Orders of the Day — Excess Profits Duty.

Part of the debate – in the House of Commons on 28th April 1920.

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Lieut.-Colonel Sir J. NORTONGRIFFITHS:

I rise to support my hon. Friend's Amendment, and, in doing so, it is my intention to be very brief, as I understand a great number of hon. Members wish to speak on this question. I support my hon. Friend's Amendment because I believe, and I think I believe as whole-heartedly as the Chancellor of the Exchequer himself, that the tax is an unsound one, that it is not the best method of obtaining or collecting the revenue, that it is a tax which we had to resort to owing to the War, and I am perfectly convinced that in his mind, as it must be in the minds of all hon. Members, a better means can be found of collecting the revenue required. On Wednesday last I made four main points against this Excess Profits Tax. The first point I made—and in looking through the OFFICIAL REPORT one sees in almost every speech the same point—was the inequality of the tax as between old businesses and new ones. We have all received hundreds, and many, I believe, thousands, of letters on the subject. I do not propose to read them, because nothing bores the House more than the reading of letters; but I will read one, because it is a typical case of the small man and how unjust the tax is to him. I have a case here which I have investigated, and early this morning went down to see the works myself It is a business of three partners, with a combined capital of £9,000. The three partners—and all served in the War in one way or another—put in their whole time at this business, and the total income, after paying their staff, rents and expenses, is £3,000, of which this year there will be paid £1,200 in Excess Profits Tax, leaving £1,800 to be divided among three men with families, and out of that sum each has to pay a considerable amount of Income Tax. The business was started in 1913, and with the combined efforts of the partners could be increased. Three of the staff are paid in salaries £500 each, while each partner draws £600, and they do all the principal work. When going into that business, if they had had a little more freedom— not to squander the money, but to put it into their business so that it might develop— they would have been able to ship goods out of this country; whereas, at the present time, it is all they can do to keep their customers in this country going.

The next point I made was the restriction it imposes on trade and its expansion. I have had a resolution sent me, among others, by the Master Bookbinders' Asso ciation, as follows: That this meeting of the Master Bookbinders' Association protests against the continuation of the Excess Profits Duty in its present form, owing to its incidence being particularly severe upon the progress of an industry such as book-binding, which has a low pre-War standard. The association suggests that a development of the Corporations Tax is far preferable to a continuance of the Excess Profits Tax. I think I am right in stating that most hon. Members of this House have been swamped with letters and telegrams from their own constituents, and it is their duty to represent truly the interests of their constituents. If there are Members representing industrial constituencies, it is their duty to do what they really conscientiously feel in regard to this particular measure. If they feel there is another and a better method of obtaining the money, and they really, after close study, believe that this tax is bad for trade and industry, that it is a corrupt method of taxation, then I say, without hesitation, it is our duty, whether we like it or not— and personally I loathe doing it—to press this Division in the lobbies.

My third point was its incentive to extravagance, and I dealt with that very fully. My fourth point was the liability of it being passed on to the consumer. In that respect I desire, if I may, to give what has actually happened in my own case. We invited tenders for a very close competitive work in South America, and in getting quotations, which all public works' contractors have to do, it is our business to test the market. We got quotations for something like seventy-four different articles connected with railway-development work in particular. Since the Budget speech was made by the Chancellor of the Exchequer, in the case of more than 40 per cent. of those tenders we have had a supplementary letter informing us that, in view of that statement, they must add 10 per cent., or whatever it is, to their previous offer. We cannot, of course, until we get a tender, book definitely the material we want, which we should like to do, to cover the period of two or three years' work. Our business is not to speculate in the markets, but simply to secure ourselves by fair prices, and not to take any risks. I do not think I am overstating the case when I say that this proposal is causing the gravest anxiety throughout the country in trade and industry. I am perfectly sure that the Chancellor of the Exchequer, who comes from an industrial centre, a portion of which I for some time represented— I refer to Birmingham—will appreciate that point. Doubtless he has had all sorts of representations made to him like the rest of us. It is not overstating in the case— and after all, the proof of the pudding is in the eating— by saying, and it is proved, that this proposal is an absolutely unsound method of taxation and against the best interests of the country. One might talk for an hour or for a couple of days and not sum up the case more briefly or accurately than in these few words. I most earnestly appeal to the right hon. Gentleman in this matter. I know men who are struggling to get back to pre-War conditions, who hate profiteering, and dislike having to add things on to the cost of production; and I do beg the right hon. Gentleman to do his utmost to meet the views shown to exist, not only in this House, but in the country.

May I add a statement from a gentleman who I believe is still a Member of the Government? I refer to Sir Joseph Maclay, head of the Ministry of Shipping. He was speaking at the launch of a big vessel quite recently—and it was quite by accident that I picked up this paragraph from the " Shipping World "—and Sir Joseph, we all know, is one of the leading business men of the country, one of the magnates of industry, and of the commercial life of the country—speaking on 21st April, he said—and I will give the most important points, for they go to the root of the case: He believed that this tax would have a very serious effect upon industry in this country. Instead of seeing a reduction of the tax as they had anticipated, it had been increased. It would materially hamper the trade of the country. He did not think that it was too late for serious reconsideration by the Chancellor to be given to the matter. Then Sir Joseph got to the bedrock of the matter— He did not expect any great improvement in the trade of the country unless they replaced a condition of uncertainty by a state of absolute certainty. It is this uncertainty which is trying everybody and makes the position difficult. I know one particular case in which an order for two ships was on the point of being signed: it was cancelled in view of the Budget. This thing is disturbing everybody. It is my business to go down to one of the biggest shipyards in the country. I was there recently, since the Budget speech. It was almost agony to see so much uncertainty and uneasiness The feeling is, " What is the good of trying; what is the good of trying to get back to normal conditions under the circumstances?" And this at a time when we could if we would get that degree of certainty in this country which is desirable and, by greater strides with that certainty, go ahead in a way better than anyone can conceive towards pre-war conditions and to that pre-eminent position which we held in the world before the War. Virtually we have no competitors. The world is demanding our goods I submit that if the Chancellor would only look at the matter from this point of view, then by encouraging the trade and industry of this country you could get from the foreigner half, if not more, by profits on our goods—perhaps almost enough—to redeem the whole of the War debt!

There are many alternatives. I am not going to suggest them. All I would say is you have only to study United States or Canada and find alternatives there which would do away with the Excess Profits Tax. Again, it is certain if the Excess Profits Tax were abolished the whole tax would not be lost, as many people imagine. Income Tax and Super-tax would be payable on a much larger sum, and any difference would thus be made up. I am not that sort of optimist recently described and said to be a Scotsman wandering through the United States with a corkscrew. But I am certain of one thing, that if the Chancellor will give the country some statement on this particular point, so as not to make us who loath doing it press this matter to a Division, then he will not spoil that which otherwise will be a brilliant career, and the record of one of the most wonderful Governments this country has ever had in its history. Compared to the Governments of other countries, the Government has turned out a wonderful amount of legislative and other work. We all admit the wonder of it. This proposal is a big, black, blot on the Budget, and on that record. I ask the right hon. Gentleman not to turn down our proposal, but to give the matter one further consideration, and try to relieve some of us of the unpleasantness of having to go into the Lobby against the Government, who, I believe, desire the general development as well as any Member of this House.