is fairly extensive in these matters—is that developers are only too happy to develop if they get the chance, in spite of the development charge. I have made frequent inquiries of the Central Land Board as to whether there was a single case to their knowledge of any developer who abandoned a scheme of development merely on account of the development charge, and they assured me that they know of no single case. I admit that noble Lords can come to this House and quote individual examples of someone who has paid too much money for his land, or even of someone who has been asked too much development charge. I concede that there are such cases. On the other hand, I remember that the noble Lord, Lord Llewellin, some two years ago or so, came to this House and complained that district valuers had in some cases substantially reduced their demands as a result of discussion.
LORD LLEWELLIN: I was complaining not of the final demand but that it had been put so high to start with.
LORD SILKIN: I know. But it is a fact that the district valuers are open to negotiation if you can make a case to them. As a matter of fact, the noble Lord brought forward a case which I had to investigate afterwards. I found that the district valuer had been asked to give his idea as to what the development charge might be.
LORD LLEWELLIN: Is this the case of Grosvenor Square—the Union Club?
LORD SILKIN: It may be. But this did frequently happen, He had been asked to help by ascertaining what the development charge might be. Then it

1523
turned out that the particular development approved by the planning authority was something quite different—something, possibly, of less value, and the development charge was less. And that very often accounted for the difference between the first figure and the later one. These things do happen, over a large area and with many district valuers. It is quite conceivable that some district valuers might ask for a payment which was in the first instance unjustified and which could be negotiated. These are matters for negotiation and administration; they are not fundamental defects of the Act itself. One way of remedying that would be an appeal against the district valuer's development charge.
When I was Minister of Town and Country Planning, I resisted the provision that there should he an appeal. I resisted it frequently on the ground, among others, that administratively it would be impossible—that there was a great shortage of district valuers and that one just could not afford to let them take up their time in attending arbitrations and in doing all the administrative work that was necessary in connection with appeals. I took the view that this was a matter in which one could normally arrive at a fair figure by the process of negotiation between the valuer acting for the applicant and the district valuer; and I believe that, by and large, that is true. If the administrative position to-day is such that it is possible to have an appeal, I certainly should not object to it. I think it would make the applicant feel that he was getting a better deal. I do not know whether he would be or not; but if he felt he was getting a better deal and if it helped to remove any grievance, then, certainly, there is no objection, in principle, as far as I see, to an appeal. I hope the noble Lord will go to his colleagues and consider whether the time has not now come when it is possible to provide an appeal.
The noble Lord, Lord Llewellin, made a number of other suggestions, and I am sure the whole House will be grateful to him for having considered the matter and made those suggestions. He suggested that there should be no development charge when an existing
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developed property was being redeveloped for the same purpose. I am sure the noble Lord is aware of the Third Schedule of the Act, which provides that you can re-develop a site as often as you like without charge and without its being regarded as development. If that is all the noble Lord is asking, then it is already in the Act itself. It is true that you cannot develop a much larger area than the existing one, but you can take the existing area and re-develop it as often as you like.
VISCOUNT PORTMAN: May I interrupt the noble Lord for one moment? There have been cases where houses, shall we say, which would not be suitable to the present housing emergency, have stood on sites which were required for the building of flats—perhaps two blocks of flats—for the national benefit in the present emergency. That is where the soreness over development charge has been very strongly felt.
LORD SILKIN: That is a change of use which at present carries a development charge. Lord Llewellin was taking the example of a site being re-developed for the same purpose. I do not suggest that there might not be some further consideration of the amount of development charge. Here, again, I would not fight in the last ditch over the 100 per cent. I think the 100 per cent. development charge is logical and right. But Her Majesty's Government might consider reducing it to 80 per cent.—which I understand is their conception of what it should be. However, it is not a matter on which one would wish to start a revolution; and it can be done without amendment of the Act. All that is needed is a simple regulation which will require an Affirmative Resolution of both Houses.
LORD LLEWELLIN: Nor, I presume, would the noble Lord object to some alteration in the "change of user" part of the Act.
LORD SILKIN: No, I should not. But I do say that it would be a remarkable thing if a complicated measure of this kind, passed in 1947, could not be improved by some such amendment after five years of experience. Certainly I should welcome an exhaustive examination of the Act with a view to making it

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work better if it is possible. What I should strongly oppose would be amendment for the sake of amendment, in order to comply with, perhaps, a reckless statement inserted in an Election manifesto. In passing, may I say that I was refreshing my memory of a speech I made on the Third Reading of the Bill? I said very much the same thing then. I recognised that a measure of this kind was bound to produce defects which were not foreseen but could be reasonably considered after a time: when those defects were made clear and had manifested themselves, consideration could be given to amendment of the Act itself.
I want to deal now with the remarks of the noble Viscount, Lord Gage. He produced a reductio ad absurdum argument as regards Lord's Cricket Ground. May I say that the previous Government considered the question, not of Lord's Cricket Ground but of places of that kind—golf courses, sports grounds and so on—where there was no intention to develop, where, indeed, if development were entertained at all it would arouse the greatest possible public protest but where, nevertheless, if the land were developed, the development value would be very high indeed—places where the owners never anticipated or expected to pay development charge. Those cases can, of course, he met by the Treasury scheme. The Treasury scheme is provided for in the Act to enable the Treasury to decide, after discussion with the appropriate Minister, how the £300,000,000 shall be distributed among different classes of claimants. It may be that the equity of the matter would justify some claimants getting nothing and some getting 20s. in the pound. I had in mind that it might well be that those who had recently bought their land and paid for it on the basis of full development value would have a greater claim to be paid out in full than those who had inherited land or who had owned it for many generations. At any rate, the Treasury scheme was inserted rather to provide that amount of elasticity and to try to judge as between the equity of different claimants to be paid compensation.
There has been a certain amount of dissatisfaction with the development charge generally. One noble Lord referred to it as the "invention of Satan." I can assure your Lordships that it has a much more
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respectable parentage than Satan. Indeed, it was invented by the Liberal Government in the form of betterment, but betterment did not produce any results. The objective of betterment was very much the same as the objective of development charge—namely, that those who benefited as a result of planning should make a contribution. But I noticed that the noble Lord who regarded it as a device of Satan and who desired to abandon the development charge altogether did not offer also to abandon compensation. The two must go hand in hand. It is the development charge which helps to finance compensation. The two need not, of course, exactly match. I believe that experience up to date will show that the amount of development charge received has not been sufficient to pay interest on the £300,000,000; but that is largely because the amount of development owing to necessary restrictions has been less than was anticipated in 1946. I think that is all I have to say on compensation and betterment and the provisions of Parts VI and VII.
I am sure—and I think that any noble Lord who has given any consideration to planning will agree—that without the provisions of Parts VI and VII the whole Act is futile. I would say this also: that it was not the Labour Government who invented the provisions of Parts VI and VII of the Act. They were invented as the result of years of deliberation by all Parties—and nobody knows that better than the noble Lord himself, who took a very active part in some of the discussions—and I believe they arrived at a result which was not very different from the results at which the Labour Government arrived. There may have been differences in percentage; and so on, but, in broad outline, all Parties arrived at the same conclusion: that it was necessary to have something like the provisions of Parts VI and VII of the Act.
Since we are discussing the working of the Act, I should like to say a few words about advertisements. Nobody so far has said anything about this matter in this debate. I imagine that all Parties are, on the whole, satisfied with the advertisement provisions in the Act and would not wish to alter them. Indeed, no part of the Act was more enthusiastically received, when it went through its discussion in both Houses, than the

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advertisement provisions. These were, of course, designed to protect the amenities of both our cities and our countryside. They constituted a considerable interference with the position of the advertisers and they were, in the first instance, very much resented by them. But, in the end, the advertisers accepted the provisions of the Bill. There were two very serious departures from previous practice. The first was that the Bill brought them under planning control, whereas previously they had been allowed to exhibit their posters until the posters were challenged by a local authority as constituting an offence against amenity. Then, if the advertisers were challenged, they were ordered to take their posters down, although, of course, they had a right to go to the courts. The Bill substituted an appeal for the loser in the event of permission being refused. Those were the two major provisions. The advertisers have accepted them in what I regarded as a very public-spirited way. They themselves have taken action, so far as they can, through their organisations to prevent the most undesirable advertisements from appearing. They have collaborated and co-operated with the Ministry in framing the regulations and, so far as I know, they have throughout acted in the best public interest.
I know that there are some people—maybe some noble Lords too—who object to all outdoor advertising. I am not arguing whether outdoor advertising is a good or a bad thing. If it is a bad thing, and if it is desired to abolish all outdoor advertising, it should not be done through the machinery of a planning Act; the Government should come out quite openly with a White Paper and introduce subsequent legislation on the subject so that we all have a chance of debating it. But that of course is not the policy to-day, and at critical times nobody has advertised more than Her Majesty's Government themselves. Therefore we must assume, at any rate for the time being, that outdoor advertising is a perfectly legitimate form of activity, so long as it is not carried out in an anti-social fashion.
The advertisers have made a complaint, and in a sense I feel personally responsible, because I gave them an assurance that they would be well treated under the provisions of the Act. I feel
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that, having regard to the way in which they have behaved, I owe it to them to do my best to see that their complaint is investigated. The complaint they make is that the number of appeals in which they are successful has seriously declined in the last two years or so. Rightly or wrongly, they feel that there is a prejudice on the part of the Minister or the Ministry—at any rate, that there is in existence an anti-advertising bias; that there is no consistency in the appeals that are allowed; that there is no definable policy; that what is allowed on appeal in one town is disallowed in another, and that probably the Ministry are unduly biased in favour of the local authorities. I hope that is not true. I gave the noble Lord, Lord Lloyd, notice of this point, and he may be able to give some figures showing the number of appeals that have been allowed over different periods. The information given me is that the number of appeals allowed recently has seriously declined, and the advertisers feel that they are being seriously affected by some change in outlook. I hope that the noble Lord, Lord Woolton, will be able to deal with that point.
Generally, I would say that, judging by this debate, the noble Lord will find it very difficult to carry out the drastic amendments to the Act which he promised in the Conservative Election Manifesto. Improvements, yes. Most of those he can carry out by normal administration and by changes in regulations. When he comes to examine the position, I think he may well find that all that is necessary is to make a few minor amendments, and I can assure him that if they are in the public interest, and are not introduced in a doctrinal spirit, they will have the support of all quarters of this House.
7.3 p.m.
LORD WOOLTON: My Lords, in the customary language of this House, at this late hour I will not detain your Lordships unduly. Before I go on to the main subject, let me answer the last question which the noble Lord put to me. He asked me whether there had been any serious alteration in the number of appeals from advertisers that have been allowed. There has been an alteration since his time. The alteration took place at the time of his successor. The number

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of appeals allowed by the present Minister is almost identical with that which was allowed by the noble Lord's successor. As to whether they are right or wrong, I should not for a moment care to give any opinion, because I am not in a position to do so. But I will draw the attention of my right honourable friend the Minister of Housing and Local Government to the position because, never having had anything to do with outside advertising, I have some sympathy with the position in which the noble Lord opposite found himself when he had to deal with this issue. I will certainly have a conversation on the subject with my right honourable friend.
On the general debate, when my noble friend Lord Llewellin told me that he would like to raise in your Lordships' House this question of town and country planning, I told him quite frankly that I should be delighted if he would do so, because, on behalf of the Minister of Housing and Local Government, I should be very glad indeed to have the benefit of the opinion of your Lordships. Of course, as the noble Lord opposite was talking to us, he convinced me still more that it is indeed true that he is the person par excellence in the country who really understands the 1947 Act. It is difficult enough in all conscience to understand. Let me say that the noble Lord, Lord Silkin, has done something more than understand the Act himself, because during the last two days I have had the advantage of some briefing by the people whom he trained, and they also understand it. He left behind a very competent body of people to administer the Act. The speech that the noble Lord has made to your Lordships to-night has convinced me of his understanding of the position. Necessarily, he has looked at it with all the pride of a creator, but very fairly indeed he admitted that there might be imperfections in it.
I am going to be perfectly frank with your Lordships. Just let me add first that, as the noble Lord said, I too, have had some experience of this situation, because when I was Minister of Reconstruction in a Coalition Government, we tried to hammer out, without any Party bias, what would be the best solution to this problem of town and country planning. Of course, the theory of what is desirable—and this was embodied in a White Paper presented to
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your Lordships' House on the subject—and the practice of what is attainable, are two different things, not always easy to co-ordinate. As I understand it, and as I think the speeches that have been delivered this afternoon indicate, the previous Government were finding that there were quite a number of ways in which it would be desirable to make some amendments in this Act, either by regulation or by legislation.
My Lords, this is where I want to be frank with your Lordships. The present Government are, in fact, at the moment going very thoroughly into this question and endeavouring to come to a conclusion. Let me say at once that we realise the importance of the essential feature of this Act, which is to secure the best use of the land of this country. On this, there will be no division of opinion between us. Your Lordships will agree that it would be quite improper for me to say anything to-night which might indicate the way in which the Government's deliberations are proceeding and your Lordships will, I am sure, be good enough to wait until we can announce in the proper form what our conclusions are. But let us not bother unduly about adjectives. If a noble Lord says "operations are necessary," if some anonymous person who wrote a Party Election pamphlet used the word "drastic"—-well, we will not bother. The noble Lord says he will not use it against us if alterations to the Act are not drastic. We shall endeavour to make alterations such as will be in the best interests of the land of the country: we shall certainly not make alterations for their own sake.
The noble Lord, Lord Wise, who made what I thought was a very fair and practical speech, urged that we should retain the major body of the Act. I have no doubt about that. Many of us on this side of the House have been interested in town planning for a very long time, and there is no danger of our ceasing to be interested. But one thing the noble Lord said went straight home to my rather practical turn of mind. He made an appeal (I do not know whether I am quoting him precisely, but he will not mind if I do not) that we should seek to make things easier for the applicant. That is very sound. Much of the criticism in general to-day—which I am sure my right honourable friend will welcome—

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has been on the lines of the complaint made by the noble Lord, Lord Wise, the noble Viscount, Lord Portman, and many others—to the effect that there is too long a delay in dealing with planning matters. That is a thing we all complain of concerning Governments. When we do not happen to be in office ourselves, we complain publicly; when we are in office we complain privately. I will see that all these issues are brought to the notice of my right honourabe friend Mr. Macmillan, and particularly I should like the noble Viscount, Lord Portman, to be assured that his remarks on the subject of the National Trust will be conveyed to the Minister.
My noble friend Lord Gage, who spoke to us from his wide experience in these matters, asked for some continuity in town planning. I am sure he was right in that. I shall ever be grateful to him for the phrase about the "stratospheric technicalities" of the expert. I think that is one of the things that ought to go down in the history of your Lordships' debates. The noble Lord, Lord Quibell, says that he rarely comes and speaks to us. If I may address him quite personally across the Floor of the House, I would say this: "If we must have such a difficult subject for debate as this in order to induce you to come here and make speeches of that refreshing nature, then we will have a series of very difficult subjects, because we all of us very greatly enjoyed your speech." To my noble friend Lord Llewellin, I would express my gratitude for having raised this subject. There will come a time when I shall be able to speak to your Lordships in a more informative manner. In the meantime, I thank you for a debate which certainly has been of very great value, and, if I may be very personal. I thank Lord Silkin for the most informative speech with which he entertained us at the end of our discussion.
7.15 p.m.
LORD LLEWELLIN: My Lords, I am obliged to all noble Lords who have taken part in this debate. I did not expect that we should at this stage receive
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any declaration of Government policy, but we have the satisfaction of having made suggestions to Her Majesty's Government as to what they might do. If they do not do it, we may have the satisfaction of saying that we think that they would have acted better if they had adopted our suggestions. I do not consider myself one of those who really understand this Act, although I took a considerable part in its passage through this House, but there are some noble Lords here who through their practical experience have great knowledge of this subject, and I am obliged to them for taking part in the debate to-day. I hope that Her Majesty's Government will profit from some of the speeches. With those words I ask to be allowed to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

FUTURE BUSINESS
7.16 p.m.
EARL FORTESCUE: My Lords, I have a statement to make as regards future Business of the House. Tomorrow we shall meet at half-past two to take the business that is down on the Order Paper. For Thursday, there is no business down on the Paper, so we shall not meet. On Friday, there will be a formal meeting at 11.15 a.m. to receive some Bills from another place. After that, we shall adjourn, and re-assemble on Tuesday, June 10.

BRITISH TRANSPORT COMMISSION BILL
Brought from the Commons; read 1a, and referred to the Examiners.

GLOSSOP WATER BILL
Brought from the Commons; read 1a, and referred to the Examiners.
House adjourned at seventeen minutes past seven o'clock.