§ Question proposed, That the Clause stand part of the Bill.
§ 10.0 p.m.
§ Mr. Houghton
Now, I do have to be tiresome. This Clause is the second one under Chapter 3, and under Chapter 3 we part company with the pilot—the pilot being the White Paper entitled "Taxation of Short-term Gains." We are now moving into the open sea, and I take the opportunity of expressing the hope that explanations might be given of difficult and complicated Clauses in the Finance Bill, even when they do not relate to the taxation of short-term gains.
This Clause is very complicated; it covers about two pages, there are cross-references to the Income Tax Act, and to the Finance Act, 1954. In a moment or two, we shall come to another complicated Clause and, a little later, to yet another. Cannot we be told what these are about before we consider them in detail?
I found that the White Paper enabled hon. Members to get clear in their minds the objects and purposes, and the framework of the new tax, which made it much easier to deal with the technical detail, and the obscurities, problems and Parliamentary draftsmanship in the Bill itself. One or two of my hon. Friends have told me that in our debates they have not found it necessary to refer to the White Paper to understand what the Clauses were about, because the White Paper had registered in their minds and they knew what the Government were after, which made it much more convenient when we were dealing with the Clauses themselves.
572 I know that on Second Reading the Chief Secretary went through the Bill, but on such an occasion he naturally does not want to dwell too long on obscure Clauses that are not of general interest. In Committee, however, it is mare necessary to get down to the detail, even though the proposals may concern a limited number of people and be of particular interest to specialists and tax advisers. The Committee should know why it is modifying the right to set capital allowances against general income; and what has turned up to make it desirable to modify Section 20 of the Finance Act, 1954—which, itself, is a complicated Section, covering more than a page.
I would therefore suggest to the Chief Secretary that as we come to these several Clauses on which there are no Amendments—I think that the next Amendment is to Clause 20, or to an even later Clause, and we have several Clauses to deal with before that—the might tell us what we are doing. Would it be asking too much of the Chief Secretary just to get up far five minutes to acquaint the Committee with what it is we are doing? We should not legislate in blinkers and no one is more lucid in explanation than is the Chief Secretary. Since hon. Members do not intend to keep the debate going until the Secretary of State for War arrives the Chief Secretary has no problems and can answer the points I have raised, for he has the field to himself.
§ Mr. Brooke
I will certainly bring to the attention of my right hon. and learned Friend the remarks of the hon. Member for Sowerby (Mr. Houghton) about the advantages of having White Papers. They certainly facilitated our discussion of Clauses 9 to 15, but it would, perhaps, be going too far to produce an explanatory memorandum for every Clause. I will certainly do my best to deal with the Clause under discussion, though I very much doubt whether any explanation of mine will be more crystal clear than the words which we already have in front of us.
The purpose of the Clause is to bring forward by a year the date at which capital allowances can be brought into account by way of claim for relief against losses. This is something which particularly affects the shipping industry, 573 as the hon. Member for Sowerby will know. That industry has large capital allowances on its new ships and, at the same time, it also has substantial income from investments which are normally set aside against the requirements for the building of new ships. That is the practical reason why the Clause is of more benefit to the shipping industry than to any other. The case for it was brought to the notice of my right hon. and learned Friend by the shipping industry, and I am glad to say that appreciation has been expressed.
If I may seek to put it in a non-technical way, under the present law the capital allowances will only create a loss if they exceed the combined total of the assessment for the year in which they are to be allowed and the profit arising in that year. The assessment will be on the previous year's profits. A firm may not merely have had to wait a year but may not have been able to establish a loss in the second year if the assessment for the previous year and the profit for that year exceeded the amount of the capital allowance. I can assure the Committee that we are not just letting money slip through our fingers. It is true that there will be a loss of revenue of about £6 million in the first year, but it will taper off because the total amount of capital allowances is not itself enlarged by the Clause.
It simply means that, as the law stands, firms must wait—indeed, they have established to the satisfaction of my right hon. and learned Friend that they must wait unfairly long—to secure the advantage of the capital allowances. It is desired at present that the shipping industry should not be unduly handicapped. It must face severe competiton and if anything can be properly done, not by way of special undeserved advantage but by righting a wrong in the existing law, it is desirable that that should be done.
As to the complications of the Clause, they arise out of the difficulties of making provision for exceptional cases—of a new firm being established and one being wound up—and of the possible variations that arise in ordinary tax law.
What I have said explains as succinctly and as clearly as I am capable of expressing the principal purposes of 574 this Clause. If I or my right hon. and learned Friend are asked about any other Clauses, we shall seek to do the same.
§ Mr. Millan
This is an important Clause in so far as £6½ million are involved, according to the Chief Secretary, and therefore I think we were entitled to an explanation.
However, I want to raise another point. We now have the position, so far as capital allowances, and indeed losses are concerned, that certain preferential treatment has been given to the shipping industry. It receives an investment allowance of 40 per cent. as compared with 20 per cent. for other industries. Now we are introducing special provisions with regard to losses, which, as the Chief Secretary said, arc specially designed to help the shipping industry. I have no objection to helping the shipping industry in this way, or indeed any other industry which may be in rather difficult circumstances. But if there is a case for this rather negative procedure of helping industries which are in difficulties, there is a far stronger case for helping new and expanding industries to enable them to expand more rapidly.
I want to contrast the special treatment which we give to the shipping industry, which is going through a bad period, with the complete failure of the Government in this Bill, or indeed in any other Finance Act in the last two years, to deal with the whole question of capital allowances in a way which would give stimulus, incentive and encouragement to the new and expanding industries. One sees absolutely nothing about that. There is nothing about allowing them to accelerate their depreciation allowance, nothing about rationalising the whole structure of depreciation allowances. These matters require considerable attention.
As I say, one has no objection to helping the shipping industry, but I wish the Government would do something in a more positive manner for the rest of our industry and particularly for that section of industry which is expanding. After all, the President of the Board of Trade and other members of the Government are continually reminding us that we must not use Government money to prop up the old and inefficient. The old and inefficient must give way to the 575 new, the modern, the radical and progressive industries. It is the sort of thing that we were told about in connection with the cotton industry, for example.
Yet, if one looks at the taxation legislation one finds that the only industries to which the Government give financial encouragement, by way of investment allowances or anything else, are those industries which are in a decline and for which the Government say we must not use Government money to protect. I wish we could get some encouragement for the expanding industries, and if we cannot do it under this Clause I hope the Government will bear this in mind when framing Finance Bills in the future.
§ Colonel Sir Leonard Ropner (Barkston Ash)
I wish to express appreciation of what the Chancellor of the Exchequer is proposing in this Clause. I should like to add, however, if I am in order—and I do not think there will be time to pull me up if I am out of order, as I shall be very brief—that the shipping industry has been considering the introduction of Amendments to the Clause. The industry feels that the Chancellor might have gone rather further than he has done, and I should like the Chief Secretary to note that two new Clauses have been tabled which I trust will be called when we reach them.
§ 10.15 p.m.
§ Mr. Fletcher
I do not think that the Chief Secretary did very well in replying to my hon. Friend the Member for Sowerby (Mr. Houghton). My hon. Friend made the point which, I think, strikes a great many Members of this Committee, that this Clause is an extremely complicated Clause and very difficult for Members of the Committee and for the public to understand. He said how very convenient it was to have a White Paper dealing with the earlier Clauses 9 to 15; that it was of great benefit to all Members of the Committee. He said how very convenient it would have been if we had had a White Paper dealing with Clause 17 and other Clauses.
The Chief Secretary said it was not possible to have a financial and explanatory memorandum dealing with each Clause. But why not? If it is not possible, why, at any rate, is it not possible for the Chief Secretary, before he comes 576 to explain a complicated Clause like this, or Clauses 18 and 19, when we come to them, to supply himself with a prepared, concise statement of what the Clause is intended to do and what it does, so that if the Chief Secretary makes a speech it can be read and that may at any rate be some substitute for an explanatory memorandum?
Why does the Chief Secretary leave himself in the position of having to improvise, as he himself said, to the best of his ability—uttering some stuttering, rambling explanation of the Clause? It would be far more valuable if he prepared his case properly, and prepared a brief, and was able to tell the Committee what the Clause does, what it is intended to do, and what the substance of it is—in other words, if he prepared a short, intelligent statement which took the form either of a White Paper or of an explanatory memorandum.
Is it too much to ask the Chief Secretary to take the trouble to do that for the benefit of the Committee? I hope that before we come to Clauses 18, 19 and 20, which are even more complicated, the Chief Secretary and his colleagues on the Treasury Bench will take note of that suggestion, because it really is very difficult for people to understand these complicated measures in the Finance Bill, measures dealing with miscellaneous Amendments to the law and with references and cross-references to earlier enactments and earlier Income Tax Acts and all kinds of other Acts. Something is required of the nature of a precise statement equivalent to the White Paper on Clauses 9 to 15. Surely it is not too much to ask the Treasury to do this.
Was the apparent refusal to do it—or the neglect to do it—on this occasion intended to make it more difficult for Members of the Opposition—[HON. MEMBERS: "Where are they?"]—to do their duty in criticising these Clauses? It is not night that we should be asked to deal with complicated Clauses like this at this hour of the night without some far more intelligent explanation of their object and purpose than we have yet had.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.