Source: https://api.parliament.uk/historic-hansard/commons/1937/jul/15/finance-bill
Timestamp: 2019-04-21 18:21:36+00:00

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HANSARD 1803–2005 → 1930s → 1937 → July 1937 → 15 July 1937 → Commons Sitting → ORDERS OF THE DAY.
§ As amended, further considered.
§ In the case of any business the chargeable profits whereof include income from property, there shall be deducted from the amount of National Defence Contribution otherwise payable in respect of any chargeable accounting period an amount equal to five per centum of the aggregate of the net annual values of all properties the income from which is included as aforesaid, which properties were, during any part of such accounting period, properties the rents whereof were restricted under any of the provisions of the Rent and Mortgage Interest Restriction Acts, 1920 to 1935.
This Clause is designed to afford exemption from National Defence Contribution to businesses whose income is already restricted by the control afforded by the Rent Restrictions Acts, to companies whose property rights are drastically regulated in that the yield on their property is restricted in the interests of the poor. The limitation in such cases is not one of percentage yield, but of the actual cash return, which is fixed at a maximum low rate irrespective of economic circumstances. The result is that these companies are in such a position that they cannot reap any value from increased prosperity, nor can they make full economic use of their capital; and it is my submission that the yield on that property cannot fairly be treated in the same way as an economic yield on property which can be used freely. It seems to me that for the purpose of National Defence Contribution it would be only right and proper to put companies owning controlled properties rather in the position of those public utility companies which have restricted income 1520 and are, therefore, exempt from National Defence Contribution. I need not say more, except that I hope the House will not think that this new Clause is in any way concerned with slum property. It is intended to deal with those larger companies which in their own interests can have only good property which is well maintained. The Clause is reasonable in substance and in spirit, so reasonable indeed that it speaks for itself, and I hope that the Chancellor of the Exchequer will accept it.
My hon. Friend the Member for Blackpool (Mr. R. Robinson) has stated his proposal with admirable brevity, and he will excuse me if I reply to it without speaking at any great length. The proposal seems to me to amount to this: It is a proposal that National Defence Contribution shall not be imposed upon property owners unless they are free to pass the tax on to their tenants. That is really the nature of the proposal. I do not think that it is a proposal which the House of Commons will accept.
My right hon. Friend has rather misinterpreted the tenour of my speech. The point behind my argument is this: At the present moment these people who own controlled property in the interests of the poorer section of the community are forced to accept a rent which is very much lower than what would normally be an economic return, and lower than the rent which they could gain on the open market. It seems to me that by this very restriction on the yield of their capital they are rather put in the position of a public utility company which is exempt from National Defence Contribution.
I appreciate the kind of case that my hon. Friend has in mind, and I am not without sympathy with it. But I am sure he will appreciate that we really have to look at the effect of the new Clause. He told us that the Clause would not apply to slum property. I reply that it would; it would apply to protect the owner of slum property just as it would apply to those entirely reputable companies which my hon. Friend has more particularly in mind. I cannot 1521 take the view that because the Rent Restrictions Acts prevent the raising of rents in a free market, therefore the owners of house property who are restricted by those Acts should escape from any portion of this tax. After all, the Rent Restrictions Acts were not passed for the purpose of fixing what was the reasonable rent to charge. They were passed for the purpose of preventing rents being raised. That is not the same thing as pronouncing judgment on what is or what is not a reasonable rent. If rents had been unlimited they might have been put up to much higher figures, but the State came in and limited the further profit that might be made.
In those circumstances my hon. Friend will see that while there is no doubt very much force in the argument about estate companies, I cannot recommend acceptance of such a wide proposal. I do not take the view that the holding of every sort of house in this country at the present time under rent restriction can be regarded as strictly analogous. When one speaks of a public utility company one is speaking of something that is in the first place a monopoly, and a monopoly which is providing an essential public service—transport, lighting, or something of the kind. No doubt houses are very essential. But so are boots, and so are umbrellas. We really cannot make exceptions to the general scheme of the tax because there is a case to be made that in instances of this sort it may not be possible to pass the tax on to the tenants of the property, the rents of which are thus restricted. I recognise that there is a certain measure of hardship, but there is hardship in every case of taxation.
I heard only a few words of what the Chancellor of the Exchequer has said, and I might not have understood the whole substance of his argument, but I am not very much impressed with that part of it which I did hear. Public utility companies have been exempted on the ground that either their profits or their rates of charges are limited. Here is a case where people supply what is a part of an essential public service, and they have been limited in their profits ever since 1915. The rents that these people draw are proportionately very much less than the rents 1522 charged by local authorities for houses of equivalent accommodation. [HON. MEMBERS: "No."] Every municipality in this country, on the basis of accommodation for accommodation, is charging, and every other owner of free houses is charging very much higher rents, proportionately. That is undeniable. If not, what is the objection to removing the Rent Restrictions Acts from the Statute Book? The knowledge that rents would rise. The rents of controlled houses are below the economic limit. In fact, we have created a new vested interest by the Rent Restrictions Acts, and, rightly or wrongly, we have transferred part of the capital value to the tenants. No one can deny the truth of that. Here are people who have been deprived for many years of part of their property by the action of the State. Into the circumstances we need not go now.
Here are people supplying an essential service, who have been supplying it, in one sense, at a loss that was imposed upon them by Statute over 22 years ago—in one sense a loss, because the rent they obtain is substantially below that which they would obtain in a free market and which every municipality has charged for similar accommodation. The people who are in this unfortunate position are now, where the property happens to be owned by a company which does not do anything else but own property for investment—these people who for years have not had a square deal are now called upon to pay this special tax. The only argument of the Chancellor of the Exchequer is an argument not on merit but an argument that it would cost so much money. In effect he says, "I do not want to do it because I have already given so much away to other people." If that is the argument, we have to put up with it, but we are not convinced on the merits and I ask the right hon. Gentleman to give a little more consideration to the proposal.
Question, "That the Clause be read a Second time," put, and negatived.
I beg to move, in page 6, line 17, to leave out from "vessels," to the end of line 18.
The Chancellor of the Exchequer will recall the brief discussion we had on the 1523 Amendment in Committee. The proposal has been introduced to take away the privilege held by off-licence holders for 75 years past, which enabled them to sell a commodity called "sweets"—I do not understand why that term is applied—more properly known as British wines, in open vessels or in bottles of any size to customers. For some reason the Finance Bill on this occasion takes away from off-licence holders the privileges they have possessed in this respect. When the Chancellor spoke on my Amendment at a previous stage, he directed his attention particularly to the abuses that might arise if these British wines were sold in open vessels. With regard to the other point as to the possibility of permitting the sale of British wine in bottles that hold less than a pint, he went so far as to say that, in view of certain other points that were brought out in the short Debate which took place, he would, without giving any promise, look into the matter and see whether it was possible to do anything. Acting on that suggestion, I have confined my Amendment merely to the last part of the Clause in order to try and maintain the right of off-licence holders to sell British wines in any quantity less than one reputed pint bottle.
There is no suggestion that the right of off-licence holders have in this respect been abused and the suggestion was not made by the Chancellor nor by anyone in the discussion. It is difficult for the House to follow this discussion because of the difficulty of knowing exactly what we are discussing. For the purposes of greater accuracy, therefore, I would like to display to the House what it is that are called sweets in this Clause. I have here a bottle of one of the most popular brands. It is called "Rich White Wine" and is sold by off-licence holders. Another bottle I have here is of "Whiteways Ginger Wine." I produce these two small bottles in order to show that there is nothing in the argument used on the last occasion, when it was suggested that people might go into an off-licence with, say, a medicine bottle, or that the off-licence holder might bottle the stuff himself and hand it out in that way. These are proprietary articles and they are popular with and purchased mostly by old ladies and others who have a rooted objection to going into a public house. 1524 They prefer to go into an off-licence and buy a small bottle, which they can get very cheaply.
I find some difficulty in understanding why it should not be possible to accept the limited Amendment, which is confined to these British wines that are proprietary articles and are not bottled by the off-licence holder but by the manufacturer. These wines, I am told, are made almost entirely from grapes derived mainly from the Empire and manufactured under excellent hygienic conditions by British labour. They are purchased almost exclusively by the poorer classes, and I suggest that hon. Members who have more expensive tastes in wines should not deprive the poorest classes of the little comfort which they derive from buying these wines. The effect of the Clause as it stands will be to give a preference to hotels and public houses. Almost every new hotel and public house has an off-licence department, so that the off-licence holder will have to refuse the poor old people who come in to buy this British wine, because he is unable to supply them, and tell them to go to the nearest public house in order to obtain it. In the case of the off-licence which is part of a public house, a person who wants to purchase some of this wine will merely have to go in at one door and out at the other. The Clause will give an advantage to the hotel keeper and the publican who have off-licence departments as part of their premises.
I should make it clear that I am not a spokesman of off-licence holders. I know only one. I have known him for 30 years, and I know him only because he lives not far from me. I am merely putting the Amendment forward in order to assert the right of poor people to obtain cheap small bottles of wine, as they have been able to do in the past, without being forced to go into a hotel or a public house. I understand that this practice obtains in Scotland with no evil effect, and there have been no allegations of any abuse. There have not been any in England. I believe that the licence holders are respectable citizens. Probably 95 per cent. of them are supporters of the National Government. They are a body of people who earn a modest living and obey the law, and I do not think that any allegation can be made against them. Big profits are earned by certain sections of this trade, but they do not 1525 come the way of off-licence holders. The concession asked for in this Amendment, which is strictly limited to the narrow point into which the Chancellor promised to look, will not effect the revenue to any material extent. I hope that the right hon. Gentleman may see his way, having given further attention to it, to grant it.
Unless the Amendment is accepted, it will mean that the legitimate owner of an off-licence, who for over three-quarters of a century has been legally entitled to sell these sweets, which, as the hon. Member has explained, are really British wines, in small quantities, will no longer be entitled to do so. His most serious competitor, the off-sales department of the on-licence will be able to do so. What reason can be given for so grave an injustice of transferring trade from one normal source of supply to another? Already the off-sales department of the public house possesses certain decided advantages over the selling rights of the off-licence. Wines and spirits can be sold in open vessels and in small quantities for consumption off the premises. While no objection can be taken to the on-licences catering for off-licence sales, I submit that in all fairness the off-sales department of the off-licence should be granted similar trading rights. What are these cheap British wines? We have had two samples produced here this afternoon.
We have only seen them.
No doubt the hon. Member for Burslem (Mr. MacLaren) will be able to taste them shortly. When I was a young man they were called raisin wine, orange wine, ginger wine, port wine, and all sorts of names, and if to-day some of them are given more fancy names in order to bring them up-to-date, they are still the same kind of stuff that total abstainers delight to provide at weddings and funerals. They are manufactured in this country by British labour. Only the purest fruit juice is used in their manufacture and most of it is produced within the Empire. The more British wines we sell, therefore, the more workpeople will be employed. It has been said by some foolish people that other foolish people in their own homes have been known to add methylated spirits to give the wines 1526 a kick. Surely, if that has been done it is no fault of the off-licence holder.
No case has been proved that these wines have been supplied to the public adulterated with harmful or undesirable ingredients. It is significant that those people who make such allegations have never instituted proceedings in order to prove their correctness. In any case, the action proposed in this Bill will not meet the problem. The consumers affected, the lower middle and working-classes, the people who quite rightly limit the amounts they purchase in accordance with the size of their purses, will resent being constrained either to buy more than they want or to go elsewhere for the small quantities that they require and can afford. It is to obviate such resentment and in order that a worthy and highly respectable body of traders shall have fair play and justice, that this Amendment has been moved.
I have had representations on the subject of this Amendment from many quarters, and I observe that it is supported on the Order Paper by hon. Members sitting in all parts of the House. There are, naturally, certain differences of opinion about it, and possibly that is inevitable, because I do not know that trading interests are all of the same mind in the matter. In putting forward this Clause we were not so much concerned with the revenue point of view, but were endeavouring to trim up certain loose ends of the law, and the question before the House is whether we should do it in the terms of the Clause or whether we should do one thing at a time and make the present Clause refer only to the sale of wine in open vessels by off-licensees.
The situation is a curious one as far as England is concerned. An on-licensee may sell wine or other things either in a closed or an open vessel and in such quantities as the customer wants. Ever since 1910 the off-licensee has been limited in two ways in the sale of wine. First of all, he may not sell wine in an open vessel, and, secondly, he may not sell wine—in England; it is different in Scotland—in any quantity less than one reputed pint bottle. When we say "in any quantity less than one reputed pint bottle" it does not mean that a licensee cannot supply his customer with wines 1527 in those nice little smaller bottles such as have been exhibited to us, but that he must sell two of them at a time. The sale of two quarter-bottles constitutes a sale of a half-bottle. Therefore, it is merely the total quantity sold at a time which matters. As regards sweets—these British wines and some other things—there has never been a law in England which required the off-licensee to sell the liquid in a closed vessel. That seems to me absurd. If a man has only an off-licence manifestly he ought not to be entitled to sell excisable liquors in an open vessel. That a person should be able to go to his shop and say, "Fill that" and then to take it away is plainly wrong. Therefore I think we should all be at one in desiring to amend the law by providing that a man possessing an off-licence may not sell sweets in open vessels.
Now comes the second question raised by the hon. Member for North Tottenham (Mr. R. C. Morrison). The Clause goes on to say that an off-licensee may not sell these sweets in a quantity less than one reputed pint bottle. As I have pointed out, that would not mean abolishing the quarter-bottle; the licensee would only have to sell two quarter-bottles at once.
How could two bottles be one reputed pint bottle?
One reputed pint bottle is really called a half-bottle, and I was substituting the word "half-bottle." You do sell a quantity which is not less than one-half bottle if you sell two quarter-bottles.
That is not one bottle.
Undoubtedly it has been the practice to supply the public with these smaller bottles. The hon. Gentleman produced two, unfortunately sealed, and I cannot recall in Parliamentary history any more eloquent exhibit since the days when Edmund Burke produced a dagger and flung it on the Floor of the House. This practice of selling wine at off-licence shops has been going on in Scotland, and no one is proposing to alter it, and I do not see any particular reason why the North of the Tweed should have an advantage over the rest of the country in this matter. I should 1528 like, at any rate, to see how the administration of the new law providing that there is to be no selling of sweets in open vessels works out, and in view of the number of hon. Members who have put forward views in support of this Amendment I am prepared to accept it and to omit from the Clause the words or, in England, in any quantity less than one reputed pint bottle. I cannot really think that the matter is of very great importance to the interests concerned. I do not desire in the least to alter the balance between the on-licence trader and the off-licence trader, because it is our duty to deal fairly and properly with all branches of the licence trade. I cannot think it will be a very important point from the on-licensee's point of view, but if off-licensees do attach importance to the change, I think we can agree to it.
I wish to express on my own behalf, and on behalf of all the other Members of the House who have put their names to this Amendment, our appreciation of the action of the Chancellor in accepting it. I had myself brought a bottle, from a place which the Chancellor knows very well, in a constituency which he himself at one time represented. It is corked. Somebody has been good enough to hand me a corkscrew since I came here, and if the Chancellor really meant what he said in his a references to the bottles produced by the hon. Member for North Tottenham (Mr R. C. Morrison) I should like to present him not only with this bottle but with the corkscrew.
As the Chancellor of the Exchequer has said, no question of importance concerning the revenue is involved in this Amendment. I agree that it does not raise a very important question. The position is that of late years there has grown up a business in what are called British wines, and that it is really necessary, in the interests of the administration of the licensing laws, that the law on the subject should, as the Chancellor has expressed it, be trimmed up. I would warn hon. Members who are amused by seeing sealed bottles produced in the House that they have not had the whole story. There are a good many other classes of sweets and British wines which 1529 are not put up for sale quite so attractively, and possibly they have not the same carefully-prepared contents.
§ CLAUSE 7.—(Amendment as to unladen weight of goods vehicles).
I beg to move, in page 6, line 24, after "receptacle," to insert "being an additional body."
(b) if the receptacle is constructed or adapted for the purpose of being lifted on or off the vehicle with goods or burden contained therein."
I should like, if I may, to discuss the three Amendments as one. They have been put down with the object of removing a certain ambiguity which has existed for many years with reference to the use of containers on goods vehicles on the road. A container is a receptacle, complete in itself, into which goods can be loaded for safe transit. It serves a purpose exactly similar to that which would be served were the goods separately packed into many crates and placed on the vehicle for conveyance. The container is really one large packing-case, and its use is much more convenient and much safer than if the goods were packed in sacks or in cases, placed on a lorry and bound together with rope.
Many traders have found the use of containers an advantage in the distribution of their goods, and many containers belong to traders themselves and not to the haulage contractors who may be engaged to distribute the goods. Under this Clause 7 any road haulier who went to a trader, loaded up the container on his lorry and then drove away to the place to which it was to be delivered would be liable to a much heavier tax on the vehicle, which was his property, because he was carrying a container which was not his property. That is not the 1530 whole tale, because it meant that as the road haulier would not be quite sure which vehicle he might have to use for the purpose of conveying a container it would be necessary for him to take out considerably more expensive licences for the whole of his fleet of vehicles. Side by side with that would come this fact, that if the container was to be regarded as being part of the vehicle itself, that is to say, to be included in the unladen weight of the vehicle, the capacity of the load which he could carry would be considerably reduced if he kept his vehicle down to the weight which would permit him to run it at 30 miles an hour instead of 20.
The first Amendment deals with the case where the container itself belongs to the trader and not to the proprietor of the vehicle. The second Amendment deals with the container which is the property of the haulage contractor. In most cases a haulage contractor will have only one or two containers to a fleet of, perhaps, 20 vehicles, and were this Clause 7 passed in its present form it would mean that he would have to license at the extra rate the whole of his fleet, because he would not know which particular vehicle was going to take the load. This extra licence charge would amount to anything from £5 to £20 a year on each of his vehicles, and in some cases the additional charge might rise to £40 a year through, out his whole fleet.
The Amendment has been put down not for the purpose of avoiding the intention of the Government, but in order to clarify the position which has arisen since the Road Traffic Act, 1930, was passed, a position which I can illustrate by one specific case. It was the case of a man who was licensed in London and a case in which the container was not regarded as part of the unladen weight of the vehicle. He was going a journey southward and when driving in Wiltshire was apprehended for not having his container added to the unladen weight of his vehicle, which had previously been sanctioned in London. The case is so well known that I do not propose to enter into details. I hope the House will accept this Amendment and the others, and that the Minister will thus make clear a position which, if it were not made clear, would constitute a great injustice to road hauliers and be of distinct detriment to the traders of the country.
As my hon. and gallant Friend has said, Clause 7 of this Bill was inserted to clear up an ambiguous position. Where additional bodies are placed on vehicles, by Section 26 of the Road Traffic Act, 1930, those additional bodies have to be included in the unladen weight. When this Clause was before the Committee various Members indicated that they thought the wording could be improved and that it was unfair. I then gave an undertaking that I would receive a deputation and would see whether I could meet their point. I did receive a deputation, and I came to the conclusion that some Amendment would improve the Clause. The wording which my hon. and gallant Friend has put down is the result of consultation with my Department. I think it is fair. Containers as such are exempt, but the additional body as such is part of the unladen weight.
Do I understand that the hon. and gallant Gentleman is now accepting the four Amendments?
I understand that the fourth is out of order.
In page 6, line 24, leave out "or in."
I beg to move, in page 12, line 12, to leave out "they think fit," and to insert "it seems proper to them so to do."
I am afraid this is rather a lawyer's point. There is in existence Section 21 1532 of the Finance Act, 1922, aimed at stopping certain evasions in the payment of Surtax, brought about by holding up interest or profits made by companies in control of less than five persons so that ultimately, without having declared any dividend and without the person who is entitled to benefit having paid any Surtax, he winds up the company and then gets the benefit of the assets. Section 21 provides certain machinery which works in order to stop that particular type of evasion. The Clause which I am seeking to amend is an endeavour to stop a further evasion which we have discovered. It arises in this way: Somebody holds a number of shares which, theoretically, entitle him to share in the profits of a company, but the company does not declare any dividend and the individual's income not being within the Surtax range is not liable for Surtax. In winding up the company, the capital is arranged so that some other individual, who would be a Surtax payer if he got the profits, is entitled to have the assets.
The Clause prevents that. The Special Commissioners are empowered to give a direction as to the amount of profits which ought to be divided, in accordance with the real facts and in accordance with the proportion of the assets in the winding up due to the particular individuals concerned. I have nothing to say but to applaud the object of the Clause, and the only little point which has arisen is that language has been used which suggests to the legal mind that the Special Commissioners have an absolute discretion as to how they are to make that division and apportionment. The object of the Amendment is to show that they have not an absolute discretion, but that they have to investigate and to do the thing on proper lines. That being the whole object of the Amendment, I commend it to the attention of the House.
My hon. and learned Friend said that this was a drafting point. The words at present in the Bill are, "they think fit," and he proposes to substitute the words in his Amendment. The question is, which wording is the more fit and proper of the two. On the whole we 1533 agree with him, and we are prepared to accept his Amendment.
I beg to move, in page 13, line 34, to leave out the first "and," and to insert being either— (i) a building which". There is a second Amendment, linked with this one. I cannot speak on this matter with the authority I would like, because I am moving the Amendment as a result of certain proposals made upon the Committee stage by my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen). He cannot be here to-day because he is commanding a Territorial Brigade of which he is the commanding officer, and which is at the moment in camp. He asked me whether I would look after these Amendments for him. I understand he desired to move them at the instance of that celebrated authority, the Mersey Docks and Harbour Board, with which are associated other enterprises which run docks and harbours in various parts of the country. Despite his absence in camp, I regret to say that my hon. and gallant Friend has deserted the Amendments, because he has taken his name from them and has transferred it to the Amendment which my hon. Friend the Member for Elland (Mr. Levy) proposes should be made in the second of my Amendments. This Amendment to the proposed Amendment would add force to the Amendment which I have upon the Paper.
May I now explain the position? The Clause is easy to understand. It provides for depreciation in respect of certain buildings—that is the general theory—of a kind that suffer depreciation from the presence of working machinery in or associated with them. In the case of a docks and harbour board, the buildings are not generally erected where manufacturing processes are carried on. They are buildings where storage takes place and where there is movement of goods, but, in fact, a very large amount of machinery is used in those buildings, and those buildings belonging to dock and canal authorities do suffer depreciation. 1534 It takes place not only in the building in which the machinery is, but to a considerable extent in adjoining buildings. The Amendment, as I have it on the Order Paper, covers only buildings in which machinery happens to be situated, but the further Amendment of my hon. Friend the Member for Elland goes further and includes adjoining buildings in which there is no machinery but which suffer from the vibration. If the Government accept my proposal, I hope they will do as I feel inclined to do, accept the Amendment to the Amendment of my hon. Friend the Member for Elland. Perhaps we might have some indication from the Front Bench before my hon. Friend moves his Amendment, because I do not want his Amendment to prejudice mine.
It might be convenient if I adopted the suggestion which my hon. Friend the Member for South Croydon (Mr. H. G. Williams) has made and if, with your permission, Mr. Speaker, I dealt with this Amendment and its effect upon the one which follows. I would make it clear now that while we feel able to accept the Amendment of my hon. Friend the Member for South Croydon, as well as that which follows, we do not feel that we can go as far as to accept the Amendment proposed by my hon. Friend the Member for Elland (Mr. Levy), and my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen), whose absence we all understand. Clause 14 is intended to deal with abuses which have crept into the method of securing a certain allowance for depreciation which was granted in the Finance Act of 1918. As I was careful to emphasise to the Committee, the intention of the Clause is not to take away or to increase the allowance, but to deal effectively with abuses that have crept in, and, in general, to leave the effect of the allowance as before.
An Amendment which I was unable to accept was moved by my hon. and gallant Friend the Member for West Birkenhead, but it had in it a point which was worthy of consideration. That point has been embodied by my hon. Friend the 1535 Member for South Croydon in the Amendment which he has moved. That point briefly is that the Clause gives an allowance for special depreciation of mills and factories due to vibration caused by power machinery in respect of a building containing, and wholly or mainly used for the purpose of operating, such machinery. It was represented that it would also be fair to give an allowance for a building which forms part of the premises and which, while not itself containing power machinery, suffers substantial depreciation from the operation of the machinery in the other building. The second Amendment of my hon. Friend would make the allowance applicable to the depreciation of the building affected by the operation of the machinery in the first building, that is to say, a building used wholly or mainly for the purpose of operating power machinery. We agree that that is a reasonable point, and are prepared to accept the Amendments. The second of them does, to a very small degree, extend the allowance.
My hon. Friend the Member for Elland would go further and extend the allowance to any building containing machinery which had a substantial effect on the depreciation of the building, whether or not that building was used wholly or mainly for the purpose of operating the machinery. The reason why we cannot accept the Amendment to the proposed Amendment is that it is not our intention to introduce a new allowance but merely to repeat in a different form the allowance granted in the Finance Act, 1918. For that reason I can accept the Amendment in the name of my hon. Friend the Member for South Croydon, but cannot go further.
Is the hon. Member moving his Amendment to the proposed Amendment?
The main Amendment has not yet been proposed.
I beg to move, in page 13, line 36, at the end, to insert: or (ii) a building the depreciation of which is substantially increased by the operation of machinery so worked on the premises in any such building as is mentioned in paragraph (i) of this Sub-section.
I beg to move, as an Amendment to the proposed Amendment, in line 3, to leave out from "premises" to the end.
I understand that in the case of the Mersey Docks and Harbour Board, and authorities of that kind, this kind of depreciation is not allowed, whereas in the case of all private undertakings it is allowed. I think the right hon. Gentleman the Member for Hillsborough (Mr. A. V. Alexander) will agree that even in the case of co-operative stores, which have large buildings, warehouses and the like, this depreciation is allowed. But we find that in the case of dock authorities there is a certain amount of discrimination, and depreciation on buildings is only allowed, as I understand it, where the premises contain and are used wholly or mainly for the purpose of operating machinery worked by mechanical power; while in the case of other premises in which machinery is necessary, such as elevators to deal with corn, but which could not really be said to be wholly or mainly used for the purpose of operating that machinery, no depreciation is allowed.
One can easily imagine the use of a building wholly or partly for the purpose of operating machinery causing such vibration in an adjoining warehouse as to cause it to depreciate unduly, and yet in that case no depreciation would be allowed. My hon. and gallant Friend the Member for West Birkenhead, in moving his Amendment in Committee, said that the question deserved to be looked into further, and he withdrew the Amendment on the understanding that consideration would be given to the question whether the point could be met by an Amendment on Report. We have put down the 1537 Amendment again, but I understand that the Financial Secretary cannot accept it. I am not going to press it, but I hope he will give the point consideration at some future time, when perhaps he may be inclined to alter his view.
I beg to second the Amendment to the proposed Amendment.
I want to emphasise what my hon. Friend has said with regard to the position of the Mersey Docks and Harbour Board. It is, as hon. Members are aware, a board of particular value to the public service, to the City of Liverpool, and to the docks on the Mersey, and the situation of which my hon. Friend has spoken bears very hardly in that regard. I would like just to remind the Financial Secretary that the position of the Mersey Docks and Harbour Board was discussed in a number of derating appeals a few years ago, when it was set out in great detail and with great clarity.
Amendment to the proposed Amendment negatived.
Proposed words there inserted in the Bill.
I beg to move, in page 14, line 14, at the end, to insert: (5) A person occupying any premises as the tenant thereof shall be treated for the purposes of this section as if he were the owner thereof if, under the covenants to repair contained in the lease or agreement by virtue of which he occupies the premises the whole of the burden of any depreciation of the premises falls upon him. This Amendment also I am moving on behalf of my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen). I can summarise its object by saying that it proposes that only the persons who are entitled to the money should get it.
We are able to accept this Amendment. It was moved in another form in Committee by my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen) but, as his wording was not quite correct, I was then unable to accept it. Its object is to ensure that the allowance—which is the same allowance that was referred to 1538 in the last Amendment—should go to the benefit of the person on whom falls the burden of making good the special depreciation in question. That may be the owner or may be the tenant who has, under the terms of his lease, to bear the burden of any depreciation of the premises, and, as the Amendment is in line with our practice, we propose to accept it.
I am very much obliged.
I beg to move, in page 14, line 19, to leave out from "trade," to the end of the paragraph.
It will be seen that the words which I am moving to leave out, namely, or for lighting any street, public place or public building, might create a sense of ambiguity.
We accept this Amendment. It is a drafting Amendment. The words which it proposes to leave out are not necessary.
I beg to move, in page 16, line 11, at the end, to insert: Provided that the total amount of National Defence Contribution to be charged under this Section on any society registered under the Industrial and Provident Societies Acts, 1893 to 1928, shall not exceed five per cent. of the nett sum on which the society is assessed for the purposes of Income Tax. I should like at the outset to say, if I may be allowed to do so, that, however high political feeling may run at times—and I daresay it does run high at times in connection with the discussion of co-operative societies—I hope that this Amendment will be considered by the House without any of that political feeling. The plea that I make from that point of view needs a word of explanation, because I often hear statements made by hon. Members of the House, when they are dealing with the question of the taxation of co-operative societies, which indicate that their attitude towards this matter would have been very different but for the fact that co-operative societies have 1539 essayed to take certain political steps. However controversial that subject may be, I beg hon. Members to consider that that is not really a legitimate answer to a straight and honest case for fair treatment in regard to the manner in which co-operative societies are assessed to taxation and, indeed, the very kind of case that we are considering to-day emphasises and stresses the necessity under which co-operators have found themselves of defending themselves as far as they can against situations of this kind when they actually arise.
I often have to confer with my hon. Friends on the measures to be taken to secure justice in cases of this kind, and we have to remember that we are dealing, not only with Members of Parliament who represent their constituents, but with Members of Parliament who have very wide commercial interests, and can be expected to look at these matters from a business point of view, even though we may not agree with that point of view. When we consider that there are 790 directorships of trading, commercial and financial companies within this House, I do not think that any great case can really be made against us on the ground that we happen to have certain political avenues of defence, and it is on that ground that I ask that this matter should be considered without political prejudice.
As to the reason for moving this Amendment, I will put it to the House first of all from the social standpoint, I feel that in doing so I am on very firm ground, in view of the Debates which have already taken place on the Financial Resolution and on an Amendment in another form which was moved during the Committee stage. It is clear, from the utterances of the Chancellor and other representatives of the Government in those Debates, that, whatever may have been his original intentions in framing the second edition of the National Defence Contribution, he has undoubtedly been moved by social considerations in the concessions and arrangements which he has made up to date in respect of this tax. One might submit to the House, in dealing with this tax, quite a number of considerations from the social standpoint, but, since I am arguing mostly on the ground of the action which the Chancellor has taken, I will confine myself to three.
1540 First of all, there is the main overriding proviso in the Chancellor's computation proposals which gives complete exemption to all trading profits which do not exceed £2,000 a year. There can be no shadow of doubt that the only reason for his action in that direction is a social consideration; I do not believe there can be any other explanation than that, for social reasons, he does not want to superimpose this tax, in addition to Income Tax, upon small traders or small trading bodies, because he thinks it will unduly interfere with what he regards as their legitimate position in the commercial and political structure of the country. In the second place, I submit that the Chancellor has admitted, in his treatment of the building societies, the necessity for making adjustments for social reasons, for during the Report stage of this Bill an Amendment to his original tax provision has been made which reduces by two-thirds—a pretty substantial reduction—the contribution of building societies, on what is undoubtedly a social ground, namely that the building societies perform a service to the community in the direction of assistance in the provision of housing which he thinks would be injured by the full operation of the National Defence Contribution.
So far as the Chancellor of the Exchequer has moved to make this concession to the building societies, not on tax grounds but upon social grounds, he has completely departed from the general principles which he put into the Bill for governing the levy of this tax on those societies. In the third place, the Chancellor exempts altogether from the operation of the National Defence Contribution the profits of public utility companies and societies although there is certainly far less claim to exemption, either upon social grounds or upon the actual profits which on the average they make, than there is claim for adjustment and relief to the co-operative societies.
We feel that the Amendment will bring to co-operative societies, not the full justice that they ought to have, because, if we were properly treated, as we do not make profits, we ought not to be taxed on profits, but it will bring an element of that justice to which we have a right, and I think we are entitled to submit some evidence of the social value of the societies. Can anyone doubt the real 1541 social service of co-operative societies in this modern community of ours? Here we have gathered together in about 1,150 separate and autonomous organisations between 7,000,000 and 8,000,000 of the population, in the main that section of the population which, because of the lowness of its income, is totally exempted from any assessment to Income Tax. When the State in its wisdom has exempted that large section of our working class population from Income Tax, ipso facto, it recognises that up to that point those members of the community have discharged their just liabilities to the State in taxation. They gather together in their co-operative societies at that point, having fulfilled all their tax liabilities to the State upon their incomes, to engage in mutual association with each other to spend their nett incomes in a manner most economical to themselves and to raise, as far as they possibly can, the standard of their life, which is far too low.
It is a tribute to the common sense, the independence, and the thrift of great masses of the British industrial population that we have now to say about the British co-operative movement, if I may quote the title of a book recently published by one of our own Members, that Britain has become not only the cradle of co-operation but pre-eminently an example to communities in all parts of the world as to what can be done voluntarily by mutual association of the poorest people in any community provided, not that they are given privileges, but that they are at least protected by the State from undue handicap and from unfair interference. That is all that we are asking for when we ask for the element of justice that we are submitting to the House. There are thousands of our co-operative members who would never have been able to become, as they have become, depositors in building societies if they had not first been able by their mutual thrift to put themselves in a position, first to make a deposit, and then to keep up their payments to the building society when they actually take out their advances for the purchase of their houses. Therefore, if it were not for the thrift and economy practised by co-operators there would be a vast difference to-day in the amount of service that is rendered to the State by the building societies.
Even more striking proof is forthcoming with regard to the social service rendered 1542 to the stability of the State in general by co-operative members if one thinks of their service in time of economic stress in the State. I could give numerous examples, but I am content to give one outstanding example which springs to my mind because I have the honour to represent the City of Sheffield. I and many of my friends who are connected with Sheffield will not forget the circumstances of the economic depression after the great armaments expenditure from 1915 to 1919. I remember the demonstration before the town hall pleading on behalf of the unemployed for something more than a bare maximum of £1 a week to keep body and soul together in a whole family. When we had spent all that we could possibly raise by rate revenue in order to make up out of the Poor Law fund what could not be given at that time from the Unemployment Fund, the City had to come to the Minister of Health and borrow in the course of less than 15 months no less than £1,250,000 for current expenditure on poor relief, which it is still repaying to-day by a special rate of 6d. in the £, and yet in the course of that same 15 months the more thrifty members of the industrial population in the City drew out from their co-operative society £1,000,000. If it had not been for the existence and the success of the thrift of the co-operators in that instance the charge upon public funds would actually have been double.
Is there any doubt that, when building societies make their claim, with which we do not quarrel, on their social service to the State, the co-operative movement can make double the claim, both in regard to its size and in regard to the measure in which its effort comes from the working class, and also on the relief that it brings to the State through the efforts of the working class. As I and my hon. Friends who are used to addressing co-operative gatherings travel about the country, we find that there is not a single important industrial local authority whose treasurer will not say that they bless the existence of the co-operative societies and their regular periods of disbursement of the savings of those people, because it avoids 50 per cent. of the difficulty that they would otherwise have in collecting the local rates, which bear so hardly upon the working class. This is the kind of mutual thrift and economic independence which 1543 the Chancellor in our view is seeking to tax and to tax unduly.
I will touch briefly on some of the other activities of these millions of co-operators. In education, in the provision of houses, assisting holidays, and in the provision of general social amenities they are pre-eminent. With regard to employment, I wonder whether the Chancellor would consider the effect of any unfair taxation upon the position which these mainly working people have adopted with regard to their employés. This vast group of societies is giving, not broken but continuous employment—guaranteed employment—to 306,000 people. I wonder whether it is really recognised that the majority of these people are employed in the distributive trade and that 94½ per cent. of them are in a trade union, not always by the voluntary effort of the worker but because the working-class nature of these societies leads to the members going to their quarterly meetings and saying, "We want to give the best trade union conditions that we can afford in negotiation with the trade unions but, if we give them you, our employés must be in a trade union and must help to raise the standard of other workers."
For 15 solid months now, since April, 1936, the Minister of Labour has called periodic conferences of the distributive trades trying to get some measure of voluntary agreement for raising the standards of distributive workers and yet up to the moment we see no real progress. Outside the co-operative movement not more than 5 per cent. of all the hundreds of thousands of distributive workers are in a trade union, and the vast majority of them have not got trade union conditions. If the Chancellor persists in what we feel is an unfair additional imposition upon our societies, he must answer the charge that every extra penny that he takes from them in this way will be retarding and not helping the maintenance of those employment conditions which are so satisfactory a feature of the co-operative movement. I hope I have said enough on the social position to show that the gist of our case is that it is not a loss to the State, it is an investment to the State, to adopt a course, not which confers a privilege, but which will withhold the House from enacting an injustice upon our societies.
1544 I now turn to a comparison of the treatment of co-operative societies with that which has been accorded to building societies and public utility companies. The capitalisation of the building societies is in no real sense different at all in principle from that of the co-operative societies, because neither of these sets of organisations works on a fixed aggregate capital, and their shareholders in both instances are able at any time either on demand or, if the rules show it, by very short notice to withdraw their capital when they need it. Further, both organisations work upon a low fixed interest, very often lower than the interest upon those loan charges, which figures in other parts of this Measure, lower, in fact, than on many issues of company debentures. On the other hand, when we come to make a comparison of industrial and provident societies with the building societies we must remember that whereas the building society is enabled to take from any individual shareholder a sum up to a maximum of £5,000, and that a shareholder in the building society can, therefore, receive, at what perhaps is the average rate to-day of 3 per cent., up to £150 per annum free of tax as pure investment income. An industrial and provident society is limited by statute to 200 per member.
Take the next comparison. The building societies to-day, taking the average of their shareholders from the returns in their reports, have an average holding of nearly £300 per member. What is the position of the co-operative societies? The average holding does not represent £20 per member. That is to say, that the average holding of the building society member is 15 times as great as it is in the case of the co-operative society. Therefore, if you take these things in comparison, you will see that, if there is a case for the building society, there is a far greater and stronger case from the point of view of the economic level of the member of the co-operative society.
If you take the average holding of £20 per member and the fact that the average rate of interest on those shares does not exceed 4 per cent., there are thousands upon thousands of shareholders in the co-operative movement to-day who are exempted in effect from being charged 1545 with Income Tax and then having to reclaim it afterwards, but who will be mulcted indirectly in this new form of tax although the maximum that they can receive from investment income upon their average of £20 is probably not more than 16s. or 17s. a year. We think that that is a perfecly unreasonable condition for the movement to have to face. We are not asking in this Amendment—and I dare say that some of my hon. Friends will think that we are not asking for enough—for as much relief to co-operative societies as is accorded to the building societies.
But I come back to the treatment of the co-operative societies in comparison with that of public utility companies. Here is a very general exemption altogether from assessment to the new tax of public utility bodies, if they are either required by Statute or by Order to limit their prices or, on the other hand, by the same kind of Statute or Order to limit their interest upon shares. I am not going to suggest, and I hope that the Chancellor of the Exchequer will not take me when I deal with the public utilities in this matter as advocating without very careful examination at any rate, a change in the view with regard to public utilities. I do not feel that on this Amendment I am called upon to do it, but it is incumbent upon me to contrast the kind of return which we get from public utility companies which are exempt. I hope that the House will bear with me while I take a few random selections which I have made within the walls of this House from the "Stock Exchange Year Book," a document which is open for consultation to any Member of the House. Let me take the Altrincham Electricity Company, which is a subsidiary, I understand, of one of those holding companies about which we have heard so much in the course of the Debate, and may I ask hon. Members on this side of the House who are interested in mining to listen to one or two of these figures?
Here is the Altrincham Electricity Company: 1923 to 1925, payment on preferred shares, 500 per cent; in 1926, 1,000 per cent. and a capital bonus of 8,571 per cent. in the same year; in 1927 to 1933, 146 per cent. on the inflated capital. In 1934, 1935 and 1936 they continued to pay 146 per cent., having passed another capital bonus; in 1927 of 60 per 1546 cent. If I come up to November, 1936, not so long before the Chancellor of the Exchequer gives them the exemption from this tax, the capital bonus in that year was 50 per cent. on the ordinary, and 357 per cent. upon the deferred shares. Does the Chancellor of the Exchequer really justify the special taxation of co-operative societies while he exempts companies of that kind? I think that that is enough, but I want to give one or two other examples. No doubt if the Chancellor of the Exchequer went to his officials they would say, "Well, of course, one black sheep does not make a whole black flock." But let me take some more examples and come back to more sober figures. Banbury Electricity Company paid 10 per cent. in 1925, 1926 and 1927, to per cent. in 1928, plus a capital bonus of 100 per cent., and from 1929 to 1931 10 per cent. on the double capital, and a very substantial interest ever since. Let me take Bournemouth, which is not a small company. In 1923 it paid 13 per cent. and a capitalised bonus of 20 per cent.; 1924 to 1926, 10 per cent. each year on the inflated capital, plus another 4 per cent. bonus; 1927, 15 per cent. and another capital bonus of 100 per cent.; 1928 to 1933, 15 per cent. each year, and the further maintenance of 15 per cent. in the last accounting period.
I will take one or two of the main London companies, which, I have no doubt, are to be exempted from the impost of the National Defence Contribution. The Brompton and Kensington Company have averaged nearly 9 per cent. since 1923, and have included in that period a capitalised bonus of 20 per cent. Charing Cross, which is a pretty big and influential company, in 1924 and 1925 paid 15 per cent.; in 1926 11½ per cent. and a bonus of 80 per cent.; in 1927 to 1929, 8 per cent. on the inflated capital; 1930, 8 per cent. and another bonus of 6½ per cent.; 1931, 8 per cent. and a bonus of 10 per cent. With these additions to capital, they have had no difficulty in maintaining throughout the economic depression a regular 8 per cent. I will take Chelsea—and I want to drive this home if I can—in 1923 and 1924 they paid 12 per cent.; 1925, 12 per cent. and a capitalised bonus of 60 per cent.; 1926, 10½ per cent. on the inflated capital; 1927 to 1928, 8⅞ per cent.; 1929, 8[...] per cent.; 1930, 8[...] per cent. and another 1547 capital bonus of 5[...] per cent.; 1931, a further 8½ per cent.; and 1935, a further 10 per cent. on the inflated capital. These are large Metropolitan public utility companies, and the Chancellor of the Exchequer exempts them. I am not asking him to decide to-night to change his intentions, but I am asking for corollary justice to those great masses of working-class people who are gathered together in their co-operative societies.
This sort of thing does not apply only to electrical companies. The same thing applies to large numbers of gas companies, but I will say on behalf of the gas companies that they do not show this great mass of profits like those which I have quoted from the electrical companies, but still they are substantial. Altrincham, 9¼ per cent. on original shares, 7 per cent. on new ordinary shares; Ashton, 17⅞ per cent., 15¾ per cent. and 14[...] per cent., and in the last two years 15¾ per cent. and 13½ per cent., not a bad return for shareholders in a public utility company which is to get exemption. Take Banbury, 10 per cent. and 7 per cent.; Beccles Water and Gas, 10 per cent, and 8 per cent.; Bideford, where they have maintained from between 13½ per cent. to 14½ per cent. for the last 14 years, almost without a break on their local gas, light and coke company; Bilston, 11, 8, 12, and 9 per cent. in successive years. And so I could go on. From the numerous other cases, I could produce a book of statistics for the House if they needed further proof of the case.
I would add this further comment that it does not end there because my hon. Friend the Member for East Ham, South (Mr. Barnes) said a word or two earlier in the Debates about the position of the transport companies. We know some of the difficulties of companies like the main railroad companies. We do not want to interfere in any way with a proper adjustment of the position as is required by social conditions, but when one comes to look at the companies which are exempted —take the type of company like Thomas Tilling, Limited, which my hon. Friend the Member for East Ham, South, mentioned a few weeks ago in this House—is there any doubt that, compared with the treatment which the Chancellor of the Exchequer is giving industrial and 1548 provident societies, they are absolutely in clover. That is the only way to describe it under this tax when you get results like this, in 1923, 15 per cent. and a bonus of 30 per cent.; 1924, 15 per cent.; 1925, 15 per cent. and a tax free cash bonus of 33⅓ per cent., plus a capital bonus of 66 per cent.; 1926, 15 per cent.; 1927, 15 per cent. and a bonus of 15 per cent.; 1928 and 1929, 20 per cent.; 1930, 20 per cent. and a cash bonus of 5 per cent. and a capitalised bonus of 50 per cent.; 1935, 10 per cent, and a capitalised bonus of 100 per cent. And so I could go on. There seems to be no end to the way in which the public can be found to be contributing to these very substantial profits in what are termed public utilities and which are given the special social preference of being exempt altogether from the provisions of this National Defence Contribution.
One of the main arguments put up by the Chancellor of the Exchequer in dealing with the exemption of these societies and companies is, that they are on a special plane and do not really enter into competition with anybody. He says that if you take the case of building societies, there is no other body with whom they can compete. Is that so? I mentioned to the House yesterday that it is not so with regard to building advances. The ordinary provincial banker is still advancing money to his smaller clients on house property, the solicitor on behalf of clients, and other lenders. I have seen the case of the building societies, because we have a large building society in our own membership. I have seen the case which has been submitted to the Treasury for special treatment. The ground of their case in the main is that if they had been mulcted in the full tax they would have to raise their rate of interest, and if they had to raise the rate of interest to borrowers, they could not compete with many forms of competition which they have to meet.
That is the burden of their case, and it is no use the Chancellor of the Exchequer saying that they can justify the special treatment on the ground that they are not in competition. Take the public utility company. It may be that there is no special ground for disputing the Chancellor's claim as to competition in the case of the railway company in many respects, but that does not apply to all 1549 the public utility companies. I have here among my papers a circular which came to me this morning at my house from the Gas Light and Coke Company. It begged my patronage for the purchase or hire, whichever I was able to do, of a gas refrigerator. It is perhaps not without interest to tell the House that the co-operative members have banded themselves together to provide themselves with their own make of refrigerator.
These people whom you exempt actually compete with us. The Gas Light and Coke Company are not the only people concerned. I went into a new house recently and the Westminster Electric Supply Company wanted to supply me with all my electrical fittings. They wanted to sell or hire to me all the electrical fittings and stoves that I required; but our co-operative members supply themselves from their own factories with all these things. Therefore, these concerns are competing, and yet the Chancellor of the Exchequer said that they are in a special position because they do not compete with other people. There is not a shadow of justification for that argument or that we are asking for special treatment in relation to ourselves. We maintain that if the Chancellor of the Exchequer has been able to discover social grounds on which he can exempt incomes up to £2,000, on which he can exempt the building societies, in part, and exempt altogether the public utility societies, then we have an unanswerable argument for a fairer treatment for the industrial and provident societies.
I have taken up a considerable amount of time, but I feel very deeply on this matter. I should like now to come to the final stage of my argument. I hope that the Chancellor of the Exchequer will not misunderstand me when I say that it is very important that he should be under no misapprehension in regard to our case. Our societies hold the view that they proved beyond the shadow of doubt to the Norman Raeburn Committee that our societies' mutual surpluses would not constitute profits and that they ought to be exempted altogether. The Chancellor of the Exchequer does not now take that view. It is only because of the unfair and unjust treatment of our societies in the Finance Act of 1933 that the right hon. Gentleman is able to get away from his own legal view and from what we 1550 regard as much more important, the splendid rational way in which he put his view in 1920, when he said that the co-operative societies did not actually make a profit. The case for complete exemption having been argued before I do not want to press it now. We rest our case upon the element of justice which ought to be given in relation to the payment of this tax.
We are only asking that the contribution made by industrial and provident societies as entities should be confined to a 5 per cent. charge upon the net sum to which they would ordinarily be assessable for Income Tax. Let us look at the incidence of the new tax. I have not yet received an answer to a point which I put to the Chancellor of the Exchequer, and that is whether there are any companies assessable under the National Defence Contribution who will in fact pay a higher net sum under this tax than 5 per cent. of the sum on which they are assessable to Income Tax in the ordinary way. I have not been able to discover any such companies. That is not how it works out in the case of co-operative societies.
Our headquarters at Manchester have been getting out a few more examples of the effect on industrial and provident societies. Let me give two examples. Society A is obviously a small, I will not say a struggling society, but it has very little margin to play with. Their Income Tax payment assessed under the Act of 1933 is £126 10s., but under the National Defence Contribution they will be required to pay £407 14s. The cheque made out by that society to the Treasury for a tax which nominally is to be at one-fifth the rate of Income Tax will be more than three times the size of the cheque payable for Income Tax under the Act of 1933. Is that just? Society B has an Income Tax liability of £178 and a National Defence Contribution liability, if taken on the accounts for last year—I do not know what it will be for the current year—of £412, or 2½ times as much as the charge for Income Tax or, to put it in another way, nearly 12 times what they ought to pay if they were paying at one-fifth of the rate of Income Tax. Is that just?
The Chancellor of the Exchequer has put up what he regards as the legal answer to the case. He says that whilst we complain that we are not given exactly the 1551 same treatment in law as we were given under Section 32 (4) of the Finance Act, 1933, under which Share Interest is not brought into charge because we are not allowed to deduct Income Tax from that interest, we do not mention Section 31 under which all surplus is brought into charge. He says that it was only a matter of machinery that Section 32 with its special rules was put in the Finance Act of 1933.
That will not be an answer to the working-class directors of co-operative societies in their board rooms at Heckmondwike and Cleckheaton when they have to make out cheques perhaps two and a half times as much for Defence Contribution as for Income Tax. If I had anything to do with advising them as to the approaches that they should make to the right hon. Gentleman, I should say that they are entitled to look to him as their representative as well as Chancellor of the Exchequer. Let him explain to them how it is that the companies with which they are competing in Cleckheaton and Heckmondwike only pay under this tax one-fifth of what they have been paying in Income Tax, whilst they are to be so heavily mulcted. In the Finance Act of 1933 it was settled what was their just contribution to Income Tax, and now, hey presto, the right hon. Gentleman finds that he must charge them on a Defence Contribution of 1s. in the £ more than they pay in Income Tax at 5s. in the £. The answer of the right hon. Gentleman will not be found a very satisfactory answer for them, and it is certainly not an answer on the actual facts of the situation.
If this thing is looked at from an entirely impartial point of view and the social values to which I have referred are taken into account, there is an overwhelming case on which the right hon. Gentleman could rely for giving the relief which is asked for in this Amendment. He and his Government in the last four or five years have been responsible for changing the judicial judgment of the House of Lords in regard to the basis of our assessment. There was no ground for that action except a political ground. There was no case in law, and no legal reason for it. It was purely a political act. The right 1552 hon. Gentleman and his Government are responsible for changing it, and now when it comes to dealing with this question of the National Defence Contribution this Government changes from the principle that was settled in the Finance Act of 1933 in regard to the charges for Income Tax upon co-operative societies. We submit that in equity and common sense and in recognition of our social value as a movement the Government ought not to charge co-operative societies more than one-fifth of the sum that they would be assessed on for Income Tax, and it is on that basis that we have tabled our Amendment and on that I urge the Chancellor of the Exchequer to accept it.
The right hon. Gentleman will, I hope, permit me as an old Member of the House and an old colleague to say that nobody admires the tone and the manner of his speech more sincerely than I do. It is a very difficult thing for anybody who has devoted his life service to a cause of this sort, to present an argument on which he feels very deeply with such unfailing moderation and good temper, and I hope that I shall be able to state, bluntly and firmly but I hope without any heat, the considerations which I think justify the House in not accepting the right hon. Gentleman's proposal. He began by justifying very eloquently the great importance and usefulness of the co-operative movement. I do not dispute it. I have never either publicly or privately spoken slightingly of the co-operative movement, or attacked it. It is not only a movement which has rendered great service to its members, but it is a movement which has extended all over the country, and I am glad to take note of the fact that more particularly in the distributive trades its branches have had great success. Therefore, whatever else may be said, it cannot be said that if this tax is imposed on co-operative societies it is being imposed on people who cannot afford to pay.
Without any technicalities, what I observe and what we all observe is that if one walks down a street in any town or large village in the country, one finds that there is Messrs. X. and Company, Limited, carrying on a retail trade in, say, provisions, grocery, drapery and so so. Then there is Messrs. Y. X. in 1553 partnership carrying on a similar trade, and further down the street one finds a co-operative store carrying on the same trade. Technicalities apart, I must say that I think the result would be very remarkable, if we are going to impose this tax, if we did not impose it upon the profits which are made by all three concerns. I do not think that the argument, powerful as I think the argument is, on its proper occasion, that the profits made by co-operative societies are only profits in a very specialised sense—I do not think that it would satisfy the country or the House of Commons if any distinction was to be drawn between these different classes of traders.
The right hon. Gentleman has said, quite frankly, that he does not want to fight the battle of 1933 over again. I have never had the slightest difficulty in understanding the old argument in favour of the co-operative societies on the subject of profits, and I do not in the least retract my view that there was some logic and force in that argument. The right hon. Gentleman accepts the provision which Parliament made in the Finance Act of 1933, the words of which are very simple. It says: any reference to profits or gains shall be deemed to include a reference to profit or surplus arising from transactions of the company or society"— we will say a co-operative society— with its members which would be included in such profits or gains for the purposes of"— We will say Income Tax— if they were transactions with non-members. In those circumstances the profits have been treated as profits which attract Income Tax. The right hon. Gentleman does not give up his contention that the political philosophy which enacted that law is bad, but he accepts what was done in the Act of 1933. The question, therefore, comes to this, should co-operative societies bear this tax in common with their rivals, and if so, what are the methods by which the tax should be applied to them. I have given the reasons why I think they should not be exempt from the tax, and, of course, the right hon. Gentleman does not suggest in the Amendment that they should be exempt. What is proposed in the Amendment is special treatment for co-operative societies. Let me deal with that. The 1554 right hon. Gentleman protested against what he called the special taxation of co-operative societies. There is nothing special in the proposal about co-operative societies. Indeed, as I pointed out in Committee, co-operative societies are never mentioned in the Bill from beginning to end. We are not making special proposals for the taxation of co-operative societies, we are merely asking that they should rank with other traders and come within the scope of the tax. It is those who are proposing the Amendment who are suggesting that some special arrangement should be made in the case of the co-operative societies.
Let me say perfectly bluntly what I believe is the meritorious part of the argument upon which the case for the co-operative societies rests. It is equally true of the small man who holds shares in an ordinary company. This tax, which is to be a simple tax on profits, does in fact operate in this way, whether you are dealing with the small man who is a member of a limited company holding a few ordinary shares or whether you are dealing with a man who is a member of a co-operative society. The tax is so constructed that you apply it to the profits which are made by the undertaking itself without asking how the profits afterwards are going to be divided or subdivided and whether they are going ultimately to reach the pockets of poor people or rich people. If it was possible to devise a more elaborate system there would be something to be said for trying to make some arrangement for the small recipient, but I deny that that is the case of the co-operative societies alone, it is equally true in the case of 10,000 people in the country who hold one or two shares in an ordinary company. You find for this purpose that a company is faced with a tax which does not contain all kinds of allowances, abatements, and concessions, and references to earned and unearned income.
The House must face the truth that a simple tax on profits made by an undertaking has this consequence, that if you consider how what is left may be distributed you must not draw a distinction between those cases in which the distribution will be infinitely sub-divided and those cases where it will not. To that extent the right hon. Gentleman has a case, but it is not the case of the co-operative societies. It is a complaint 1555 against the construction of the tax. My point is that it clearly is in the nature of the construction of this simple tax on the profits of an undertaking that you must first find out your undertaking, whether it is a limited company or not, then ascertain the profits it makes—I am not using the word "profits" in a technical sense but in the ordinary sense—impose your tax on those profits and ask for the tax to be paid. This tax should be regarded as a sort of levy, a licence duty, which is paid by an undertaking because it is engaged in making profits through trading.
I take the right hon. Gentleman's argument about the company, but I cannot find in the case of any company that the revenue authorities have found in the past such a number of shareholders below the taxable limit that they have denied the company the right to deduct the tax. In the case of an industrial provident company it is the Government which have settled the provision and everybody was to have the right to this deduction. The Government now propose to deny them this right.
I am obliged to the right hon. Gentleman. I hope the right hon. Gentleman and those who support him will forgive me if I give them one or two figures. I really think that there is widespread misunderstanding on this subject. The Amendment, in fact, is a proposal that the National Defence Contribution should be regarded in the case of the co-operative societies as though it was a tax on their undistributed profits. I reply by saying that that is a misunderstanding of the nature of the National Defence Contribution. It is not a tax on undistributed profits, whether they are made by a company or by a co-operative society. It is a tax on profits, whether distributed or not. Let me give a case to show how it will work out. I appreciate the importance of the different methods by which the Income Tax Acts work out in the case of a co-operative society and a private company. In the case of a co-operative society the law charges the whole of the profits made for Income Tax, let us say it is £100,000. Having done that the law says, as a piece of machinery we will only ask the co-operative society itself to pay Income Tax on £40,000, the undistributed por- 1556 tion, and if they desire they distribute £60,000 as interest to the shareholders. Take these figures, £100,000 profit, £60,000 paid as interest to the shareholders, and £40,000 undistributed. The co-operative society is charged on the £100,000, but by a subsequent section its own cheque will be a cheque for the Income Tax on £40,000, and at the present rate that cheque would be £10,000. Many people imagine that that makes a fundamental difference from the case of a company. Does it? Suppose a limited company makes in a given year £100,000 of profit and decides to declare a dividend of 6 per cent., £60,000, and to put to reserve £40,000.
The right hon. Gentleman and hon. Members opposite say that in a case like that the limited company has to draw a cheque for Income Tax not on the £40,000 but on the £100,000—and that is true. The Income Tax on the £100,000 would be £25,000. What happens next? Having declared a dividend of 6 per cent. the company, which has already paid Income Tax on the whole of its profits of £100,000, discharges to its shareholders this 6 per cent. dividend by distributing to them not £60,000 but £60,000 less the amount of Income Tax; which is £15,000. It follows that having in the first place paid £25,000 to the revenue it gets the £15,000 back and is left with a net tax payment of £10,000. The difference between the two cases is a difference of pure machinery. It is not true to say that there not be many shareholders who will go to the Revenue and get the tax back. There will be many who will do so.
I agree that in the case of co-operative societies like that of the ordinary shareholders of a company, the National Defence Contribution does not inquire into how many fractions the profit will be divided, but that is a criticism which may be made against the tax as a conception, and it is a complete confusion of ideas to suppose that it is something which is done for the special injury of co-operative societies. It is a necessary consequence of the character of the tax, and it is a complete delusion to suppose that because a co-operative society pays Income Tax on the £40,000 of undistributed profits that a company in similar circumstances pays more. It does not. It pays more in the first instance, but it 1557 gets back £15,000 from the shareholders to whom it has distributed dividends.
I hope I have made the matter perfectly clear. For my part I cannot see how there is any case here at all other than the case that this kind of taxation undoubtedly does not make special provision to give relief to the ordinary shareholder or to any other person in a small way who will ultimately get only a small fraction of the total profits. Those are the reasons why I cannot accept the Amendment. The right hon. Gentleman in the Amendment says that in no case would a company pay more than one-fifth of what it would be assessed at under the Income Tax. I would point out that my figures show that it is true also in the case of the co-operative societies, and the only reason why the right hon. Gentleman thinks it is not true is because he takes the view that in the case of the co-operative societies it is only undistributed profit which is to be taxed, whereas there is no difference. It is merely a difference in machinery by which the ultimate amount of the tax is payable.
The right hon. Gentleman has not asked for special relief on the ground that those for whom he speaks are particularly unfortunate or find themselves in an embarrassing position in the way of trade. Everybody knows that co-operative societies, along with the retail trade generally, are doing very well. The "Board of Trade Journal" of 1st July contains very surprising statistics about the retail trade for the month of May, the last month reported. The total value of the daily sales made was 13.2 per cent. greater in that part of the distributive trade than a year ago, and it was the second largest advance on the previous year recorded since the figures have been taken. The co-operative societies undoubtedly had a very important section of the advance shown in those figures. I am afraid I cannot agree that a case has been made out for this wholly special exception. It is not correct to say that what is proposed in the Bill is any special tax upon co-operative societies. On the contrary, an entirely special provision would have to be inserted if we accepted the proposal contained in the Amendment.
I thought, as no doubt did many other hon. Members, that one of the most effective parts of the speech of the right hon. Gentleman was that part in which he gave figures that he had extracted about the 1558 distributions made by some companies which he considered would come within the exemption on the grounds of being public utility companies. I found those figures, as he set them out, extremely impressive, and naturally I want to look at them. The conception which we had in proposing the exemption for public utility companies was that the law so operates as to set a reasonable limit to the profits which they make. I quite understand that the right hon. Gentleman was not using that argument except indirectly, but I admit its force indirectly, and I shall certainly want to examine the figures which he gave and to see exactly how they work out. We may have to reconsider it in a subsequent year, but for the present all I have to say is that the special case I submitted to the House the other day in regard to building societies stands, and the House accepts it.
I regret I am not able to find a special case for a concession to co-operative societies. I do not for a moment think that the view which I take, and which I believe is very widely supported, is in the least inspired or biased by any desire to treat the co-operative societies unjustly. I have not found that there has been that dead set against them which in some quarters it is said there is. I know that in many parts of the country they discharge very large and important distributive functions. I do not want to do anything unfair or unjust to them, but for my part I must say that I am not in the least impressed that they are entitled to special provision, and therefore, to my great regret, I cannot accept the Amendment.
The Chancellor of the Exchequer opened his case against this Amendment by stating that co-operative societies can afford to pay this tax. I suggest that, from the figures that have been given this afternoon, it is clear that public utility companies can afford to pay it. The Chancellor again repeated that he would look into that matter, but it was mentioned on the Committee stage, and he has not looked into it between the Committee stage and the Report stage. That brings out very clearly his different interests in this matter. I would point out also that the building societies can afford to pay the tax on the same basis, but the right hon. Gentleman has made an exception in their case. He also referred to the 1559 fact that there are substantial co-operative stores premises in trading areas where there are other traders. I would remind him that he has exempted businesses whose profits do not exceed £2,000 a year, and that when a business is operating on a profit basis of £2,000 a year, it means that there is an investment of capital of £10,000, £15,000, £20,000 or £25,000.
The hon. Member should bear in mind that that equally applies to a co-operative society which does not make a profit of £2,000 a year.
I realise that. I was replying to the Chancellor's argument that the co-operative societies can afford to pay the tax. My point is that public utility companies, professions and building societies can afford to pay it, and that there are many businesses operating on a capital of £10,000, £15,000 or £20,000, and making an annual profit of £1,500, which can afford to pay it. Therefore, the argument that co-operative societies can afford to pay the tax appears to me to have nothing to do with the Amendment. The right hon. Gentleman then proceeded to say, in justification of his refusal to accept the Amendment, that this charge is levied on the profits of the undertaking. I clearly understood that. It was made clear, when the Chancellor proposed the new National Defence Contribution, that it was to be a tax of 5 per cent. on the profits of the undertaking and that it was to represent one-fifth of the amount paid in Income Tax. Let me turn again to the comparison with building societies. I wish to repeat the figures I gave when we were considering this matter in Committee.
There are just over 2,000,000 shareholders in building societies, and there are 7,500,000 shareholders in industrial and provident societies. The share capital of building societies is £480,000,000, and the deposits, which represent loan capital, amount to £141,000,000. The issue of share capital in a building society is exactly the same as the issue of share capital in a co-operative society. If the £480,000,000 share capital of building societies had been loan capital, the Chancellor would not have found it necessary to make this special adjustment for building societies. If the share capital had been £141,000,000, instead of £480,000,000, this charge on the building societies would have worked out roughly at the figure of 1560 £400,000 or £500,000. Because the tax of 5 per cent., or one-fifth of their Income Tax payment, levied on a share capital of £480,000,000 represented the excessive charge of £1,000,000, the Chancellor, the Treasury and the Government were compelled to recognise that the incidence of National Defence Contribution fell with undue severity on building societies.
The building societies were faced with three alternatives, because of that heavy and exceptional incidence of National Defence Contribution on their share capital. They had to reduce the rate of interest to shareholders, to take the additional £600,000 out of reserves, or to increase the mortgage interest charge to their borrowers. When the matter was submitted to the Chancellor, there were those three alternatives, and the right hon. Gentleman found it necessary to depart completely from the principle that he has laid down of charging the tax to the undertaking, and in the case of building societies he has altered the whole basis of computation of this tax. I submit that if the right hon. Gentleman can find a justification for changing the whole basis of the computation for building societies because of the weight of their share interest charge, the case of the co-operative societies should be considered on the same basis.
I want the House to observe that the Chancellor's explanation did not dispute the argument put forward by my right hon. Friend the Member for Hillsborough (Mr. Alexander), that in the case of the co-operative societies, the share interest is not charged at the source, and that the Treasury have agreed to and have recommended the procedure that this should be taxed in the hands of the recipients. in the case of building societies, the Treasury altered the basis of computation in order to avoid the building societies having to pay a heavier tax than was justified, but in the case of the co-operative societies, they say it is a question of machinery and they bring the whole of the share interest charge, which has previously been taxed in the hands of the recipients, back into the accounts and levy the National Defence Contribution on that amount. It is that change of procedure that has caused the National Defence Contribution to fall with excessive severity on co-operative societies as compared with private companies.
1561 Let me give to the House one or two additional cases. First of all, I will give the case of a co-operative society on the North-East coast, operating in one of the worst-hit industrial towns in this country. Last year the tax paid by that society was £900; under National Defence Contribution it will have to pay £400 or £500, which is equal to 50 per cent. In the case of a large Midland co-operative society, with approximately 60,000 members, it is estimated that the Income Tax liability this year is £7,000; the National Defence Contribution charge will be £3,000, or 42.8 per cent. of what it pays in Income Tax. Another society, which operates largely in a mining area and where the capital of the members averages £17 a member, paid £5,230 in Income Tax last year; the amount that society will have to pay under the National Defence Contribution will be £3,996, or 76 per cent. of what it paid last year in Income Tax, on the 1933 basis. A large Metropolitan society paid £20,000 in Income Tax last year; under National Defence Contribution it will have to pay an additional £15,000, or 75 per cent. That is the case which we desire the Chancellor to answer. In the three debates on this subject the Chancellor of the Exchequer has not so far replied to that case.
My right hon. Friend the Member for Hillsborough has brought forward a number of instances of public utility companies, and I do not think that any useful purpose would be served by emphasising that point. But we wish to submit once again to the House of Commons the case on behalf of these 7,000,000 citizens of this country who have joined together legitimately to carry on business operations. The legislation governing that type of trade in this country is restrictive in character. The only restriction imposed upon a statutory company is that its prices must bear some relation to its profits and a public utility company operates on fixed capital. But in the case of a co-operative society, the capital is withdrawable and the practice of those societies is to limit their rate of interest to 3 or 3½ or 4 per cent. and the average shareholding is very low compared with any other type of undertaking. Yet the Chancellor, when finding excuses for differentiation on other occasions, cannot meet the simple point of this Amendment.
1562 We are not now discussing whether the co-operative societies should be exempt or not, but the simple issue of whether the Chancellor's statement that this is a 5 per cent. tax applies to the co-operative sociėties or not. This Amendment puts before the House a simple issue. We are prepared to pay one-fifth of the sum which we pay in Income Tax on the 1933 basis, without any change in the practice of the Treasury in our regard. When the proposition is reduced to those terms, the right hon. Gentleman should have no hesitation in accepting the Amendment because it does not prejudice any other concerns, but gives justice to the co-operative societies.
The speech of the Chancellor of the Exchequer and the reply which has just been given by my hon. Friend the Member for East Ham, South (Mr. Barnes), reduces the issue to a simple point which can rapidly be brought to a head and to which, I think it can be shown, we have not yet had any reply. It is agreed that for the purposes of this Debate, the question which was settled in 1933 of whether co-operative societies should or should not be taxed is not being re-opened. That question is not at issue. It is also agreed that this new National Defence Contribution is, broadly, based on the principles of the Income Tax and that in the Bill, co-operative societies are not specifically discriminated against because they are not mentioned at all. The National Defence Contribution is, to the ordinary company, practically an addition of 1s. in the £ to the Income Tax. A company which now pays 5s. in the £ will pay another shilling or an increase of about 20 per cent. All that is agreed, but the problem which we are considering arises out of this difference between ordinary Income Tax and the National Defence Contribution. In connection with Income Tax there is an elaborate system of abatements and exemptions which has been constructed specially to meet the cases of the smaller Income Tax payers and also those who are outside the range of Income Tax altogether. This problem arises out of the fact that such machinery is not included in the new National Defence Contribution proposals.
I know the Chancellor of the Exchequer has made a reply. He has said that what 1563 we complain of is a necessary consequence of the National Defence Contribution without those exemptions and, broadly speaking, I can understand that if you take two ordinary companies, including about the same numbers of persons with small incomes, it does a kind of rough justice as between the two. But here is the case which the Chancellor of the Exchequer has to meet. If there are institutions which are recognised as having within their membership a far larger proportion of taxpayers of the smaller class than the ordinary company, and if in their case you make no allowance for exemptions or abatements, then those institutions will pay a larger percentage of increase on their tax than ordinary companies. There is a difference both in degree and in kind. Two classes of institutions of that kind exist in this country and their special case has been recognised, I do not say in the principles of the Income Tax but in the actual mechanism of its collection. I refer to building societies and co-operative societies.
Broadly speaking, it is calculated that the ordinary company will pay an additional 20 per cent. on its Income Tax in this new contribution. The building societies made it clear that they would have to pay an additional 50 per cent. of their Income Tax. Figures of a remarkable character have been given by my right hon. Friend the Member for Hillsborough (Mr. Alexander), but I think the general position is that co-operative societies under these proposals will pay an extra 40 per cent. of their Income Tax. That is to say, the co-operative societies will pay about twice as much as the ordinary companies. We have heard the argument which applies to the building societies. The position of the co-operative societies is exactly the same. The right hon. Gentleman's dilemma was shown by his treatment of the building societies. He has recognised the special position in their case and has drawn up a special formula to exclude them, but his whole case was abandoned when the formula was revealed to the House. The actual formula simply destroyed the whole National Defence Contribution and every principle of it.
I was interested in a question which was put by the hon. Member for 1564 Gravesend (Sir I. Albery), who has a professional knowledge of this subject, about the building societies' formula. It was a very innocent question. He asked on what grounds, if special concessions were to be made to the building societies, a method outside the ordinary machinery was being employed. The grounds are very simple. If the concession were made on the ordinary simple grounds it would have to include the co-operative societies. So, a formula has been devised for building societies to keep the building societies out of the main charge of the tax and keep the co-operative societies in. The result can be clearly shown. I think it can be summed up in the example quoted by the Chancellor of the Exchequer earlier. He said that if in one street there was a co-operative society, a company and a partnership of private traders, all competing in the same business, it would be very remarkable if they did not all pay the same tax. That is our argument. What will happen is that the co-operative society, on the average, will pay about 40 per cent. increase on its Income Tax; the company will pay 20 per cent. increase, and the private traders, if as in most cases they are earning less than £2,000 a year, will pay nothing at all. That is why we say that there were two institutions which clearly needed special treatment in this matter unless grave injustice was to be done. Of those two in-institutions, one has been selected for that special treatment, but the co-operative societies have been left with a penal discrimination against them in the new tax proposals.
I have very little to add to what was said by my right hon. Friend the Chancellor of the Exchequer, and I hope that nothing I say on this subject will cause offence. I shall try to follow the example of those who have spoken before me, and who have shown such moderation in dealing with this question. My right hon. Friend in an interjection made a reference to the £2,000 exemption, and of course, as the House is aware, it applies to the small co-operative society just as to anybody else. There have been frequent allusions to dividends, and as that word has two connotations in connection with a co-operative society, it is right to make it 1565 clear that the dividends on purchases are deducted before the National Defence Contribution percentage is calculated. The fallacy which, in our view, ran through the argument of the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) arose when he slipped from the 5 per cent. on profits to 20 per cent. on the Income Tax paid, because this tax is a tax on profits, and has no logical relationship, or only an accidental relationship, to the particular cheque which any particular company or individual may have to draw for Income Tax.
The dispute which arises on the Amendment springs out of the fact that a company pays its Income Tax, whatever the rate may be, on the whole of the profits irrespective of how much it may distribute. It has been said by an eminent legal authority—and though the actual phrase has been criticised, it expresses the result in business language—that a company in respect of distributed profits pays Income Tax as an agent for or on behalf of its shareholders. That, in a business sense, is what happens. It is because a company has done so, that it is entitled, if it declares a dividend of 6 per cent., to pay only £4 10s., deducting the appropriate tax from the dividend which it has declared. In our view, giving full regard to the fact that the majority of the shareholders in co-operative societies are below the Income Tax limit, when one comes to apply this 5 per cent. to co-operative societies, one must, in fairness, apply it to the sum which is made up of the amount put to reserve and the amount distributed to shareholders. I put it in that way, because if I used the word "profit" it might be said that it was a question-begging word in relation to this argument. But call it profits or surplus, or what you will, it is the figure which is available for the two purposes of reserves and distribution, just as the profit, in the ordinary sense, made by a company is the amount available for those two purposes of reserve and distribution. Accepting, as we all do, for the purposes of this Debate, the decision arrived at in 1933, the only possible figure to apply to the 5 per cent. duty is the sum of those two amounts, that which is put to reserve and that which is distributed.
1566 I hope the House will bear with me for a few moments while I point out what really absurd results would be arrived at if we applied the 5 per cent. to the actual figure of the undistributed profits. Broadly speaking, the cheque which a co-operative society pays to my right hon. Friend is Income Tax on the undistributed profits, without regard to what is distributed. Let us assume that a co-operative society has built up such adequate reserves that it is able to distribute the whole of the surplus in a particular year to its shareholders. That society, if this Amendment were accepted, would pay no National Defence Contribution at all, because, owing to its financial strength and owing to the fact that it had accumulated such large reserves, it did not have to make any provision this year. It would not have to pay Income Tax to my right hon. Friend, and it would make no contribution to the National Defence Contribution at all. I am sure that anyone who views this matter impartially will recognise that that would be a totally absurd result. The Amendment before the House, if carried, would make the measure of the National Defence Contribution the amount put to reserve. You might find a very rich society which needed to put nothing to reserve, and, on the other hand, you might find a society in its early stages, pursuing what is called, without any political significance, a conservative financial policy, building up reserves before it thought itself justified in distributing sums to its shareholders. The National Defence Contribution would descend with its full force, if this Amendment were carried, on the latter society, in its earlier, struggling stages, while letting off the society which I put as a hypothetical case, but which is not at all an impossible case, which has so strong a reserve that it does not need to put by anything.
May I point out that that is just what the 1933 Act has done, to penalise the type of society to which the hon. and learned Gentleman has just referred, and that it is very unfair?
If it was unfair in 1933, do not let us repeat that unfairness now, though I do not admit that that result does follow from the 1933 Act.
Is the hon. and learned Gentleman aware that, in quite a different position from the ordinary company which can distribute dividends to its ordinary shareholders of 10, 15, 20, or even 25 per cent., the co-operative societies limit the amount of the dividend which they can distribute on their share capital generally to 4 per cent. and even less?
I fully appreciate that point, and if this tax was not a flat tax on profits, if it did take account of the actual Income Tax position of the shareholders or the amount distributed, there would be something in that point, but the principle of the tax—the principle can be criticised—is to look at the profits before they are distributed and to descend on them. I wanted to give a small reference to the sort of case that the right hon. Gentleman who opened the Debate put, of which the hon. Member for East Ham South (Mr. Barnes) gave examples, which, of course, on the face of them, appeared to be rather extraordinary. I took, roughly, certain figures which the right hon. Gentleman gave. He gave the case of a society which last year paid £125 for Income Tax to the revenue, and he said that if this Amendment were not accepted, and National Defence Contribution applied, it would pay £400 or a little more next year in Income Tax and National Defence Contribution. That means that the National Defence Contribution amount next year would be £275, that is, the difference between the £125 paid last year and the £400. If it had to pay £275 National Defence Contribution, that means that it had a trading surplus or profit of £5,500, and it is out of its £5,500 that it is being asked to pay £275 as National Defence Contribution. It is simply because, as a matter of machinery, it only paid a tax of £125 on the £500 which it did not distribute and had to pay no tax on the £5,000 which it did distribute, that these rather startling figures result.
Neither the Attorney-General nor the Chancellor of the Exchequer has met the social case. In this case you actually exclude from the provisions for assessment to this tax Section 32, Sub-section (4). When the Attorney-General now speaks about a large distribution of surpluses, that is our case. The people need that distribution.
Let me finish the sentence. It is because this tax does not have any regard, either in the one case or the other, to the Income Tax position of the individual shareholder, that that argument really has no relevance. I think the House will endorse what I say when I point out that my right hon. Friend, when putting forward his arguments in respect of building societies, did not base them on the smallness of the incomes of the shareholders. If he had done that, he would have been admonished much more forcibly than he has been by the right hon. Gentleman opposite, who told the House that the average individual's holding in the building societies is larger than the average holding in the co-operative societies. The building society concession was not based on that aspect of the matter at all.
What was it based on?
I do not think a reply to that question would be in order, nor do I think the House would desire me to go into it. I was challenged on a particular point, namely, that the building society concession ought to have led to a concession based on the fact that the shareholders in co-operative societies are below the Income Tax limit. Having pointed out that that was not the basis on which the building societies were met, I think I have paid due respect to that point.
The Chancellor of the Exchequer and the Attorney-General have spent a great deal of time in trying to prove that there has been no departure from Income Tax principles and no discrimination against co-operative societies in this matter, but I submit that their argument is a complete fallacy. The position of the co-operative societies under the Income Tax law is clear. First of all, under Section 31 of the Finance Act, 1933, which first made co-operative societies liable, a calculation is made which is based on the whole of their profits, and one calculation which, in the case of an ordinary company, would mean that they were liable to a deduction is made, and that deduction is set out in Sub-section (4) of the same Section. That is to say, while a building society has a calculation made having regard to the whole of its profits, yet, by reason of the social ground which has been voiced by my hon. Friends, and by reason of the small incomes of the great majority of co-operative society members, a special principle is applied to co-operative societies. That special principle, which is not in any sense a favour to co-operative societies, but is based on the fact that their members are below the Income Tax limit, is that there shall be a reduced payment made, that reduction being measured by the sum paid on the amount of share interest or loan interest in any year. The right hon. Gentleman has departed entirely from that principle in the case of the National Defence Contribution.
Under the 1933 Act there is a certain provision for a reduction, a perfectly justifiable reduction, and what my right hon. Friend the Member for Hillsborough (Mr. Alexander) asks for in his Amend- 1570 ment—whether it be appropriately worded or not—is that the principles applied in the 1933 Act should be applied in the case of the National Defence Contribution. If they are not applied, I submit with confidence that obviously there is a discrimination against co-operative societies in this matter. Under the 1933 Act they are taxed on one principle, but for the purposes of the National Defence Contribution they are to be taxed on another principle, and to that extent there is a departure from the ordinary Income Tax principles applicable to co-operative societies. The fact that that is so is proved by the figures given by my right hon. Friend. He proved that co-operative societies are going to pay a larger amount in proportion, having regard to the principles under which they are taxed under the 1933 Act, than is the ordinary limited company, and there again it must be clear that there has been a departure from the ordinary principles and that, in fact, there is a discrimination in this matter against the co-operative societies.
The whole relevance of the arguments addressed to the House by every speaker on this side has been that the eventual result is that a higher proportion of tax is to be paid by co-operative societies, having regard to the principles of Income Tax applicable to them under the 1933 Act, than is to be paid by a limited company. That is the justification for the Amendment. I am not altogether happy about the wording of it, but the principle is perfectly clear, in that my right hon. Friend would have less complaint if co-operative societies were dealt with under this tax precisely as they are dealt with under the Income Tax, which this tax is supposed to follow. In default of any concession, I hope that my right hon. Friend will insist on going to a Division.
I would like to say a word or two in view of the fact that I was the only Member of the House who supported the original tax. I am satisfied that if the original tax were brought in again, the Chancellor would have much more difficulty in getting it withdrawn. Many hon. Members on this side, had they been left alone and allowed to act according to their instincts, would have supported the original tax, and now we 1571 are getting a tax which the Chancellor himself admits, although he tries to cover it up, inflicts the most terrific injustice on the members of the co-operative societies. He has said that nothing unfortunately has been done to relieve the people of small means, but that that applies to every company. But he understands, and every Member of the Government understands, that as far as the ordinary company is concerned the man with small means is the exception. [HON. MEMBERS: "No."] Yes, the man with small means is the exception in ordinary companies, but in the case of the co-operative societies all the millions of members are affected by this.
The right hon. Gentleman has admitted that there is an injustice to the small people who are being pulled into this, and that it is unfortunate that nothing has been devised to relieve the small people. He was very scrupulous in his words, but he is going to be very unscrupulous in his actions, and the more unscrupulous he is in his actions the more honeyed he is in his words. In view of the fact that he has made a correct concession to the building societies, I want to appeal to the Chancellor and those associated with him to understand the justice of this demand, and to tell us that they are prepared to consider the Amendment and, maybe, bring in something to ease the situation at a later stage. I emphasise the fact that a gross injustice is being done to a mass of people who, when the National Defence Contribution was first promulgated, were quite outside the scope of anything which the then Chancellor had in mind. He never had in mind that the masses of people in the co-operative movement were to be mulcted in this way.
Question put, "That those words be there inserted in the Bill"
§ The House divided: Ayes, 135; Noes, 228.
Division No. 292.] AYES. [7.8 p.m.
Acland, Rt. Hon. Sir F. Dyke Brown, Rt. Hon. J. (S. Ayrshire) Edge, Sir W.
Acland, R. T. D. (Barnstaple) Buchanan, G. Fletcher, Lt.-Comdr. R. T. H.
Adams, D. (Consett) Burke, W. A. Foot, D. M.
Adams, D. M. (Poplar, S.) Cape, T. Frankel, D.
Adamson, W. M. Chater, D. Gallacher, W.
Alexander, Rt. Hon. A. V. (H'Isbr.) Cluse, W. S. Gardner, B. W.
Barnes, A. J. Dalton, H. Greenwood, Rt. Hon. A.
Barr, J. Davidson, J. J. (Maryhill) Grenfell, D. R.
Bromfield, W. Dunn, E. (Rother Valley) Groves, T. E.
Hall, J. H. (Whitechapel) Maclean, N. Seely, Sir H. M.
Harris, Sir P. A. MacMillan, M. (Western Isles) Shinwell, E.
Hayday, A. Mander, G. le M. Short, A.
Henderson, A. (Kingswinford) Marshall, F. Silkin, L.
Henderson, J. (Ardwick) Mathers, G. Simpson, F. B.
Jagger, J. Morrison, Rt. Hon. H. (Hackney, S.) Sorensen, R. W.
Jenkins, A. (Pontypool) Morrison, R. C. (Tottenham, N.) Stephen, C.
Kennedy, Rt. Hon. T. Paling, W. Thorne, W.
Kirby, B. V. Parker, J. Thurtle, E.
Kirkwood, D. Parkinson, J. A. Tinker, J. J.
Lathan, G. Pethick-Lawrence, Rt. Hon. F. W. Walker, J.
Lawson, J. J. Pritt, D. N. Watkins, F. C.
Leach, W. Rathbone, Eleanor (English Univ's.) Watson, W. McL.
Leonard, W. Ridley, G. Westwood, J.
McGhee, H. G. Rowson, G.
Mr. Whiteley and Mr. Charleton.
Albery, Sir Irving Culverwell, C. T. Higgs, W. F.
Anstruther-Gray, W. J. Davison, Sir W. H. Holmes, J. S.
Barclay-Harvey, Sir C. M. Dower, Major A. V. G. Hume, Sir G. H.
Barrie, Sir C. C. Drewe, C. Hunter, T.
Beamish, Rear-Admiral T. P. H. Duckworth, Arthur (Shrewsbury) Hurd, Sir P. A.
Beaumont, M. W. (Aylesbury) Duggan, H. J. James, Wing-Commander A. W. H.
Beaumont, Hon. R. E. B. (Portsm h) Duncan, J. A. L. Jarvis, Sir J. J.
Beit, Sir A. L. Eden, Rt. Hon. A. Keeling, E. H.
Birchall, Sir J. D. Elmley, Viscount Keyes, Admiral of the Fleet Sir R.
Bird, Sir R. B. Emery, J. F. Kimball, L.
Blair, Sir R. Emrys-Evans, P. V. Lamb, Sir J. Q.
Boulton, W. W. Errington, E. Lees-Jones, J.
Briscoe, Capt. R. G. Everard, W. L. Lennox-Boyd, A. T. L.
Brocklebank, Sir Edmund Fildes, Sir H. Levy, T.
Brown, Rt. Hon. E. (Leith) Findlay, Sir E. Lewis, O.
Bull, B. B. Fleming, E. L. Liddall, W. S.
Buller, R. A. Furness, S. N. Llewellin, Lieut.-Col. J. J.
Campbell, Sir E. T. Fyfe, D. P. M. Loftus, P. C.
Gartland, J. R H. Ganzoni, Sir J. Lyons, A. M.
Cayzer, Sir C. W. (City of Chester) Gilmour, Lt.-Col. Rt. Hon. Sir J. MacAndrew, Colonel Sir C. G.
Cazalet, Thelma (Islington, E.) Gledhill, G. McCorquodale, M. S.
Channon, H. Goldie, N. B. McEwen, Capt. J. H. F.
Chorlton, A. E. L. Goodman, Col. A. W. McKie, J. H.
Clarke, Lt.-Col. R. S. (E. Grinstead) Grattan-Doyle, Sir N. MacNeill, Weir, L.
Clarry, Sir Reginald Gretton, Col. Rt. Hon. J. Maitland, A.
Cobb, Captain E. C. (Preston) Gridley, Sir A. B. Manningham-Buller, Sir M.
Colville, Lt.-Col. Rt. Hon. D. J. Grimston, R. V. Margesson, Capt. Rt. Hon. H. D. R.
Conant, Captain R. J. E. Gritten, W. G. Howard Markham, S. F.
Cooke, J. D. (Hammersmith, S.) Guest, Lieut.-Colonel H. (Drake) Marsden, Commander A.
Cooper, Rt. Hn. T. M. (E'nburgh, W.) Guinness, T. L. E. B. Mason, Lt.-Col. Hon. G. K. M.
Courthope, Col. Rt. Hon. Sir G. L. Gunston, Capt. D. W. Maxwell, Hon. S. A.
Cox, H. B. T. Guy, J. C. M. Mayhew, Lt.-Col. J.
Crookshank, Capt. H. F. C. Haslam, Henry (Horncastle) Morgan, R. H.
Crowder, J. F. E. Herbert, A. P. (Oxford U.) Munro, P.
O'Neill, Rt. Hon. Sir Hugh Russell, Sir Alexander Thomas, J. P. L.
Orr-Ewing, I. L. Russell, S. H. M. (Darwen) Tryon, Major Rt. Hon. G. C.
Patrick, C. M. Salt, E. W. Wakefield, W. W.
Perkins, W. R. D. Savery, Sir Servington Wardlaw-Milne, Sir J. S.
Petherick, M. Selley, H. R. Warrender, Sir V.
Pickthorn, K. W. M. Shaw, Major P. S. (Wavertree) Waterhouse, Captain C.
Plugge, Capt. L. F. Simon, Rt. Hon. Sir J. A. Wedderburn, H. J. S.
Raikes, H. V. A. M. Smith, Bracewell (Dulwich) Wells, S. R.
Ramsbotham, H. Smith, Sir R. W. (Aberdeen) Wickham, Lt.-Col. E. T. R.
Reed, A. C. (Exeter) Spens, W. P. Windsor-Clive, Lieut.-Colonel G.
Remer, J. R. Storey, S. Withers, Sir J. J.
Rickards, G. W. (Skipton) Strauss, E. A. (Southwark, N.) Womersley, Sir W. J.
Robinson, J. R. (Blackpool) Strauss, H. G. (Norwich) Wood, Hon. C. I. C.
Ross, Major Sir R. D. (Londonderry) Sutcliffe, H.
Lieut.-Colonel Kerr and Mr. Cross.
(d) the carriage of goods or passengers by railway or the carriage of passengers by road, or the carriage of goods by canal or inland navigation."
All these are exempted from the operation of the contribution. This Amendment is submitted at the request of the Association of Municipal Corporations and follows a discussion which took place in the Committee stage when my hon. and gallant Friend the Member for Blackburn (Captain Elliston) moved an Amendment asking that exemption from the tax should apply to markets. The exemptions given so far are satisfactory to the municipal authorities to the extent that they cover the principal undertakings in which they are engaged, and which 1576 have been described as trades or businesses. It covers their businesses of gas, water and electricity. I am asked by the local authorities to point out that they are engaged in other undertakings which may also, presumably, be classified as trades or businesses, for example, public baths, markets, aerodromes, and so on. It is the opinion of the Association that there is no justification liar imposing a charge upon profits arising from any of these undertakings, and that the exemptions should be general and not limited to particular undertakings.
When the matter was raised upon the Amendment of the hon. and gallant Member for Blackburn the Chancellor said that he foresaw that markets could not properly be asked to be exempted unless similar undertakings carried on by municipal authorities were excluded from the operation of the tax. That was on 1st July. On 29th June the association had sent to his Department a request that all similar undertakings should be exempted. The Chancellor in very guarded language promised on the Committee stage to look into the matter again. Since that time the Association of Municipal Corporations have had the opportunity of seeing the representatives of the Inland Revenue Department, and they have submitted to the Department their case for the exemption of these undertakings. They have requested that if the Chancellor cannot see his way to grant exemptions in respect of all the undertakings, he will, at any rate, exempt the markets. I will not put the details which have been submitted by the association, for I am assuming that the Chancellor has fortified 1577 himself with them. The Chancellor may feel disposed to say that while there may be general cases, there are other instances where an authority may make a profit out of a race-course. I should say, however, that even they should be exempted, for the profits go to the reduction of the general rate. I hope that the brevity with which I have moved the Amendment will not detract from its merits.
The Association of Municipal Corporations feel very keenly about this matter. It was raised on the Committee stage of the Bill and the Chancellor, although giving no promise that he would exempt these other undertakings, said he would look into the matter. I hope that his investigations will be followed by favourable results. The same principle was involved in the Amendment on the Committee stage to exempt markets, and I want to urge that if there is a case to exempt markets or any other statutory undertaking, surely the argument is valid for exempting all statutory undertakings. There are two kinds of undertakings. There are those which are purely public and owned by local authorities. The profits accruing from these are used to further the public interest, and no individual gets dividends or interest from them. These are the real statutory undertakings, and they are limited very rigidly by Act of Parliament, sometimes by local Acts and sometimes by general Acts. There are other kinds of statutory undertakings which are semi-private, such as gas and electricity undertakings, where private individuals are allowed to earn profits.
Curiously enough, the Chancellor proposes to exempt such statutory undertakings, but the arguments that can be adduced for exempting them can be used with tremendous force for exempting those that are owned solely by municipalities. On any logic there is a strong case to exempt such things as markets, crematoria, parks and burial grounds. In some cases these things make profits, and it would be anomalous if we exempted, say, a gas undertaking which can make anything up to 10 or 15 per cent., as has been pointed out to-day, and yet make a market subject to the 1578 tax. I can give an illustration of what it will mean to one group of statutory undertakings. In the case of Sheffield, for instance, the Income Tax payable on the markets amounts to £7,306 this year. This does not include such things as the abattoir, the wholesale meat market and the cold stores, but only the ordinary distributive markets. If the National Defence Contribution is applied to these markets, they will have to pay another £1,147.
This matter has been raised with commendable brevity and fairness, and I think that it will be possible for me to deal with it adequately in the short time left. I have looked personally into this question. I was reminded on the Committee stage that the Association of Municipal Corporations were making representations about it, and I have since had the opportunity of studying what they said. They were naturally anxious to urge that these further exemptions should be made, but I am afraid that I cannot advise the House to agree. We have already exempted from the tax under Clause 17, Sub-section (5), the undertakings carried on by local authorities as long as they fall within the list in that Sub-section. To go further and exempt every sort of undertaking, whatever the circumstances, carried on by local authorities would go a great deal further than our principles of taxation permit.
The House may take it that it has never been accepted by the House of Commons as a principle that you should not ask for Income Tax from local authorities when they are carrying on profit-making undertakings. The general view of the House probably is that the exemptions which have been given here to statutory undertakings are wide and generous. Indeed, we have heard some information which has made us wonder whether we have not gone rather far. I am afraid that I cannot agree that local authorities should get complete exemption in all circumstances. The matter has been considered very fully, with a complete regard for the importance of the association, but I do not think that the view I have expressed will be a great surprise to my hon. Friend who moved the Amendment, because we are only following the principles we have constantly followed.
§ The House divided: Ayes, 127: Noes, 233.
Division No. 293.] AYES. [7.29 p.m.
Acland, Rt. Hon. Sir F. Dyke Griffiths, J. (Llanelly) Parker, J.
Acland, R. T. D. (Barnstaple) Groves, T. E. Parkinson, J. A.
Adams, D. (Consett) Hall, G. H. (Aberdare) Pethick-Lawrence, Rt. Hon. F. W.
Adams, D. M. (Poplar, S.) Hall, J. H. (Whitechapel) Pritt, D. N.
Adamson, W. M. Harris, Sir P. A. Procter, Major H. A.
Alexander, Rt. Hon. A. V. (H'Isbr.) Hayday, A. Ridley, G.
Anderson, F. (Whitehaven) Henderson, A. (Kingswinford) Riley, B.
Attlee, Rt. Hon. C. R. Henderson, T. (Tradeston) Ritson, J.
Barr, J. Hopkin, D. Rowson, G.
Bellenger, F. J. Jagger, J. Sanders, W. S.
Benn, Rt. Hon. W. W. Jenkins, A. (Pontypool) Seely, Sir H. M.
Bromfield, W. Jones, A. C. (Shipley) Shinwell, E.
Brown, C. (Mansfield) Kelly, W. T. Short, A.
Brown, Rt. Hon. J. (S. Ayrshire) Kennedy, Rt. Hon. T. Silkin, L.
Burke, W. A. Kirby, B. V. Simpson, F. B.
Clynes, Rt. Hon. J. R. Leonard, W. Sorensen, R. W.
Cooks, F. S. Leslie, J. R. Stephen, C.
Davies, R. J. (Westhoughton) McEntee, V. La T. Thorne, W.
Davies, S. O. (Merthyr) McGhee, H. G. Thurtle, E.
Day, H. Maclean, N. Tinker, J. J.
Debbie, W. MacMillan, M. (Western Isles) Viant, S. P.
Dunn, E. (Rother Valley) Mander, G. le M. Walker, J.
Ede, J. C. Marshall, F. Watkins, F. C.
Fletcher, Lt.-Comdr. R. T. H. Mathers, G. Watson, W. McL.
Frankel, D. Maxton, J. Wedgwood, Rt. Hon. J. C.
Gallacher, W. Messer, F. Westwood, J.
Greenwood, Rt. Hon. A. Nathan, Colonel H. L.
Griffith, F. Kingsley (M'ddl'sbro, W.) Oliver, G. H. Mr. Whiteley and Mr. John.
Griffiths, G. A. (Hemsworth) Paling, W.
Acland-Troyte, Lt.-Col. G. J. Campbell, Sir E. T. Dorman-Smith, Major Sir R. H.
Albery, Sir Irving Cartland, J. R H. Dower, Major A. V. G.
Amery, Rt. Hon. L. C. M. S. Cary, R. A. Drewe, C.
Apsley, Lord Cayzer, Sir H. R. (Portsmouth, S.) Duggan, H. J.
Aske, Sir R. W. Cazalet, Thelma (Islington, E.) Duncan, J. A. L.
Assheton, R. Chamberlain, Rt. Hn. N. (Edgb't'n) Eastwood, J. F.
Astor, Viscountess (Plymouth, Sutton) Channon, H. Eden, Rt. Hon. A.
Atholl, Duchess of Chorlton, A. E. L. Edge, Sir W.
Baldwin-Webb, Col. J. Clarke, Lt.-Col. R. S. (E. Grinstead) Edmondson, Major Sir J.
Barclay-Harvey, Sir C. M. Clarry, Sir Reginald Elliot, Rt. Hon. W. E.
Barrie, Sir C. C. Cobb, Captain E. C. (Preston) Ellis, Sir G.
Beaumont, M. W. (Aylesbury) Conant, Captain R. J. E. Emery, J. F.
Beaumont, Hon. R. E. B. (Portsm'h) Cooke, J. D. (Hammersmith, S.) Emrys-Evans, P. V.
Beechman, N. A. Cooper, Rt. Hn. T. M. (E'nburgh, W.) Entwistle, Sir C. F.
Beit, Sir A. L. Courthope, Col. Rt. Hon. Sir G. L. Errington, E.
Bernays, R. H. Cranborne, Viscount Everard, W. L.
Birchall, Sir J. D. Croft, Brig.-Gen. Sir H. Page Fildes, Sir H.
Blair, Sir R. Crooke, J. S. Findlay, Sir E.
Boothby, R. J. G. Crookshank, Capt. H. F. C. Fleming, E. L.
Boulton, W. W. Croom-Johnson, R. P. Fremantle, Sir F. E.
Brass, Sir W. Crossley, A. C. Furness, S. N.
Briscoe, Capt. R. G. Crowder, J. F. E. Fyfe, D. P. M.
Brocklebank, Sir Edmund Cruddas, Col. B. Ganzoni, Sir J.
Bull, B. B. Davies, Major Sir G. F. (Yeovil) Gilmour, Lt.-Col. Rt. Hon. Sir J.
Burghley, Lord Davison, Sir W. H. Gledhill, G.
Burton, Col. H. W. Denman, Hon. R. D. Gluckstein, L. H.
Butler, R. A. Donner, P. W. Goodman, Col. A. W.
Grattan-Doyle, Sir N. Manningham-Buller, Sir M. Selley, H. R.
Gridley, Sir A. B. Markham, S. F. Simon, Rt. Hon. Sir J. A.
Harbord, A. Mills, Major J. D. (New Forest) Southby, Commander Sir A. R. J.
Harvey, Sir G. Morgan, R. H. Spears, Brigadier-General E. L.
Haslam, Henry (Horncastle) Morrison, G. A. (Scottish Univ's.) Spens, W. P.
Heneage, Lieut.-Colonel A. P. Munro, P. Storey, S.
Holmes, J. S. Orr-Ewing, I. L. Sutcliffe, H.
Hope, Captain Hon. A. O. J. Patrick, C. M. Tasker, Sir R. I.
Hume, Sir G. H. Petherick, M. Thomas, J. P. L.
Hunter, T. Pickthorn, K. W. M. Tryon, Major Rt. Hon. G. C.
Hurd, Sir P. A. Plugge, Capt. L. F. Tufnell, Lieut.-Commander R. L.
James, Wing-Commander A. W. H. Procter, Major H. A. Wakefield, W. W.
Keeling, E. H. Ramsbotham, H. Wardlaw-Milne, Sir J. S.
Kerr, Colonel C. I. (Montrose) Rankin, Sir R. Warrender, Sir V.
Kerr, J. Graham (Scottish Univs.) Rathbone, J. R. (Bodmin) Waterhouse, Captain C.
Keyes, Admiral of the Fleet Sir R. Rawson, Sir Cooper Watt, G. S. H.
Kimball, L. Rayner, Major R. H. Wedderburn, H. J. S.
Lamb, Sir J. Q. Reed, A. C. (Exeter) Wells, S. R.
Levy, T. Rosbotham, Sir T. Windsor-Clive, Lieut.-Colonel G.
Liddall, W. S. Rowlands, G. Withers, Sir J. J.
Llewellin, Lieut.-Col. J. J. Royds, Admiral P. M. R. Womersley, Sir W. J.
Lyons, A. M. Russell, Sir Alexander Wood, Hon. C. I. C.
McEwen, Capt. J. H. F. Samuel, M. R. A. Mr. Cross and Mr. Grimston.
§ It being after Half-past Seven of the Clock, and leave having been given to move the Adjournment of the House under Standing Order No. 8, further Proceeding was postponed, without Question put.
Forward to SPAIN (NON-INTERVENTION PROPOSALS).

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