Orders of the Day — Excess Profits Duty.

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

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Photo of Mr Rei Carter Mr Rei Carter , Manchester, Withington

I wish to support the Amendment. Coming from one of the particular areas that has just been spoken of when the matter of spindles came up, I wish to say that, in our county and round about there, there was a pious hope, and more than a pious hope, that this particular duty would be dropped altogether this year. It was really believed in, so that when the additional 20 per cent. was put on it came as a very unpleasant shock. I too have had sheaves of letters, and I want the Financial Secretary to the Treasury to understand that the art of propaganda has not been really worked with regard to the correspondence that I have had on this subject, for the letters that have reached me have been written from firms really and truly who will suffer from this tax. I am speaking of the younger firms. We will take the case of a man who started business in 1912 and who very likely for the first year was absolutely at a loss, building up his business. The second year he may only just have paid expenses, and the third year he was making a small profit. He has left his old firm, and is working on his own because he thinks he can do better by so doing. Across the road there is his old firm, who were making their tens of thousands the year before the War and he on his very little return has to pay immensely more in proportion than does the wealthier firm in Excess Profits Duty. I was very glad to hear that the policy of mercy is going to be shown, and I hope in a large degree, to these young firms and these young people who are struggling to do what we are all told to do, namely, to try to increase production, as being the only salvation for the country. I consider the putting on of this 20 per cent. will not increase production, but will have the opposite effect. If the taking off last year of 40 per cent. of the duty increased production, will the putting on of 20 per cent. this year increase or decrease production? To my mind there is no doubt that, as long as this tax has to be paid in practically liquid assets, the putting on of another 20 per cent. will seriously cripple even the largest firms.

Prices have gone up in every way, and even profits, as we know, are not what profits were, and I would very much like to accentuate this fact, that I think it is undesirable even to continue this tax. After decreasing it from 80 per cent. to 40 per cent. last year, to increase it now to 60 per cent., after we are told that the financial condition of the country is more satisfactory than it was last year, is bound to cause irritation and unrest in all business circles. What I would like to do would be rather to encourage the development of trade than to hamper it, and I appeal to the Chancellor of the Exchequer to take the matter very seriously into consideration, especially, as I say, with regard to the younger firms. The very wealthy firms may stand it without much trouble, but for the young ones it means in many cases either bankruptcy or penury, or driving out some of the rising young business men of our country and making their hearts sad when they ought to be bucking themselves up and doing their best to pull things through. There are many cases of men who have put in one or two years in the War and have come back and started in business on their own, and is it fair, after they have done their bit for their country, that they should have this very heavy burden put on their shoulders? I may be asked to suggest an alternative in order to make up the loss which would be caused by not increasing the duty, but I do not think the difference is so very great to be made up by the Treasury. I do wish the Chancellor could take away the burdens from the persons who are producing. We are told that production alone will save us from bankruptcy, and yet on the other hand we are told, "If you do produce, we will take so much off you." Where is the incentive for striving to do better? I think it is a mistake, and I hope it will not be persisted in. I know very well the money must come from somewhere, and I am not asking for the abolition of the tax, but for no increase. If the tax is kept at 40 per cent., it is a heavy enough burden for any young firm to start with, and a heavy burden on the best established firms. I hope the Chancellor will go fully into the question whether this extra 20 per cent. which he is going to get is worth the candle. I do not think it is, and I think that by imposing it you will be keeping down extension, expansion, and production.