§ Provision for computing capital.
§ 1.—(1) Subject to the provisions of this Part of this Schedule, the amount of the capital employed in a business (so far as it does not consist of money) shall be taken to be—
- (a)so far as it consists of assets acquired by purchase on or after the commencement of the business, the price at which those assets were acquired subject to the deductions hereafter specified;
- (b)so far as it consists of assets being debts due to the person carrying on the business, the nominal amount of those debts subject to the said deductions;
- (c)so far as it consists of any other assets which have been acquired otherwise than by purchase as aforesaid, the value of the assets when they become assets of the business, subject to the said deductions.
§ (2) The price or value of any assets other than a debt shall be subject to the following deductions—
- (a) deduction of any sum contributed, directly or indirectly, out of the Consolidated Fund of the United Kingdom or of Northern Ireland, or out of moneys pro vided by the Parliament of the United Kingdom or the Parliament of Northern Ireland, towards the acquisition of the asset;
- (b)any such deductions for wear and tear or for depreciation as are authorised by the Income Tax Acts or Part I of this Schedule,
§ (3) Where the price of any asset has been satisfied otherwise than in cash, the then value of the consideration actually given for the asset shall be treated as the price at which the asset was acquired.
§ (4) For the purposes of the provisions of sub-paragraph (2) of this paragraph relating to deductions for wear and tear or depreciation, any additional deduction allowable for Income Tax purposes by virtue of the proviso to paragraph (2) of Rule 5 of the Rules applicable to Cases I and II of Schedule D, and any deduction allowable for those purposes under Section eighteen of the Finance Act, 1919, shall be treated as a deduction for depreciation.1044
§ 2. Any borrowed money and debts shall be deducted, and in particular any debt for Income Tax computed by reference to the standard rate or for the national defence contribution or the armament profits duty in respect of the business shall be deducted:
§ Provided that any such debt for Income Tax or the national defence contribution or the armament profits duty shall, for the purposes of this Part of this Schedule, be deemed to have become due—
- (a)in the case of Income Tax, on the first day of January in the year of assessment for which the tax is assessable;
- (b)in the case of the national defence contribution or the armament profits duty, on the first day after the end of the chargeable accounting period in respect of which the contribution or duty is assessable;
§ 3. Any investments and any moneys not required for the purposes of the business shall be left out of account, but where any investments in the beneficial ownership of the person carrying on the business are so left out of account the sum (if any) to be deducted under the last preceding paragraph in respect of borrowed money shall be computed as if the principal of the borrowed money were reduced by the value of those investments:
§ Provided that where the person carrying on the business is not a body corporate, no reduction shall be treated as made in the principal of any borrowed money in respect of any investments unless those investments are mortgaged, charged or pledged as security for the repayment of that money and the interest thereon.
§ 4. For the purpose of ascertaining the average amount of capital employed in a trade or business during any period, the profits or losses made in that period shall, except so far as the contrary is shown, be deemed—
- (a)to have accrued at an even rate throughout the period; and
- (b)to have resulted, as they accrued, in a corresponding increase or decrease, as the case may be, in the capital employed in the business.—[Sir J. Simon.]
§ Brought up, and read the First time.
§ 9.2 p.m.
§ Sir J. Simon
I beg to move, "That the Schedule be read a Second time."
The Committee will see that these provisions closely follow the provisions we made, by general approval and consent, in respect of National Defence Contribution. I think the new Schedule speaks for itself. I am not aware that there is any point of controversy, but if there is I will do my best to meet it.
§ Mr. Pethick-Lawrence
I understood from the Financial Secretary, when we were discussing the corresponding Clause, 1045 that we should get some rather detailed explanation from the Chancellor of the Exchequer on this Schedule. I do not know whether it is more convenient to the right hon. Gentleman to give it now or on the Amendment which I propose to move. It does not matter to me which course the right hon. Gentleman takes, but we do want some explanation of the point in regard to special depreciation.
§ Sir J. Simon
I think it would be better to get the Second reading of the new Schedule and to make my explanation on the right hon. Gentleman's Amendment.
§ 9.3 p.m.
§ Mr. Pethick-Lawrence
I beg to move as an Amendment to the proposed new Schedule, in line 39, to leave out "ten," and to insert "six."
I have put down this Amendment not because I am particularly enamoured of the figure six but, in the first place, to get from the Chancellor of the Exchequer in a little more detail than we have had what precise ideas he has in fixing this 10 per cent, for extreme depreciation. An ordinary business is entitled in calculating profits in ordinary circumstances to write off, from its capital, depreciation which may vary to a considerable extent according to the nature of the things which are being depreciated. Sometimes it may be as low as a few per cent., and it may rise to over 20 per cent. In the last few years depreciation for ordinary Income Tax purposes has been increased first by 10 per cent, and then subsequently to 20 per cent, so that ordinary depreciation in normal circumstances for Income Tax purposes may be not very much or it may run to a considerable figure. That, of course, corresponds to a real physical deterioration of the subject-matter of the depreciation. It may be a piece of machinery which is likely to be in normal use for a considerable number of years but the actual fittings of which may wear out, or it may be that in certain cases a plant is likely, in the normal course of trade, to become obsolete after 10 years, or even less, and, therefore, in addition to the physical deterioration of the subject-matter there may be a notional depreciation due to the expected retirement of plant.
We are now faced with the question of the capital used for the production of 1046 armaments, and that is something which is rather special. We are in this emergency, and none of us knows how long it will last, although we hope it will last a very short time indeed. During the emergency, it is a question of all hands to the pump, and we are pressing forward with the creation, on a vast scale never before, contemplated, of armaments of all kinds—all the things called armaments in the definitions in the Clauses concerning the Armament Profits Duty. It is very uncertain how long the capital plant which the firms and companies have called into being will serve its purpose. If, happily, the emergency is over in the course of a few months, it may be that a great deal of the plant will be of no further utility. We all hope that may be so. On the other hand, the emergency, or at any rate the necessity, in the opinion of the Government, for producing armaments, may go on for a very considerable time. Therefore, I can quite understand that it is very difficult for the Government, the Inland Revenue authorities, or any one else, to be able to judge what is the appropriate depreciation that should be allowed to any firm in existing circumstances.
I am not very clear as to precisely what the Government have in mind. As I understand the position, the Government say that they cannot tell what is going to happen and that they will not know until the emergency is over, but they agree that when the emergency is over the time of reckoning will come, and that if by then the plant, which is the subject matter in question, is either quite worthless or ceases to exist, or what is more likely, has a value only as scrap iron, they will recognise that fact not only for Income Tax purposes, but more particularly for the purpose of the Armament Profits Duty, and will write down all the plant to the figure at which it actually stands at the end of the period of years during which the emergency lasts. That may be the only equitable method of dealing with the matter, but it will, of course, present a very grave problem to those who have to administer the tax, because if there is a firm which, in endeavouring to meet the wishes of the Government, has provided a very considerable amount of capital at its own expense—a great many firms are not doing that at the present time, because the Government are providing the money for capital extensions—the depreciation, 1047 during the very few years which we hope the emergency will last, will be so great each year that it may easily wipe out a very large part of the profit. If it is all to remain in suspense until the emergency is over, there will be very large sums of money in connection with which we shall be uncertain as to whether they will ultimately find their way as taxes into the revenue, or will be retained by the firm in order to meet the capital loss on its plant.
I do not offer any very severe criticism of that method, because I cannot see a very much better way of doing it; but I have moved this Amendment in order to deal with the provisional attitude of the Government towards the matter. I should like to hear from the Chancellor what are his views with regard to his proposal. His proposal is that, in addition to the ordinary Income Tax provisions, we should provisionally in each year allow an additional 10 per cent., and that at the end of the time there should be a reckoning. Of course, the 10 per cent, we are now considering is a very different thing from the 10 per cent, and the 20 per cent, increase in depreciation allowed a few years back, because then it was a question of I0 per cent, and 20 per cent, of the sum allowed for depreciation, whereas this 10 per cent, is one-tenth of the capital value expended. There is sometimes some confusion on the part of people when discussing a percentage, owing to their not knowing very often of what it is a percentage. This proposal has reference to 10 per cent, of the capital value. Therefore, if the ordinary Income Tax depreciation allowed is 7 per cent., or 10 per cent., or it may be 12 per cent., then the company will be allowed to write off 17 per cent., 20 per cent., or 22 per cent, altogether. This means that, broadly speaking, the whole value of the capital will disappear in the course of four or five years. I can conceive of circumstances in which that might be right. On the other hand, if the expenditure on armaments is going to last very much longer, or if the capital plant is not by any means to be used solely for armaments and therefore, may have quite a considerable value at the end of four or five years, even when the emergency is over, it seems to me that to allow 17 per cent., or 20 per cent., or even more, off 1048 the capital value, is to allow a very large sum.
If the Government are going to allow these firms to distribute in dividends the whole of that large amount, then it may be found that, in five or six years' time, when there is a settling up, the firms will have got rid of all their money and there will be nothing available for the Armament Profits Duty, and although the Government ought to be able to have the money as it will not be there. Without disputing the general principle that, owing to the emergency, these firms, if they have been called upon to provide this capital and if it does work out at very little after the emergency is over, must be allowed depreciation over the period, I cannot help thinking that 10 per cent, is a rather high figure. It is for that reason that I have inserted 6 per cent, in the Amendment, in order that I may hear what the Chancellor has to say on the matter.
I do not want it to be a question of heads the private firms win and tails the Revenue authorities lose. I am a little inclined to think that it may be so in this case. I shall listen with great attention to hear what defence the Chancellor of the Exchequer will offer to the Committee of the figure which he has chosen, and I would ask the right hon. Gentleman, at the same time, to expound the whole subject of this depreciation allowance a little more fully than has been done up to the present, so that we may understand exactly what the Government's proposals are.
§ 9.15 p.m.
§ Sir J. Simon
The right hon. Gentleman has put the matter before the Committee in a most reasonable way. No complaint can be made of the manner in which he has put his questions and I will try, for my part, to be equally reasonable in dealing with what is certainly a rather complex and difficult affair. We are dealing here with what I may call Rule 3 of my proposed Schedule. I think "Rule" is the right word to use in this connection. It is the third paragraph of the Schedule beginning with the words:Where any buildings, plant or machinery have, after the beginning of the year nineteen hundred and thirty-seven, been provided for the purpose of fulfilling armament contracts by the persons carrying on the business.1049 That is to say, we are considering what would be the right arrangement to make for what may be called exceptional depreciation of assets. Before we come to consider anything exceptional, let us consider what is the ordinary arrangement for purposes of Income Tax. It is, of course, right that deductions should be permitted in respect of depreciation of, let us say, factory buildings, and wear and tear of plant and machinery. You cannot arrive at a true statement of the profit that has been made by the firm during the year under consideration, unless you make such a deduction. That deduction, as the right hon. Gentleman reminded us, has recently been the subject of certain increases, but it is well to bear in mind the fact that it is not a fixed amount applying to all kinds of enterprises and to all varieties of plant. The thing is worked out and settled in reference to the particular kind of business which is being dealt with. For instance, a business which uses very heavy machinery may have a different amount of percentage allowance for wear and tear, from another business which uses light machinery and factory plant which is exposed to a great deal of vibration and knocking about, will be allowed a bigger rate of depreciation than factory plant of another kind, and so on. That is the ordinary Income Tax rule which is well understood by the Revenue, by accountants, by business people and by all who have to study it closely.
What is the amount which, in such a Schedule as this, we propose to permit? It will be not only the ordinary allowance for wear and tear—which of course is involved in applying the Income Tax rules—but also an allowance for exceptional depreciation of assets. As the right hon. Gentleman so clearly explained, there may well be cases in which these armament firms, and still more, perhaps, firms which were not previously armament firms, but have taken to armament making under the pressure of the times in which we live, are providing themselves with all sorts of special plant. Not only is the value of this exceptional plant depreciated by use in the ordinary way, but its value may come to a very sudden end altogether. The right hon. Gentleman said, and I associate myself with him entirely in this, the sooner it does come to an end the better—if we could only manage to live in a better world. It 1050 is distressing to think how much has been spent in providing these factories and armament works with the most wonderful and detailed machinery, purely for the purpose of making arms and weapons—methods of killing other people. It would be an immense gain if they did lose their value because it would mean that they would not be wanted any more.
We have, therefore, to provide for the possibility of this very considerable and sudden loss in value, but nobody can say when that will arise. Thus, it is necessary to make an adjustment now for exceptional depreciation of assets which is only provisional, and we must have some arrangement by which, later on, when we know better where we are, when, it may be Parliament declares as the Schedule says, that we have reached the date of the restoration of normal conditions as regards requirement of armaments, or the like—we must have a provision by which we can then revise any provisional allowance. It is necessary to give the firm the possibility of some provisional allowance now, because you cannot in common fairness keep them waiting it may be for an indefinite time, to know when they are to have the true figure of their profit for the year—profit which might be unduly bloated, if some such allowance were not made to bring it down to the proper total. Consequently, the scheme of the Schedule necessarily is, first, that there should be applied, in connection with Armament Profits Duty those Income Tax adjustments which will give these firms their ordinary allowance for wear and tear; secondly, that you should give them, also, the possibility of an exceptional and additional allowance for wear and tear for the reasons with which I have dealt, and, thirdly, that the exceptional allowance should be provisional only, because nobody can tell at present what is the length of useful life of this plant, and, therefore how to spread whatever further allowance may be decided upon.
As far as I followed him, the right hon. Gentleman stated the scheme of the Schedule accurately except in one particular. Perhaps it was only an accidental phrase, but he spoke as though the Schedule provided that there should be an additional, exceptional allowance of 10 per cent. In fact, I think he used that expression twice. That is not so. What we have provided is that in respect of 1051 buildings, plant and machinery, where the question of exceptional allowance arises,the Commissioners, if they are satisfied that any buildings, plant or machinery provided as aforesaid are of such a character that it is likely that the conditions specified in the said sub-paragraph will be fulfilled "—that is to say, that they will lose their value and require to have an exceptional amount of depreciation allowed—may allow in any chargeable accounting period, such sums as they think fit not exceeding ten per cent.It does not say that they shall allow 10 per cent, or that 10 per cent, is to be the amount. That is the maximum amount which they could allow. Then there is an exceptionally important provision which operates both ways, namely, that whatever may be the provisional allowance which they make up to 10 per cent., that shall be subject to revision. I had better read the actual words:Any such allowance shall be provisional only and on the coming of the said date "—That is the date when Parliament declares that normal conditions in this respect have been restored—or, as the case may be, on the previous sale of the buildings, plant or machinery, the amount thereof shall be adjusted so as to accord with the provisions of the said sub-paragraph.In other words, it would be possible, when you come to the end to imagine a case where a firm would say: "You have allowed us, provisionally, 9 per cent, or 8 per cent., or possibly 10 per cent., but that is not enough and we contend that it ought to be more." The Revenue on the other hand when the time comes may say: "We allowed you provisionally too much. Now that we have worked it out we find that you are in debt to the Crown in respect of the difference." I agree with the right hon. Gentleman that we may find that there are people who receive very large sums who are unable to pay any of the money back. That is, of course, the concern of the Inland Revenue when they make a provisional allowance. But it is clear that such a provision as is involved in this exceptional writing off—the right hon. Gentleman conceded it, with his usual fairness—was a thing that had to be done, 1052 otherwise we should not be able to charge our A.P.D. next year or the year after aright.
There are two points I should like to make. Of course, the only exceptional allowance which we shall permit under this Schedule will be an exceptional allowance for the years that come under the tax. If it be the case that a particular firm has acquired its exceptional plant a year ago, or two years ago—before the A.P.D. begins to be applied—and continues to use it till some future date, which cannot yet be specified, it will not under this provision have the benefit of the writing off against the A.P.D. of the exceptional depreciation for the whole period. That would be chopped up into years, and what the firm would get would be in respect of the years for which it was assessed.
The last thing that arises is the question of the percentage. I have pointed out to the Committee, and I think it is understood, that what we have put in is a maximum. It is a maximum in the hands of the Commissioners of Inland Revenue. There is no particular inducement there to use it recklessly; I am sure they will proceed to use their powers fairly. We thought it right to put in a maximum, very much for the reason which the right hon. Gentleman suggested, namely that if you provisionally give way too much, you may find it extremely difficult to get it back again when it is adjusted. But as a matter of fact 10 per cent, has appealed to us, after a good deal of consideration as to what would be the right figure, as about the fair maximum—a certain guide, not a very precise guide. But, of course, in the case of plant and machinery, when you are considering the annual wear and tear allowance under the Income Tax Acts—which is not the same for all kinds of business—the average allowance under Income Tax, taking into account these increases enjoyed by industry in compensation for the increased standard rate is over 8 per cent, of the written-down value.
If that is true with reference to standard machinery which is being used in the industry for the purpose of producing things which a civilised community would continue to want, it does not seem a very surprising thing if it should be the case that the addition that has to be made in 1053 respect of some kinds of specialised machinery, which will have no use at all except for armaments, is very large indeed. At any rate, it is pretty clear that, in cases of very specialised plant for armaments work, when the rearmament programme is over—and it will be over some day, and the sooner the better—that plant will have only a scrap value. We do not know what it will fetch, but at any rate there is an enormous difference between hydraulic presses and looms and all the fit-out of a regular commercial factory on the one hand and on the other some of these highly specialised implements which we now have to get and use, but which may lose their value very rapidly.
I hope I have succeeded in giving the Committee a general account which is fairly intelligible and plain of the scheme of this Schedule. I am grateful to the right hon. Gentleman for raising the point which he did, and I do not think there is a real difference between us in the House on the general method we have employed. But I did not know how to do it except by providing exceptional writing off in some provisional way, and then providing that later on, when we do know, we shall correct what I dare say, in many cases, will turn out to have been a somewhat inaccurate estimate.
§ 9.31 p.m.
§ Mr. Benson
The discussion on this Amendment has been rather wide, and it was put down by my right hon. Friend and myself primarily for the purpose of evoking a discussion, and possibly a wide discussion, on the question of depreciation. I should like to know whether it would be possible on this Amendment to raise one or two specific points in connection with the Schedule on the subject of depreciation, or whether that must be left over till the Motion is made that the Schedule stand part.
§ Mr. Benson
We were very anxious for a wide discussion on the question of depreciation because the Chancellor will no doubt be fully aware that it was on the subject of depreciation, repairs, maintenance and renewals that the old E.P.D. during the War was, so far as the Exchequer was concerned, most costly. It is true that the E.P.D. produced enormous 1054 sums for the revenue, but also it produced enormous costs. One really does not want the same thing to happen here on a smaller scale. Rule 3 begins:Where any buildings, plant and machinery have …been provided for the purpose of fulfilling armaments contracts …Is there any evidence of purpose required, that is to say, before one can get this exceptional allowance for depreciation has the Ministry of Supply, or any other body, to agree that that is a plant which could be specifically put in primarily for the purpose of an armament contract? Then Rule 3 (b) runs:the buildings, plant and machinery are sold before the said date at a price less than the net cost thereof.Apparently a firm which has built or purchased a building for the purpose of an armament contract may sell this building at any time convenient to itself, and apparently at any price. Once the building has been used for armament contracts any loss is written off against the Government. What safeguards are there in respect of that? Has the building to be scheduled, as it were, for the purposes of the tax, as built or provided for that purpose, and, secondly, what control will there be of the firm when it comes to sell the building? I think buildings enter more directly into the question than plant; at any rate, I am more concerned with them.
There are two points here. It might be quite possible to contract for a sale in which there was a definite intention of tax avoidance. That is one point. I do not suggest that any reputable firm would do that, and I do not suppose that it is likely to be done frequently; but there is, on the other hand, another and perhaps more important factor, and that is that if any firm may look to the Government for the difference between the purchase price and the selling price, they themselves will have no interest in getting a good price for the buildings or plant. As the Chancellor knows, buildings are not sold across the counter, regularly and in large quantities. If you are to get your price for a building, you may have to maintain it for two or three years and wait until the willing buyer comes along. Every valuer of a building for probate or any other Government purpose invariably refuses to accept a forced-sale price, but uses the fiction of a willing buyer and a willing seller. If you are to get your 1055 price, there must be the willing buyer in the market, and I want to know what safeguards there are here to prevent the Exchequer finding itself in the position of having to make heavy repayments owing to the fact that there has been no concern, on the part of the owner of the building, to sell it to the best advantage.
§ Mr. Radford
Surely when the owner of a building realises, and at a loss, all that that loss secures to him is a 60 per cent, reduction of his tax, whereas he loses the whole 100 per cent, of any price that he fails to get.
§ Sir J. Simon
I think that what my hon. Friend the Member for Rusholme (Mr. Radford) has said is quite right, and it is the answer that I was preparing to give. We must, of course, see that there is no loophole for the hypothetical person to misuse this Schedule to his own advantage—we all agree about that—but I do not think it is a very practical point, because all that a man who threw away his building by selling it for a half-a-crown would lose would be that he would save the tax, but he would lose on the price. It is not really his interest except to sell at the best price he can. I think that is the answer, but I will look at the point carefully.
§ Mr. Benson
As a matter of fact, my first impression was that that was the answer, and I read through the Schedule half-a-dozen times to try to make out whether I could find anything in the Schedule to that effect. I am not a lawyer, and the interpretation suggested by the right hon. Gentleman may be correct, but, frankly, it is not apparent on the face of it.
§ Mr. Benson
I shall be glad if the right hon. Gentleman will. There is one other point, relating more precisely to the Amendment and the 10 per cent. I was rather frightened of the additional 10 per cent., in that it brings depreciation up to a possible 18 or 20 per cent., which in three years brings down the book value of the assets 60 per cent. What made me afraid was this, that if you got a 1056 theoretical figure fixed in the books, it might be very difficult to adjust that figure upwards against the Government. Once a firm has it on its books that certain assets are worth a certain figure by depreciation, the Government will have a very much harder struggle to get that depreciation back than they would have to moderate the rate of depreciation in the first case. It is an old saying that you cannot get butter out of a dog's throat, and that applies in more respects than one to armament profits. It applies, I am afraid, to the general tax, and I do not want it to apply in its smaller degree to this question of depreciation.
§ 9.40 p.m.
§ Mr. Pethick-Lawrence
It is quite clear that if a person deliberately throws away his assets and gets a very small price for them, he is, as the Chancellor said, giving away the whole of the money and saving himself only 60 per cent, when it comes to taxation. Nobody would be so foolish as to do that in that simple form, but what I think may happen—and what did happen in the case of the Excess Profits Duty, so that it is not purely imaginary—is that a person either spends money recklessly or sells things at a low price, and he does not do that quite for nothing, but gets something out of it. I am not suggesting, any more than did my hon. Friend, that it will be a usual case, but you do get rather loose things done where certain interests are concerned. They sell to somebody—machinery, it may be, or buildings—below the proper figure in a general deal in which the other party to the bargain gives them something at some other point, and in that way they may not lose the whole amount that they appear to -be throwing away. They may not lose even 60 per cent. Therefore, I do not think it is quite so negligible a factor as the right hon. Gentleman suggests. With regard to Excess Profits Duty, apparently it was to their good not to waste their money, though we know that they did waste very large sums of money, because they said that 80 per cent, of it would be paid for by the Government. It may very well be that, I will not say unscrupulous people, but careless people, people not too nice in matters of money, may have to be watched by the Chancellor to see that undue advantage is not taken of this provision in the Bill.
§ 9.43 p.m.
§ Sir J. Simon
We have had, I think, a very Interesting and important Debate. I will certainly look at the point very carefully, and it may be that there is something to be done in the way of tightening it up before we finally pass the Bill. As regards the point that the right hon. Gentleman has just put by way of illustration, when he says that you may have people who appear to be selling their property at a price, but they are getting something else in return, all that I can say is that neither in commerce nor in law could I describe the price they get then as the net price. If they get, by way of exchange, something of value, I regard the net price as what they get on the whole transaction, and I think everybody will agree about that. As regards the question put to me first by the hon. Member for Chesterfield (Mr. Benson), namely, who should decide whether the buildings were buildings provided for the purpose of fulfilling armament contracts, I think that is like any other provision in taxing
§ law where there is a description which has to be applied. If there is no difference between the parties, it applies without question. If there is a difference, if necessary the matter can be tested in the Law Courts. I agree with what the right hon. Gentleman opposite said at the end. I, too, have a certain recollection of the Excess Profits Duty. There is no doubt that in practice it led to a good deal of loose spending, and I know the authorities are very much alive to that. We have tried to take advantage of the lessons of the past, though we may not have been entirely successful. We shall want the co-operation of every one. In the light of what has been said I will have the Schedule carefully examined and, if there is anything that can be suggested as an improvement, I shall be glad to consider it.
§ Question put, "That the word 'ten' stand part of the proposed Schedule."
§ The Committee divided: Ayes, 209; Noes, 107.1059
|Division No. 217.]||AYES.||[9.47 p.m|
|Acland, Sir R. T. D.||Denman, Hon. R. D.||Hely-Hutchinson, M. R.|
|Acland-Troyte, Lt.-Col. G. J.||Denville, Alfred||Hepburn, P. G. T. Buchan-|
|Adams, S. V. T. (Leeds, W.)||Doland, G. F.||Hepworth, J.|
|Alexander, Brig.-Gen. Sir W.||Drewe, C.||Hogg, Hon. Q. McG.|
|Allen, Col. J. Sandeman (B'knhead)||Dugdale, Captain T. L.||Holdsworth, H.|
|Aske, Sir R. W.||Duggan, H. J.||Holmes, J. S.|
|Assheton, R.||Dunoan, J. A. L.||Hopkinson, A.|
|Astor, Major Hon. J. J. (Dover)||Eastwood, J. F.||Horsbrugh, Florence|
|Balniel, Lord||Eckersley, P. T.||Howitt. Dr. A. B|
|Barrie, Sir C. C.||Edge, Sir W.||Hunloke, H. P.|
|Beamish, Rear-Admiral T. P. H.||Elliot, Rt. Hon. W. E.||Hunter, T.|
|Beaumont, Hon. R. E. B. (Portsm'h)||Ellis, Sir G.||Hutchinson, G. C.|
|Beeehman, N. A.||Emery, J. F.||Jarvis, Sir J. J.|
|Bernays, R. H.||Emrys-Evans, P. V.||Jones, Sir G. W. H. (S'k N'w'gt'n)|
|Bird, Sir R. B.||Erskine-Hill, A. G.||Jones, Sir H. Haydn (Merioneth)|
|Bossom, A. C.||Evans, Colonel A. (Cardiff, S.)||Kerr, Colonel C. I. (Montrose)|
|Boulton, W. W.||Evans, D.O. (Cardigan)||Kerr, Sir J. Graham (Scottish Univ.)|
|Braithwaite, J. Gurney (Holderness)||Everard, Sir William Lindsay||Kimball, L.|
|Briscoe, Capt. R. C.||Findlay, Sir E.||Lamb, Sir J. Q.|
|Brookleblank, Sir Edmund||Fleming, E. L.||Leighton, Major B. E. P.|
|Brooke, H. (Lewisham, W.)||Foot, D. M.||Lennox-Boyd, A. T. L.|
|Brown, Brig.-Gen. H. C. (Newbury)||Furness, S. N.||Lewis, O.|
|Bull, B. B.||Fyfe, D. P. M.||Liddall, W. S.|
|Burgin, Rt. Hon. E. L.||George, Megan Lloyd (Anglesey)||Little, J.|
|Campbell, Sir E. T.||Gluckestein, L. H.||Llewellin, Colonel J. J.|
|Cary, R. A.||Glyn, Major Sir R. G. C.||Looker-Lampson, Comdr. O. S.|
|Chamberlain, Rt. Hn. N. (Edgb't'n)||Gower, Sir R. V.||Loftus, P. C.|
|Chapman, A. (Rutherglen)||Grant-Ferris, Flight-Lieutenant R.||Lyons, A. M.|
|Clarke, Colonel R. S. (E. Grinstead)||Greene, W. P. C. (Worcester)||M'Connell, Sir J.|
|Cobb, Captain E. C. (Preston)||Gridley, Sir A. B.||Magnay, T.|
|Colville, Rt. Hon. John||Griffith, F. Kingsley (M'ddl'sbro, W.)||Makins, Brigadier-General Sir Ernest|
|Conant, Captain R.J. E.||Grigg, Sir E. W. M.||Mander, G. le M.|
|Cook, Sir T. R. A. M. (Norfolk, N.)||Grimston, R. V.||Manningham-Buller, Sir M.|
|Cooke, J. D. (Hammersmith, S.)||Gritten, W. G. Howard||Margesson, Capt. Rt. Hon. H. D. R.|
|Cooper, Rt. Hn. T. M. (E'nburgh, W.)||Guinness, T. L. E. B.||Marsden, Commander A.|
|Courthope, Col. Rt. Hon. Sir G. L.||Gunston, Capt, Sir D. W.||Mellor, Sir J. S. P. (Tamworth)|
|Cox, H. B. Trevor||Hambro, A. V.||Moore, Lieut.-Col. Sir T. C. R.|
|Craven-Ellis, W.||Hammersley, S. S.||Moreing, A. C.|
|Croft, Brig. Gen. Sir H. Page||Hannah, I. C.||Morgan, R. H. (Worcester, Stourbridge)|
|Crooke, Sir J. Smedley||Harbord, Sir A.||Morrison, G. A. (Scottish Unlv's.)|
|Crookshank, Capt. Rt. Hon. H. F. C.||Harris, Sir P. A.||Nicholson, G. (Farnham)|
|Cross, R. H.||Haslam, Sir J. (Bolton)||Nicolson, Hon. H. C.|
|Davidson, Viscountess||Heilgers, Captain F. F. A.||O'Connor, Sir Terence J.|
|Orr-Ewing, I. L.||Salmon, Sir I.||Tasker, Sir R. I.|
|Owen, Major G.||Salt, E. W.||Taylor, Vice-Adm. E. A. (Padd., S.)|
|Peat, C. U.||Samuel, M. R. A.||Thomas, J. P. L.|
|Perkins, W. R. D.||Sanderson, Sir F. B.||Thorneycroft, G. E. P.|
|Peters, Dr. S. J.||Sandys, E. D.||Titchfield, Marguess of|
|Pickthorn, K. W. M.||Schuster, Sir G. E.||Touche, G. C.|
|Pilkington, R.||Scott, Lord William||Tree, A. R. L. F.|
|Plugge, Capt. L. F.||Seely, Sir H. M.||Tufnell, Lieut.-Commander R. L.|
|Ponsonby, Col. C. E.||Selley, H. R.||Turton, R. H.|
|Pownall, Lt.-Col. Sir Assheton||Shakespeare, G. H.||Walker-Smith, Sir J.|
|Procter, Major H. A.||Shaw, Captain W. T. (Forfar)||Wallace, Capt. Rt. Hon. Euan|
|Radford, E. A.||Shepperson, Sir E. W.||Ward, Lieut.-Col. Sir A. L. (Hull)|
|Raikes, H. V. A. M,||Simon, Rt. Hon. Sir J. A.||Wardlaw-Milne, Sir J. S.|
|Ramsbotham, Rt. Hon. H.||Sinclair, Col. T. (Queen's U. B'lf'st)||Waterhouse, Captain C.|
|Rathbone, J. R. (Bodmin)||Smiles, Lieut.-Colonel Sir W. D.||Watt, Lt.-Col. G. S. Harvie|
|Reed, A. G. (Exeter)||Smith, Braoewell (Dulwich)||Webbe, Sir W. Harold|
|Reed, Sir H. S. (Aylesbury)||Smith, Sir R. W. (Aberdeen)||Wells, Sir Sydney|
|Reid, W. Allan (Derby)||Smithers, Sir W.||White, H. Graham|
|Remer, J. R.||Somerville, Sir A. A. (Windsor)||Whiteley, Major J. P. (Buckingham)|
|Rickards, G. W. (Skipton)||Spens, W. P.||Williams, Sir H. G. (Croydon, S.)|
|Ropner, Colonel L.||Stanley, Rt. Hon. Oliver (W"ml"d)||Willoughby de Eresby, Lord|
|Rosbotham, Sir T.||Stourton, Major Hon. J. J.||Windsor-Clive, Lieut.-Colonel G.|
|Ross, Major Sir R. D. (Londonderry)||Strauss, H. G. (Norwich)||Womersley, Sir W. J.|
|Ross Taylor, W. (Woodbridge)||Strickland, Captain W. F.||Wragg, H.|
|Rothschild, J. A. de||Stuart, Lord C. Crichton- (N'thw'h)|
|Royds, Admiral Sir P. M. R.||Stuart, Rt. Hon. J. (Moray and Neirn)||TELLERS FOR THE AYES.—|
|Russell, Sir Alexander||Sueter, Rear-Admiral Sir M. F.||Major Sir James Edmondson and Mr. Munro.|
|Russell, R. J. (Eddisbury)||Sutcliffe, H.|
|Adams, D. M. (Poplar, S.)||Hayday, A.||Poole, C. C.|
|Adamson, Jennie L. (Dartford)||Henderson, J. (Ardwick)||Price, M. P.|
|Adamson, W. M.||Henderson, T. (Tradeston)||Pritt, D. N.|
|Anderson, F. (Whitehaven)||Hills, A. (Pontefract)||Richards, R. (Wrexham)|
|Banfield, J. W.||Hopkin, D.||Ridley, G.|
|Barnes, A. J.||Isaacs, G. A.||Riley, B.|
|Bartlett, C. V. O.||Jagger, J.||Ritson, J.|
|Batey, J.||Jenkins, Sir W. (Neath)||Robinson, W. A. (St. Helens)|
|Bellenger, F. J.||John, W.||Sexton, T. M.|
|Benn, Rt. Hon. W. W.||Johnston, Rt. Hon. T.||Shinwell, E.|
|Benson, G.||Kennedy, Rt. Hon. T.||Silkin, L.|
|Broad, F. A.||Lathan, G.||Silverman, S. S.|
|Buchanan, G.||Lawson, J. J.||Simpson, F. B.|
|Burke, W. A.||Leach, W.||Smith, E. (Stoke)|
|Chater, D.||Lee, F.||Smith, T. (Normanton)|
|Cluse, W. S.||Leslie, J. R.||Sorensen, R. W.|
|Cooks, F. S.||Logan, D. G.||Stephen, C.|
|Collindridge, F.||Lunn, W.||Stewart, W. J. (H'ght'n-le-Sp'ng)|
|Cove, W. G.||Macdonald, G. (Ince)||Summerskill, Dr. Edith|
|Cripps, Hon. Sir Stafford||McEntee, V. La T.||Taylor, R. J. (Morpeth)|
|Daggar, G.||McGhee, H. G.||Thurtle, E.|
|Dalton, H.||McGovern, J.||Tinker, J. J.|
|Davies, R. J. (Westhoughton)||MacLaren, A.||Viant, S. P.|
|Davies, S. O. (Merthyr)||Maclean, N.||Welkden, A. G.|
|Dunn, E. (Rother Valley)||Mainwaring, W. H.||Watson, W. McL.|
|Ede, J. C.||Mathers, G.||Westwood, J.|
|Edwards, Sir C. (Bedwellty)||Maxton, J.||Whiteley, W. (Blaydon)|
|Fletcher, Lt.-Comdr. R. T. H.||Milner, Major J.||Wilkinson, Ellen|
|Frankel, D.||Montague, F.||Wilmot, John|
|Gardner, B. W.||Morrison. R. C. (Tottenham, N.)||Wilson, C. H. (Attercliffe)|
|Gibson. R. (Greenock)||Naylor, T. E.||Windsor, W. (Hull, C.)|
|Greenwood, Rt. Hon. A.||Noel-Baker, P. J.||Woods, G. S. (Finsbury)|
|Grenfell, D. R.||Oliver, G. H.||Young, Sir R. (Newton)|
|Griffiths, G. A. (Hemsworth)||Paling, W.|
|Guest, Dr. L. H. (Islington, N.)||Parker, J.||TELLERS FOR THE NOES.—|
|Hardie, Agnes||Parkinson, J, A.||Mr. Groves and Mr. Charleton.|
|Harvey, T. E. (Eng. Univ's.)||Pethick-Lawrence, Rt. Hon. F. W.|
§ 9.55 p.m.
§ Captain Strickland
I beg to move, as an Amendment to the proposed new Schedule, in line 51, at the end, to insert:(4) If any person proves to the satisfaction of the Board of Referees that after the end of the last chargeable accounting period he has incurred any loss or expense arising out of or as a consequence of armament contracts (including a fall in value of stocks and stores) or in the termination of commitments and liabilities, the amount of any such losses and 1060 expenses, so far as the same shall not have already been allowed, shall be deemed to be an allowable deduction in arriving at the profits of that business for the purpose of the Armament Profits Duty, and any necessary repayment shall be made accordingly.We are approaching the end of the discussions on the Armaments Profits Duty and I was very much struck by a phrase used by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) when 1061 he said that he wanted to make quite sure that it was not a case of "Heads the manufacturer wins and tails the Government loses." I want to put forward a case where that position is completely reversed. The purpose of this taxation is that where excess profits are made as a result of the heavy expenditure which the Government have undertaken in the course of rearmament they shall be subjected to this duty. It is obvious that a company might make a profit for, say, two years, on which they would pay Armaments Profits Duty, and that in the third year, for some unforeseen reason, there might be a very grave loss. At the present time it is hardly realised that under the Socialist State in which we live to-day in this country the Government is a preferential shareholder to the extent of 27½ per cent, in every successful business in the country and does not recognise in any way losses which are made in industry. It is a preferential shareholder taking 27½per cent, out of the profits but taking no liability whatsoever for any losses made, which have to be borne by the companies themselves.
This is a special tax, and I ask in all fairness that my Amendment should be accepted, at least in principle, if not in the terms in which I have framed it, and examined very carefully by the Government to see whether it does not make out a very reasonable case. We are going to take 60 per cent, of the excess profits that are made, and it will be a grave injustice if a company are left to make a loss after they had paid on what was supposed to be an excess profit. My Amendment provides that if at the end of the time it can be proved, not by the capitalist concerned, not even by the Government, but by the referees, or in the case of Income Tax, by the Commissioners, that a greater sum has been taken by the Government than represents the excess profits that have been made, there should be relief.
The case of buildings, plant or machinery, and, in the case of the staff, compensation for cessation of employment at the end of the period—for any of these reasons which were so obvious at the end of the War and were then provided for, there should be the possibility of a man who has been charged more than he ought to have been charged under this duty being able to make out his case. In the case of buildings, plant and machinery he would go to the Board of Referees and 1062 in the other case submit the facts to the Commissioners of Inland Revenue, and if he can prove that the amount of A.P.D. which he has been called upon to pay is not justifiable from the point of view of fair play between the State and the company, he should have a chance of getting a fair and square deal. I do not want to labour the point, because I think it is one which the Government and the Committee are either willing to concede as being a fair proposition or are unwilling to concede.
§ 10.0 p.m.
§ Captain Crookshank
The hon. and gallant Member for Coventry (Captain Strickland) has quite clearly indicated the extent of his Amendment. It is to the effect that if at the end of the last chargeable accounting period of the Armaments Profits Duty a person can show that he has incurred losses arising out of or consequent upon armaments contracts, including a fall in the value of stocks and shares or in the termination of commitments and liabilities, the loss shall be allowed backwards against profits or the chargeable accounting period within the three years of the life of the duty. I do not doubt that he has raised this question to-day having in mind certain provisions which were made at the termination of the Excess Profits Duty under the Finance Act, 1921, when various options were given to traders who could show that at the end of the period of liability to Excess Profits Duty they had suffered a loss through a fall in the value of the stocks which they held at or about the date of termination.
I do not think I need discuss the matter beyond saying that it seems to be unnecessary, and, in fact, is impracticable at this particular stage, to come to any final views as to what ought to happen when this duty should come off in three years' time. After all, we cannot begin to hazard a guess as to what trade conditions may be then or whether there will then be any need to make provision for relief in respect of a fall in the value of stocks and the like. My right hon. Friend feels that this is a subject which will have to be considered in the light of circumstances far nearer the time when it is likely to be applied, if it has to be applied at all, that is to say, somewhere nearer the date when the duty comes to an end, instead of before it 1063 begins to be collected. I think that perhaps the Committee will agree that it is premature to insert in this Finance Bill provisions of this kind, and for that reason I hope that my hon. and gallant Friend will not press the matter to-night.
§ 10.4 p.m.
§ Mr. Pethick-Lawrence
I do not know whether the hon. and gallant Member who moved the Amendment quite appreciates what the words of it seem to imply. It does not speak of a loss in the latter part of the accounting period, but, as I read it, it may mean that though during the whole period of the years when the tax is running a company may make so much profit in excess of standard profit that it attracts this duty, if subsequent to that period—it does not say how long afterwards—it makes a loss and that loss arises on armament contracts it can then set that loss, made after this period has come to an end, against the profits made during the chargeable period. I do not know whether that is the intention of the hon. and gallant Member, but it seems to me an extraordinary proposition and I am glad that the Chancellor of the Exchequer is not prepared to entertain it.
§ 10.5 p.m.
§ Mr. Peat
I feel that my right hon. and gallant Friend has already a precedent for granting this Amendment, in that the Chancellor of the Exchequer has laid it down that in the case of redundant plant which may, after the end of the period have been a considerable loss to the manufacturer of arms, the manufacturer shall be compensated for that loss. That is a consequential loss, and is, I gather, the whole purport of this Amendment. It may appear after the end of the period, and it is proposed that the actual losses during the period shall be taken into consideration and offset against any duty which may be paid on the profits which may have been made during that period. I can see no reason why the principle should not be conceded in this case. Just as truly as you may have redundant plant, you may have expenses which are not entirely able to be judged until the end of the period. I would ask my right hon. and gallant Friend to take this matter into consideration before he turns down this Amendment.
§ 10.6 p.m.
§ Sir H. Williams
The Amendment raises considerations of great importance. I was for some years the secretary of an organisation known as the Machine Tool Trades Association —
§ Sir H. Williams
I do not quite see why it should have been a shame. They remunerated me, any way, and I still have an affection for that industry with which I had a connection for many years. The effect of the War on the industry was to force them to produce in four years an output which was normally produced in eight or ten years. As soon as the War was over, all those firms passed through a very difficult period. There were great masses of plant. Some of it was specialised plant, but some of it was of a very general character suitable for all sorts of jobs. During the next five or six years most of the people concerned passed through a period of acute difficulty. Some of the firms ceased to exist. Some of the Departments have been faced with the problem of a machine tool industry which is too small because the Excess Profits Duty destroyed part of it. The scale of this industry's operations had been magnified, with the result that, while their profits had been very much increased, some 40 per cent, or 80 per cent, of them was taken away. Then they went through a period of about six years, during which all of them were running in unfavourable circumstances. The capital which they ought to have retained to carry them through the lean period had been taken away by the Treasury.
I heard the other day about a gentleman who had recently started in business. He did not know much about it. He had not been a Member of Parliament and in touch with things. He received a request from the Inspector of Taxes, so he went along. He had one of those assessment forms to fill up. He asked the inspector: "What does it all mean?" The inspector said: "If you make any money, out of every 20s. you make I take 5s. 6d. from you."The man said: "I see; but suppose I lose 20s., do you give me 5s. 6d?" The inspector said: "No." So then the man said: "Well, I won't join." That story illustrates what is behind this Amendment. Remember that under the Ministry of Supply Act 1065 these activities are going to be forced upon people. [An HON. MEMBER: "They need not join."] They may not want to join but it will be forced upon them. Believe me, much of this armament business is not very profitable.
§ Sir H. Williams
I say it quite deliberately. I am a director of one or two companies. I was at one to-day at which we considered our annual report. We have done a good deal of what amounted to Government work, but we found that the profit on it was about one-half what we expect to make on ordinary work. Let hon. Members not run away with the idea that all this Government work is very profitable. I must congratulate those responsible—in this case it happened to be the Office of Works—on the way in which they induce people to take on contracts. When this Government work comes to an end a great many firms will have built up large plants consisting of a great quantity of machinery. Some of it will be able to be adapted to civil work, but before the firms can get the civil contracts much time may pass away, and they may find themselves in very great difficulty. It is not so easy to adapt plant which has been used for the production of munitions to the production of other things. I remember when Woolwich Arsenal was in very great difficulty. The War had stopped and nearly all operations had been cut down. The Government of the day decided to build locomotives. The cost of those locomotives was the greatest joke in the engineering world.
When a manufacturing department turns over from the production of one article to the production of another, it experiences very great difficulty. Take the history of the War and that of the great armament firms. I have no interest in them. In 1919, 1920 and 1921 they were in difficulties, and they had to scale down their capital. Messrs. Vickers, Messrs. Armstrong, Whitworth and all the rest of them had difficulties. It is because of my observation of the Excess Profits Duty that I do not view the matter with any enthusiasm at all from the long-range point of view of the prosperity of the country and the employment of our people. The only difficulty about this tax—
§ The Deputy-Chairman (Colonel Clifton Brown)
I would remind the hon. Gentle. 1066 man that we are discussing the tax, and that there is an Amendment before the Committee. We have been a long time in getting to it.
§ Sir H. Williams
I was led astray, partly because it is the first time I have taken any part in the Debates on the Armament Profits Duty. I am getting beyond the scope of the Amendment. The object of the Amendment is clear, that is to say that we should take into account the whole effect of the armaments contract and the whole effect of the duty. You should not say you will merely apply, the duty over that restricted period during which it is presumed that these armament contracts are in being, and, on paper at least, large profits are being made, but, if substantial losses are incurred, they should be set off against the profits. In other words, the story I used earlier in my speech, about the new gentleman in business who said he was not prepared to join on the ground that the Government took 5s. 6d. out of every £1 of his profits while they were not prepared to subscribe 5s. 6d. towards every £1 of his losses, is pertinent to this Amendment, and for that reason I hope that my right hon. Friend, although he cannot accept the Amendment to-night, will give the matter further consideration. If consideration is not given to it now, it will have to be given later on, not only by Members on this side, but by Members opposite, when they see large numbers of people, whom they profess to represent because they belong to various trade unions, dismissed from their employment as a result of the evils that have been produced by the fact that abnormal profits over a short and temporary period are not going to have set off against them the losses which are inevitable during the subsequent period.
§ 10.17 p.m.
§ Miss Wilkinson
The hon. Member for South Croydon (Sir H. Williams), instead of being secretary of the Machine Tools Association, ought to be secretary of a society for the prevention of cruelty to capitalists. I wonder whether he imagines that he can get away, after our experience of the last 20 years, with the sort of speech he has just made. He said how unfortunate it is, because the poor things do not want to make these profits, but have had them pushed on to them, and so much is taken away from them by the Treasury which they ought to be able to 1067 use to tide over bad times. There is no Member on this side of the Committee who represents one of the big distressed areas which were the heavy armament towns during the last War who would not echo the statement that the high profits made during the War were distributed, and no reserve was left to meet the difficult times which followed. Why was that? Surely the whole reason, as is shown by the history of firms like Palmers of Jarrow or Dorman Long of Middlesbrough, was the haste, after the War and just at the end, not only to distribute profits in the form of bonus shares, but to buy up subsidiary concerns at inflated prices, to use cash reserves in order to give very large profits to a few people, and then to unload the subsequent losses on the public. The consequence was that at the end some people did make very large profits, and did get away with enormous and highly inflated amounts of capital, for they sold their shares at very high prices to the long-suffering public, who have had to bear the losses ever since because they have got no dividends.
If the Amendment were carried, it would be possible for all kinds of jiggery-pokery to take place at the end of such a period as we envisage after a war, so that not only would the inner ring of shareholders in armament firms be able to do all the taking away, but they would be able to make these arrangements among themselves and then unload a proportion of the consequent losses on the Treasury as well as on the public.
§ Captain Strickland
I hoped I had pointed out that I was not defending a position like that, but that the case would have to be proved to the referees. I think the referees would be capable of dealing with that kind of thing. I do not want to be misrepresented in the matter; I have no wish to help people to profiteer unfairly or unduly at the expense of the State; I only want to see fair play.
§ Miss Wilkinson
I am glad that the hon. and gallant Gentleman admits the general case I am putting forward. But surely, in view of the sort of things that happened in the shipping world, the insurance world, and the steel world immediately after the War, he knows perfectly well the sort of time the referees would have 1068 in disentangling what had really happened behind the scenes. It was 10 years, in some cases, before the truth was really known. If the Amendment were passed, these people would be able to get away with that in the hectic years that would follow a war, or if we were to have a bad period of depression, for we have got to a stage in employment now when an outbreak of peace is only less fearsome than an outbreak of war, because of the appalling social consequences that would result. In a condition like that the people in the inner ring would be able to capitalise, to clear out with all the swag, and to unload all their losses on to the Treasury. I do not think the provision with respect to the referees would be anything like a sufficient safeguard in view of what happened after the last War.
§ 10.21 p.m.
§ Mr. Radford
My hon. and gallant Friend, in moving this Amendment, made it clear that he did not wish to adhere strictly to its words if the Government would accept its purpose. The Amendment says:If any person proves to the satisfaction of the Board of Referees that after the end of the last chargeable accounting period he has incurred any loss or expense arising out of or as a consequence of armament contracts …As the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) pointed out, there appears to be no limit to the period when claims for such losses might be made, but I think it is clear that what my hon. and gallant Friend meant was that the period should be the last accounting period, when it was known that the rearmament scheme was coming to an end. Then the raw materials which such a firm had would probably be falling in value. It is perfectly obvious that the intention of the Committee and of the Government is that 60 per cent. of the excess profits shall be paid over the whole accounting period, and, therefore, the aggregate of the results of the accounting period ought to be taken into account. Under the Excess Profits Duty, deficits at the end of any year were taken into account. This Duty is on absolutely parallel lines. I think the promise of the Financial Secretary that the matter will be duly considered is as much as we can hope for tonight, although it is hardly a satisfactory answer, because hon. Members opposite 1069 may be in power then, and we know the kind of sympathetic treatment that any manufacturing concern will receive at their hands.
§ Amendment negatived.
§ 10.24 p.m.
§ Sir Arnold Gridley
I beg to move, as an Amendment to the proposed new Schedule, in line 65, at the end, to insert:(c) where any expenditure is incurred by a person carrying on a business following an Order by the Minister of Supply or by any other Minister (with the exception of the Minister for Civil Defence) for the purpose of the protection of buildings, plant or personnel, such expenditure, so far as it is not met by capital repayment by His Majesty's Government, shall be allowed as a deduction in calculating the amount of excess profits assessed to Armament Profits Duty.I have no doubt that every Member of the Committee shares with me a measure of relief that this is the last Amendment which we have to consider on this lengthy Schedule. Under the power of the Civil Defence Minister, manufacturing firms have to make, and have in most cases made, provision for the safety of their employés in the event of air raids. There is a new obligation which the Minister of Supply, under the Bill which is now in another place, may impose upon industry by calling for the provision of measures for the protection of buildings and plant. The financial provisions, as far as one can follow them—and I hope that I am right in the deductions that I have made—really amount to this, if I may give a simple example by way of illustration. If an undertaking is called upon to spend £40,000 on protective measures, there is a capital grant of £10,000 towards such expenditure. If the firm is engaged to the extent of 50 per cent, on armament work, half the difference between £10,000 and £40,000, namely, £15,000, may be added to the contract price. What is clearly intended to be given by way of a grant would be taken back to the extent of 60 per cent, under the A.P.D. tax, which we have been considering for the last few days. The purpose of the Amendment is to rectify what obviously seems to have been an oversight. It is absurd to give a relief with one hand and take a large measure of it back by a tax on the other. For that reason 1070 I and my hon. and gallant Friend have put down this Amendment, which I hope the Financial Secretary to the Treasury will see his way to accept.
§ 10.28 p.m.
§ Captain Crookshank
My hon. Friend is relieved that we are coming towards the end of the Committee stage—he is nothing like as relieved as I am—and he hopes that we shall be able to meet him in this Amendment. It is a great tribute to any Member of this Committee that hope can go on springing, as it has throughout this Bill. I quite appreciate, and so does my right hon. Friend, the point which my hon. Friend has put forward. It is true that if the Ministry of Supply Bill passes into law in its present form the Minister of Supply will be empowered to order Government contractors or sub-contractors to take such measures as are necessary to secure the functioning of some of these works in the event of war. He will also be empowered to make to contractors a grant equal to an appropriate proportion of the capital expenditure which is given in that Bill in terms of 5s. 6d. in the £ or 27 ½per cent. I do not know whether there is any confusion on this subject, but the basis that we have been putting forward on the Schedule and in the earlier new Clauses with regard to Armament Profits Duty is that the plan of assessing profits is on the lines of Income Tax assessment. Capital expenditure, therefore, would not be allowable as a deduction in computing profits. No ground therefore exists for the Amendment. The fact that the Minister of Supply will have power to make a certain grant, calculated in a certain way, towards capital expenditure does not really have any bearing, particularly on the question of non-allow-ability of the expenditure as a deduction from profits for taxation purposes. It would look as if we were trying to do two entirely different things if we accepted the Amendment of my hon. Friend and for that reason I ask the Committee not to accept the Amendment.
§ Amendment negatived.
§ Schedule added to the Bill.
§ Bill reported, with Amendments; as amended, to be considered upon Thursday, and to be printed. [Bill 182.]