Clause 40. — (Interest on certain loans not to be treated as profits for purposes of Corporation Profits Tax.)

Part Iii. – in the House of Commons on 20th June 1921.

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8.0 P.M.

The interest receivable by any company in respect of any securities forming part of the three and one-half per cent. Conversion Loan redeemable in nineteen hundred and sixty-one, or in respect of any securities forming part of any loan which may be issued at any time after the passing of this Act as respects which the Treasury on the issue thereof direct that this Section shall apply, shall not be included in the profits of the company for the purpose of Corporation Profits Tax under Part V of the Finance Act, 1920.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I beg to move to leave out the words or in respect of any securities forming part of any loan which may be issued at any time after the passing of this Act as respects which the Treasury on the issue thereof direct that this Section shall apply. I think it is extremely undesirable that there should be certain securities, investment in which absolves the company from paying the Corporation Profits Tax on that security. Holders of the 3½ per cent. Conversion Loan are already exempt from Corporation Profits Tax in respect of that loan, but we do not want to have any more loans started, or any more stocks and shares on the market, possession of which will exempt the company holding them from having to pay this tax. The tax ought to be paid by all or none, and it is very undesirable that there should be this exemption. Wherever you have exemptions of that sort, you are very likely to have cumbrous machinery or fraud, and it is extremely difficult to keep a check on the investments.


With a good deal of what the hon. and gallant Gentleman said on the point of general principle, I am quite in agreement, but I am not sure that he perfectly comprehends the reason why this particular provision is made as regards the Conversion Loan and Government stock of that sort. It is owing to the provisions of the law relating to the Corporation Profits Tax which, as they work at present, have this result, that certain high-class securities, in the nature of debentures and so on in railways, which fall into classes of exemption from the Corporation Profits Tax, receive, when they come into the hands of investing companies and so on, whose principal business and income are derived from investment in other companies, a marked preference over Government securities of various sorts. I will not go into the samewhat intricate details of the manner in which that comes about, but, owing to the necessary and proper exemptions which are given under the Corporation Profits Tax, certain advantages as securities are received by these high-class debentures and so on over Government securities. That is, of course, a very grave disadvantage from the point of view of the Exchequer, and it is to remove that disadvantage that this machinery is provided. As regards future levies, the effect of my hon. and gallant Friend's Amendment—I am not quite sure he intends it—would be to allow the concession to be made on this occasion, and to prevent it being made in the future. He recognises, no doubt, that a promise was given, but I would venture to submit to him that if there is a strong case, as I have argued there is, for making this exemption, it is really in regard to future operations of this sort that there will be less objection taken, because the circumstance of this concession being given will, of course, be known before the price of the loan, or the bargain determining the loan, is fixed, and it will be taken into account and due consideration will be received in arranging the terms of the loan. Under these circumstances, I trust my hon. and gallant Friend will not press the Amendment.

Photo of Mr Godfrey Collins Mr Godfrey Collins , Greenock

As I understand, capital invested in railways or in debentures or preference shares, if they are sold and transferred to a holding company, the capital so transferred is not liable to the Corporation Profits Tax. In other words, capital comes under the Corporation Profits Tax in one form of investment, but not in another form. Surely it shows the gross unfairness of the Corporation Profits Tax that a fortunate individual, knowing the law about the Corporation Profits Tax, can invest his money in one class of security, and escape that tax, while others, who are not well posted in these matters, or may not be fully informed, are required to pay the tax.


I am not sure that I made quite clear my own meaning, perhaps because I did not want to enter into a region with which I thought hon. Members were familiar. What I was referring to, of course, was the arrangement by which certain returns of capital are not taxed twice over under the Corporation Profits Tax. Having paid once in their own company, the interest does not pay again when received by another company, such as an investment or loan company.

Photo of Mr John Rawlinson Mr John Rawlinson , Cambridge University

Would that principle apply to a railway debenture?



Photo of Mr Godfrey Collins Mr Godfrey Collins , Greenock

The main point I put before the Committee was that a particular type of investment escapes the Corporation Profits Tax altogether, and investments in other types of securities become liable to the payment of this tax. You single out a particular class of investors—they may be poor investors—for special taxation, which is not levied on other classes of the community. It is levied upon investors who, in their own judgment, and, it may be, without full knowledge, invest their hard-earned savings in deferred shares, which, judging by prospectuses issued in the last few days, are a very attractive form of investment. I hope my hon. and gallant Friend will press his Amendment to a division. The Corporation Profits Tax is a grossly unfair tax. Experience has shown that it is unfair between one type of individual and another. It violates the fundamental principle of taxation, which is, ability to pay.

Photo of Mr John Whitley Mr John Whitley , Halifax

The question is a narrow one, namely, whether certain securities ought to be exempted from the tax. The hon. Member must not go into the wider question.

Photo of Mr Godfrey Collins Mr Godfrey Collins , Greenock

I was venturing to argue that there should be a larger number of investments not liable to the tax. I quite realise I was on delicate ground in pressing the larger question, and I shall resume my remarks upon that point when it is moved to leave out the Clause.

Question put, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 165; Noes, 52.

Photo of Mr George Balfour Mr George Balfour , Hampstead

I beg to move, after the word "apply," to insert the words and the dividends or interest received from any company the profits of which are exempted from Corporation Profits Tax under the proviso to Section fifty-two, Subsection (2), of the Finance Act, 1920. The object is to remove uncertainty and to give effect to exemptions from Corporation Profits Tax on the dividends or interest received from certain companies, the profits of which are exempt under Section 52 of the Finance Act, 1920. I think the ambiguity which exists was due to the fact that concessions were made last year on Section 52, and the necessary consequential Amendments were not made in Section 53. Under Section 53 any joint stock company receiving dividends from a company liable to Corporation Profits Tax does not bring into account those dividends for the purpose of computation of Corporation Profits Tax in that joint stock company, such as a trust or investment company, if the dividend was already liable to the tax. Under Section 52 certain companies are exempt from Corporation Profits Tax. Being exempt, they are therefore not liable. Had they been liable, under Section 53 the company receiving the dividend would have had no further liability to Corporation Profits Tax in respect of that dividend, but being exempt under Section 52, there has arisen from time to time since the passing of the Act of last year a question as to whether there is not a charge on the dividend received from the exempted company when it is received by the joint stock or holding company. My Amendment is to remove that ambiguity and to make it clear that exemption from Corporation Profits Tax is at least as strong as the meeting of the liability for Corporation Profits Tax. There are two parties who are substantially affected. The one is the trust or investment company receiving the dividend from these companies, and they are naturally anxious to have this provision made clear, but in my opinion a still more serious grievance exists in connection with a joint stock holding company holding the whole of the mortgages, debentures, or shares of a company which is exempt under Section 52 of the Act.

Certain building societies and public utility societies are exempt under Section 52. Many of these companies which are exempt, being companies created by Statute, have the whole of their share capital held by a holding company. The statutory company is exempt under the Finance Act of last year and in this Bill, but the holding company receiving the whole of the interest and the dividends of the statutory company may be called upon to pay the Corporation Profits Tax before it hands over the proceeds of the property to the shareholders. That, I am sure, was not the intention last year. The Bill as it stands does not take account of that difficulty, or remove it—the difficulty created, by what I think were hurried Amendments last year. I suggest the Amendment that I have put down will remove the difficulty both as to these companies and the holding companies; as regards the latter, it is simply a case, as I have said, between the earnings of the property and the shareholders, for there is no doubt there is no interest by the holding company in the earnings of the other; it acts simply as trustee between the two parties.


On this Amendment, on behalf of my right hon. Friend, I shall be able to go part of the way to meet the hon. Member; not, I fear, the whole way. As regards the trust and investment companies, I believe there is no case at all for exception and the relief suggested. It is the general principle of the whole Corporations Tax that investment incomes should be liable, and I can see on the merits of the case no reason at all why, admitting in the first place that income is not taxed on receipt by the first company, it ought not to pay when received by the investment company. It is surely a sheer negation or contradiction to seek to extend that exemption to companies where the income received by the first company has not paid tax, or for whatever reason. As regards the general position of the investment company, I take it in broad terms the case of my hon. Friend is this: that the first company does not pay the tax, and so there is no reason why the second company should. We come to a very different case in the second case which he put. There is this great practical difference, here I entirely agree with him that we are on different ground, because the holding company cannot change its investment. Its whole existence is derived from that of the exempted company. I think I can undertake on behalf of my right hon. Friend to con- sider this matter before Report, and to give effect to some Clause exempting the holding company.

Photo of Mr Godfrey Collins Mr Godfrey Collins , Greenock

The reply of my hon. Friend clearly reveals the inequality which exists and which will be extended if the Government carry out their intention. If I correctly understand the Amendment, it is this: there is capital in a certain company, that company paying Corporation Profits Tax; the dividends of that company pass to another company, and the other company is liable to pay Corporation Profits Tax. The underlying idea is that the Limited Liability Acts conferred certain favours or privileges on capital, invested according to those Acts, and for that privilege the Chancellor, if I remember correctly what he said, considered that the capital invested in these companies should pay some return for that right. I think the tax itself is a bad tax, but the reply of my hon. Friend will make it more unfair and more unjust than it is to-day, between one company and another. The holding company, as my hon. Friend has said, cannot transfer its holding, for it is a holding company pure and simple. But when a company forms itself into a holding company it does so for a very good reason—for its own interest—justifiable and right, no doubt, but if the argument of the Government is correct, that the Limited Liability Acts give a privilege which induces them to impose a Corporation Profits Tax, I suggest that that tax should be levied as well on the profits of the holding company. What is good for one class of company should apply all round. To make a distinction between a holding company or trust company or any other company is unfair between taxpayer and taxpayer, and ought not to receive the support of the Government.

Photo of Mr George Balfour Mr George Balfour , Hampstead

In view of the statement made by the Financial Secretary I ask leave to withdraw my Amendment. I will endeavour to suggest something adequate between now and the Report stage.

Amendment, by leave, withdrawn.

Photo of Mr Alfred Waterson Mr Alfred Waterson , Kettering

I beg to move, at the end of the Clause to add a new Sub-section— (2) On and after the fifth day of April, nineteen hundred and twenty-one, the provisions in Part V of the Finance Act, 1920 (which relate to the Corporation Profits Tax), shall cease to apply to the profits of a society registered under the Industrial and Provident Societies Act, 1893, and paragraph (h) in Section fifty-three of the Finance Act, 1920, is hereby repealed. I desire to ask the representative of the Government to endeavour to apply, shall I say respectfully, the same sense of proportion which the Chancellor very suitably announced on a previous Amendment. The right hon. Gentleman said there was some sense of fairness and justice when dealing with excess profits. I want the Government to give the same consideration and to have the same sense of fairness and justice in the case of the societies that come under the Industrial and Provident Societies Act as they are prepared to give, quite justifiably doubtless, to those other organisations which have been appealing so far as the Excess Profits Duty is concerned. I am afraid I shall find myself in a difficulty in endeavouring to bring to the Committee new suggestions as to why these societies should be exempt from a tax. I only am too painfully aware that last year on the Budget it was my duty to make five speeches at least upon this matter. I trust the Committee will bear with me in endeavouring to find some new suggestions that will save me from reiterating what I said last year.

In tracing the Industrial and Provident Societies Act, I am led to the conclusion that every society which has its status under that Statute are working-class organisations. We can summarise them as friendly societies, working men's clubs, trade unions, building societies, and incidentally, and last but not least, the co-operative societies. I do not think that there is any Member of the Committee who would be prepared to say that any of these organisations are out for the specific purpose of making profit. I know of none, and I have been privileged to work inside most of the organisations I have mentioned, with the exception of the working men's club movement, for many years. With regard to the charge that these societies are organised for the specific purpose of making huge surpluses at the consumers' or the members' expense, I think it is well known to the Committee that any organisation which has its standing under that particular Act has its limitations. Not only that, but it also has to open its doors wide to anyone who may have a desire to enter therein. One thing we have repeatedly asked the Government to do is to remove one of those limitations, that is, in conjunction with the £200 share limit. If the Government are anxious to endeavour to force limitations that come along with the privilege of working under the Industrial and Provident Societies Acts, we think it exceedingly unfair that they should force upon us the obligations which they force upon a limited liability company.

This tax in my humble judgment—and I do not pride myself upon having as much brains as some hon. Members of this Committee, but I attempt to use them to the best of my ability—as applied to cooperative societies has not been a success. I do not think the right hon. Gentleman who speaks for the Government will be able to say that it has been a success. If my memory serves me correctly, whilst you endeavoured to secure from the co-operative movement £175,000, it is a remarkable thing that something less than that amount has accrued from the application of the Act. First of all I feel justified in mentioning, as I did on the last occasion, that I feel the Government has made a huge mistake in not altering the Industrial and Provident Societies Act before it applied the obligations forced upon a limited liability company on those organisations which came under the Industrial and Provident Societies Acts. I do not know of a case taken to the High Courts, but I still hold the view—and until the case has been thoroughly tested I shall retain that opinion—that to apply this tax to such societies is an illegal practice.

There is another point which I am anxious to bring before the Committee. It was only last year, for the first time in the history of these organisations, that the Chancellor of the Exchequer violated the principle upon which these organisations were built and upon which they have always stood. For more than 25 years every Chancellor of the Exchequer has maintained that principle, and the attitude of previous Chancellors of the Exchequer has been borne out by statements that have been promptly given by officers of the Board of Inland Revenue. I will quote to the Committee what a Deputy Chief Inspector of Taxes said before the Royal Commission which investigated this question. Replying to a question put to him, Mr. E. Standford, of London, a Deputy Chief Inspector of Taxes, said: If a co-operative society is to be treated like an ordinary trader you have only to look at the statement that I have put in showing what the profits are and what taxes we are already receiving under Schedule A to see that their statement cannot be controverted; for instance, that the revenue is receiving more tax than it would receive, assuming that dividends on purchases are regarded as non-taxable. We have always received every penny piece that was due to us by law. We have never pleaded for preferential treatment in the slightest degree, but we have a right to ask that this House shall give to the working class organisations that sense of fairness and justice which the Chancellor of the Exchequer has mentioned this afternoon. It is true—I do not think the Inland Revenue authorities would endeavour to get away from this fact—that under Schedules A and B of the Income Tax we have already been over taxed, and what we might have reclaimed we have not attempted to secure. This only goes to prove that there has been a decided endeavour to assist the country as far as the securing of revenue is concerned, and we feel that the injustice of this Corporation Profits Tax placed upon the movement as a whole is apparent to anyone who is prepared to give it even the slightest consideration.

This Clause applies a tax to corporations and societies registered under the Acts I have mentioned, which, strange to say, is not applied to any other class of trader or organisation. We are prepared to argue that even if the tax might fairly be applied to corporations registered under the Corporations Acts, it still would be grossly unfair to levy it upon mutual trading organisations registered under the Industrial and Provident Societies Acts. Those who have studied the ramifications of these organisations cannot help admitting upon first sight without further search that these societies are entirely different from those of companies which are simply arranged organisations working for profit. The whole scope of their operations are based upon a different principle with an entirely different object. Those organisations for which I am pleading this evening are mere mutual trading organisations. They are nevertheless put into the same category—into the same melting-pot—as the competitive organisations which are trading for private profit. Surely the pub- lished results of their trading should be sufficient evidence of the facts I have endeavoured to elucidate. Moreover, co-operative societies pay a limited rate of interest on their share capital, and that is subject to Income Tax. The basis of the Income Tax is that it is a tax on income and not a tax on savings. Companies often pay on their ordinary share capital enormous rates of interest to a comparatively small number of shareholders as a result of the profits they have got from the community to whom they have distributed their goods. Co-operative societies make no such profits. It is true that they make surpluses, which at the end of the surplus period are distributed, the bulk of it going back into the pockets of the members. The relationship of the members of the co-operative movement to their society is again quite different to that of the shareholders in limited liability companies to their companies. In limited liability companies they are associated for profit, but members of the co-operative societies share in the surplus from trade only according to the amount of the service taken, and not according to the amount of capital that they may be fortunate enough to possess in the business. It depends on their mutuality, on how far they are prepared to help mutually, what they receive as return in kind. They get a return according to their own action and as a result of their own initiative. I take it any Government would be prepared to support a policy of that description.

Compare the results of co-operative trading during the period of the War with the results of the trading of companies and private trading organisations. It has been found on examination that the reserves of the private trading companies have been going up by leaps and bounds, whereas in the same period the small reserve which the co-operative movement possessed at the beginning has now been reduced by 45 per cent. If the Chancellor of the Exchequer will look at some of the Government reports dealing with profiteering he will find how things have been going on in that regard. We who happen to belong to the co-operative movement, and have been driven into it by the action of private enterprise and vested interests in this country, do not stand for privilege in the question of taxation. We do not ask that in the slightest degree. Ours is a simple or- ganisation, composed practically of working men and working women, a large percentage of whom are not liable to Income Tax at all, and there is just a possibility that the Inland Revenue authority, when it endeavours to secure that which is now the law of the land, may find itself faced with many hundreds of thousands of applications for a return of that portion of the surplus which has been handed over to it in the shape of taxation in this respect. We are not seeking for any exceptional provision at all. We simply claim the right as citizens to go on in the same way as past Chancellors of the Exchequer have recognised we are entitled to. We simply ask justice and fairness.

The Corporation Profits Tax, as applied to the co-operative movement, is a tax upon thrift. It is a tax on provident management, and the last thing any Government should do should be to tax the thrift of the working people of this country. We all of us possess some human nature, and it is quite possible there may be some who, if this provision is insisted upon, will declare that if it is the intention of the Government to put a tax upon their mutual savings and upon their surpluses intended for distribution among themselves, then they must see to so arrange matters that there will be no surpluses at all. That could easily be done. There is no desire to do it if only the Government are prepared to give us fair consideration. The Corporation Profits Tax is not Income Tax at all. It is a tax on trade profits. One of my hon. Friends, in the course of the Debate this evening, has been endeavouring on various Amendments to show the un-wisdom of taxes of this character. Of course, I cannot debate this Amendment on those lines, but I do want to emphasise the fact that, so far as these organisations are concerned, these organisations of friendly societies and trade unions associated in the co-operative movement as it now stands, the industrial and provident societies really make no profits at all. I want to appeal to the right hon. Gentleman to give this matter his earnest consideration. There is going to be a rather keen Debate on this Amendment, which is drafted with the specific purpose of creating a direct negative to the attitude of the Government. I want to ask the Chancellor of the Exchequer, if he feels he can do no more, to at least agree that the decision on this Amendment shall be given by the free and unfettered voice of the House of Commons. I make that appeal to him.

Before I sit down, I would, ask the right hon. Gentleman to remember that, whilst there are many men who happen to be the proud possessors of certain shares and interests in limited liability companies, and are to-day paying Super-tax, that cannot be said of the organisations of which I am speaking, and which are appealing unitedly that this tax shall be removed from them. There are no Super-tax payers in that movement. I am reminded that the Government saw their way clear last year to give a three years' exemption to railway companies. I am not going to argue, at this stage, whether that was wise or unwise, but I say that, if they could give to the railway companies a three years' exemption, there is some justification for asking the Government to give to the co-operative movement, and those other movements that are affected by this provision, some consideration in that respect, in order that they may be able to feel that sense of fairness to which the right hon. Gentleman has more than once referred. I ask him, therefore, to consider this Amendment in the light of the new evidence that has been submitted to him, both documentary and otherwise, in order that, if he cannot, on behalf of the Cabinet, accept the Amendment, he may, at any rate, endeavour to leave to the Committee freedom and liberty, so that Members may have the privilege of voting in the way that their conscience directs.

Photo of Captain Robert Gee Captain Robert Gee , Woolwich East

On a point of Order. I should like to ask your view, Sir Edwin, as to the position in which Members will be if this Clause is carried, seeing that we have two other Amendments also dealing on the same lines with the same Clause.

Photo of Sir Edwin Cornwall Sir Edwin Cornwall , Bethnal Green North East

I think the Amendment that follows this would be in order.

Photo of Mr George Bowyer Mr George Bowyer , Buckingham

It may seem strange to Members on the other side of the Committee that I am heart and soul behind this Amendment, particularly in view of the reference in my hon. Friend's speech to the fact that private enterprise seemed to be on one side and the co- operative movement certainly on another side, if not the other side. My hon. Friend, I think, went so far as to say that the co-operative movement had been largely prejudiced by private enterprise. It would, of course, be out of Order for mo to go into that, but it is odd that one who believes, as I do, in private enterprise, should yet be supporting the cooperative movement and the mutual trading on which it is built up. I feel that this question, in the minds of many hon. Members, is the subject of some prejudice before they really are willing to give it serious consideration. It may be that in many cases the co-operative movement seems to be tantamount to a movement emanating from hostile quarters, and I can think of two events last year which may have led many Members to feel such a prejudice in their minds, instead of looking at the matter from the point of view of its intrinsic worth. The first is a sentence spoken by the Chancellor of the Exchequer last year, when he said: I have the authority of the representatives of Labour and the special representative of the Co-operative Societies upon the Royal Commission on Income Tax for the proposals submitted to the House. 9.0 P.M.

I submit that that was, I will not say unfair, but was not an accurate description of what actually happened. All hon. Members will be familiar with the fact that there were members of the great cooperative movement who signed the Minority Report, and who did go so far as to say that they thought that they would be willing to submit to a corporation tax; but when a deputation saw the Chancellor of the Exchequer in May of last year, the matter was, I think, quite clearly explained. My hon. Friend the Member for Central Edinburgh (Mr. W. Graham) last year—and I expect he will do the same again this year—easily persuaded the House that the Chancellor of the Exchequer's statement that he could claim to be backed by the cooperative movement when he brought forward the Corporation Profits Tax was not really doing justice to what actually took place. While I am on the question of prejudice, I should like to say that to my mind you cannot mix up the profits of a company with the results of mutual trading, and it is upon that that the whole question turns. It is true, as the Mover of the Amendment has said, that co-operators do not seek to shirk their liability to taxation. It is also true that to a large extent co-operators are not assessable in the same way as other people in the country, and that, again, seems to prejudice them and to bear out the contention which is so often made, that the co-operative movement is escaping its liability to contribute towards the taxation of the country. The right hon. Gentleman the Member for Chelmsford (Mr. Pretyman) and the hon. Member for Everton (Sir J. Harmood-Banner), who signed a reservation last year in the Report of the Royal Commission, called attention to the volume of trade which is being done—I think it is a greater volume each year—by the co-operative movement. The words of the reservation are worth repeating. They are as follows: I have, however, been much impressed by the evidence of the growth of these societies, of the magnitude of their operations, and of their tendency to absorb business previously carried on by trading organisations whose liability to Income Tax is unquestionable. It is obvious that if this process is indefinitely continued the loss to the Revenue will be very great, and that a corresponding increase must take place in the burden of other taxpayers. It is also clear that the present high rate of tax must tend to increase the advantage of the societies over private traders and manufacturers, and so to accelerate the progress of their absorption or displacement. I think that the very large trade carried on by co-operative societies ought to bear its due share of taxation, and that if the Income Tax is not a suitable instrument for that purpose, then some fair and workable method of taxation should be devised to fit the circumstances of the case. It would be interesting to learn whether the co-operative movement has, since the 18th May, 1920, or since the Debates last year been able to devise any fair system of adding its share to the taxes of the country. There is a large body of opinion which says that, in view of the great volume of trade done by the movement, it is not paying its just proportion. Personally, I am not inclined at present to agree with that opinion, and I think that, if you cannot say—as in my opinion you cannot—that the co-operative movement should pay a tax on profits you ought not to tax it by means of the Corporation Profits Tax simply because you want to tax it somehow. This system of mutual trading needs no words of mine to commend it. I do not look on it as being antagonistic to private enterprise or to the trade of the country, and I think the more the merits of mutual trading are examined the more everyone must be satisfied that it is entirely sound, and still more that it militates in favour of a great number of what one might call the poorer citizens of the country, and in view of the fact that I am quite convinced that it is not a case of profit but of surplus which is being taxed, I shall certainly support the Mover of the Amendment, and if he goes to a Division I shall support him by my vote.

Photo of Mr George Barnes Mr George Barnes , Glasgow Gorbals

I rise to associate myself with the Amendment, although I could not very well endorse all the arguments the Mover put forward in favour of it. For instance, he put in the plea that it was illegal, and he spoke about the House of Lords being appealed to. I think, the Act of Parliament having been passed, the House of Lords-must fall into line, and therefore I attach no importance to what the Courts or the House of Lords may think or do. This House has passed this tax, and I take it it will be imposed until the House reverses its previous decision. I hope it will now reverse that previous decision, and I am perfectly sure, if it does not it now, the force of public opinion will be such that it will have to do it ultimately. I do not agree with the Corporation Tax at all, because it seems to me to run counter to the underlying principle of the Income Tax, which I take to be that the individual is taxed, providing his income is over a certain amount, and this House and public opinion have from time to time fixed what that amount shall be. It has been fixed and readjusted so often recently that I really do not know where it stands, but at all events the principle is that a man's income, if it is not above a certain amount held to be necessary for maintenance in decent comfort, is exempt from taxation. The Corporation Tax taxes a corporation, and therefore taxes everyone in it, whatever his income may be, and, it seems to me, is contrary to the principle of the Income Tax. It is an anomaly. But in applying it to cooperative societies, another anomaly is introduced because the tax is imposed upon what is not income at all. I base that statement upon two things, first of all upon authority and then upon the facts of the case. As to authority, Commissions, and Committees, and Departmental Committees of the Inland Revenue have reported upon this matter from time to time for the last 30 or 40 years, and they have all agreed that this surplus, or whatever it may be, of the co-operative societies is not income at all, and therefore not taxable.

But apart altogether from authority, take the commonsense interpretation of the proceedings of a co-operative society. I am a member of a co-operative society, and have been ever since I was of age. Incidentally, I was a member in the struggling time of the co-operative societies here in London when many workmen lost all their savings. What takes place? As a member of a co-operative society, I go to the counter and buy a certain amount of goods, at least I pass over a certain amount of money and get in exchange a certain amount of goods. Those goods are not handed over to me at a price which might be regarded as their real price, that is to say, the price at which the members of the co-operative society agree to do service one to another. They are handed over to me at the market price. We have agreed to sell to one another at the market price merely as a matter of convenience. We could decide next week to sell not at the market price, but at the cost of production. It would be inconvenient to us, and it would introduce a principle which we do not want to introduce. It would be an exceedingly difficult thing to do, because in selling meat I suppose you would have to ascertain how much was to be charged for flesh and how much for bone, and so on. It would be difficult to apply the principle, but if the co-operators made up their minds that they would sell hot at the market price, but at the real price to them, it could be done, and by that means dividends would be wiped out and instead of getting our change, so to speak, at the end of the quarter or half-year, which is not profit, there would be no change at all, because we should get the goods at a price correspondingly less in the degree to which the dividend was ultimately paid. Therefore it seems to me that the case is proved, first by authority and then by the facts of the situation, that there is no profit and no income, and therefore it is not right to tax whatever it may be called.

The Chancellor of the Exchequer is in a very illogical position. As I gather, he admits all I have so far said, and therefore he says, "I will not tax one part of the surplus. I will not tax that part that is distributed to the Members." What is the difference between the two parts? If he taxes the part that is retained in the hands of the society, to that extent he taxes something which would otherwise have increased the dividends that ultimately went to members, and therefore the position he puts himself in is altogether an illogical one. It may be that there is something in the plea that the corporation have large property, and they carry on a large business and therefore ought to contribute more liberally or largely to the Revenue. Let the right hon. Gentleman bring some other proposition forward that harmonises with the dicta of authority, and with the facts, and I think I can say the co-operators would be inclined to look at it sympathetically. But so far as I have been able to judge, co-operators now pay in the same way as everyone else pays. In the first place, supposing a man has £100 in a co-operative society, and gets £5 interest, he has to pay upon that £5 exactly the same as anyone else. That is to say, if his income exceeds that amount I spoke of a little while ago, that £5 is entered as part of his income and he pays upon it exactly the same as anyone else. And in taxing a co-operative society, if the man's income is not up to that limit, including the £5 in his income, he can recover from the Government. The Government put themselves in the position that they might be inundated with a multitiude of forms making claims by people who are taxed not only unjustly but illegally. Therefore the individual pays just the same as any other individual as far as I can see, and when you come to the property of the society, the same thing occurs so far as I know. I believe the co-operative society pays upon its investment like any other society, corporation, or company. Therefore there is no need to differentiate, as the law now does, between the non-co-operator and the co-operator, whether in an individual or corporate capacity. The co-operator now pays exactly the same as anybody else. In imposing this taxation you are imposing a special tax upon the co-operator, which is unjust, and I believe this House will recognise some time or other, if it does not now, that the tax is unjust and impolitic.

Let me put in a word for the good work done by co-operative societies. It is especially necessary now in the time through which we are passing, when there is great unrest, and charges of all kinds are brought against the Government, when we have people who have no stake in the country, so to speak, restless and regardless of law and order, that we should have 4,000,000 or 5,000,000 people enrolled together in these co-operative societies, who own a little property, and by that means regard themselves as having a stake in the country. These people have been thrifty, and regard themselves as doing something to steady public opinion against the forces I have mentioned. It seems to me to be impolitic to put a special tax upon these people at this particular time, when we ought to be encouraging combinations of this character, encouraging people to stand together, not to upset Governments, not to create industrial unrest, but to stand together for the purpose of getting the country through an awkward pass. On that ground, as well as other grounds, I appeal to the Chancellor of the Exchequer to reconsider this matter, even at the eleventh hour, and see if he cannot make some different and better arrangement to raise on something else the money that is raised by this tax.

Photo of Mr Austin Hopkinson Mr Austin Hopkinson , Mossley

I hope the Committee will have nothing whatever to do with this Amendment. The hon. and right hon. Members who have supported it have failed to show where the real sting of the Amendment comes in. It is an Amendment which, unlike other Amendments on the Paper, is intended to exempt from this particular form of taxation the surplus earned by co-operative societies, including that which they earn by competing directly with the private trader and dealing with non-members. All the large co-operative wholesale societies do a very large amount of trade with non-members. There are lines of steamships running from this country to Continental ports, and their main object is to bring back dairy produce and other foreign produce for sale to members of co-operative societies; but does anyone suppose for a moment that if these ships could get outward cargoes as well as inward cargo, they would not compete against the ordinary privately-owned shipping concerns? They go out with coal and come back with dairy produce. Coal cargo is a cargo for whose freight they compete directly with coal shippers and ship-owners working under private enterprise.

Just in the same way a very large amount of retail trade is done by many co-operative societies with non-members on a profit basis. During the War a co-operative society near my home in Lancashire was selling to me furniture and other things for hospitals. During the War I was vastly the largest customer of that society, and I was a non-member. Therefore, the Committee should distinguish most carefully between the two sources of the surplus of co-operative societies: first of all, the surplus which is due to retail trading with their own members; my name is down to an Amendment exempting taxation in that case. They should remember also that there is a large amount of ordinary competitive trading, in which case I do not think anyone would deny that any surplus which accrues is profit in the ordinary sense of the word, and should be taxed just as much as the profits of any private individual.

Photo of Mr Alfred Waterson Mr Alfred Waterson , Kettering

It has always been recognised that that trade that is not between members is liable to taxation, and the co-operative societies have no desire to run away from that.

Photo of Mr Austin Hopkinson Mr Austin Hopkinson , Mossley

That being the case, why did not the hon. Member for Kettering put his name to the Amendment which appears next on the Paper, instead of putting his name to an Amendment which, if carried, would involve the non-taxation of profits made from trading with non-members? I listened very carefully to the speeches of hon. Members who supported the Amendment, and there was not a word said on that particular point. This Amendment is completely different from the subsequent Amendments on the Clause, and it involves the outrageous injustice of taxation upon private or limited liability companies, whilst exempting from taxation their direct competitors in the co-operative societies. I hope the Committee will bear that in mind, and whatever may be their opinion as to whether surpluses obtained by dealing with members of the society should be described as profits or not, they will remember that this Amendment, if carried, will exempt from taxation profits gained by the ordinary trade process of dealing with non-members and dealing for what is most certainly ordinary profit.

Photo of Mr John Robertson Mr John Robertson , Bothwell

The hon. Member for Mossley (Mr. Hopkinson) has created an impression that a very large amount of trade is created by co-operative societies with non-members. We have figures of one of the largest societies in the West of Scotland on this point, and the figures are .0 and .22 per cent. in that society. Co-operators are not against that portion of their profits being taxed. This tax is undoubtedly a tax upon the thrift of the working man. We hear a great deal from time to time that the working man should be encouraged to save, but no sooner does he attempt to save than there is a method adopted for taking away the savings, or at any rate, he does not get credit for the savings. We had an example the other day in discussing the question of pensions. In the North of England they make provision for the aged workman by a contribution from wages, but when the time comes for pension the contribution is deducted from the pension, and they get a lesser pension because they have contributed in order to get the pension. As a co-operator I am entirely against this tax. As a co-operator I do not think I should be exempted when an individual who is a non-co-operator pays, but I do not think that because I am a co-operator I should pay a tax which a non-co-operator is not called upon to pay.

I do not think any of the previous speakers, who have been against this Amendment, have touched the fundamental principle underlying this tax at all. I am going to take the position of three workmen, each receiving the same wage and not liable to Income Tax. Workman No. 1 spends his wage in the co-operative store. Workman No. 2 spends his wage with a private trader. Workman No. 3 spends his wage with a private trader who pays a discount. At the end of the week they have spent their wages. There may be amongst the three workmen a difference of opinion as to who is spending his wages most economically. The co-operator who has spent his wages with the co-operative store, and has probably 2s. or 2s. 6d. in the pound left, is taxed. The individual who has spent his wages with a private trader, and was more economical than the other man, is not taxed at all. The person who has spent his wages with the private trader and received a discount is not taxed either, as you are demanding that the co-operator shall be taxed. That is the crux of the whole question. As has been pointed out by the right hon. Member for Gorbals (Mr. G. Barnes), this is really a tax upon the workman who is a member of a co-operative society. I am prepared to admit that on the side of the co-operators there may be individuals who believe in private trading, but there is not the slightest doubt that this agitation to tax co-operative stores has had its mainspring in the very same spirit which endeavoured to boycott the co-operative stores out of existence some years ago. As co-operators, we are willing to pay the same tax as any other individual, but until those who are in favour of a tax can show us that the workman who spends his money in a co-operative store should be taxed as against the other two individuals who do not spend their wages in co-operative stores, then all co-operators are bound to resist this tax being imposed at the present time.

As a co-operator, I have riot the slightest doubt, if the time came when we entirely eliminated the middleman, and everything were entirely in the hands of the co-operative societies, which I think would be a very good thing, although, no doubt, there would be considerable opposition in this House—the question has been put here, where are you going to get your taxes from—that there would be a tax equitable and just both to the co-operator and to every other individual, and the amount which would be derived from it would meet the tax at present paid by the private trader. This would be far more than compensated for by the enormous advantage which the co-operative movement is bringing to the working classes of the country. Whether or not the Committee defeats this Amendment, I believe the force of public opinion and the sheer logic of the situation will compel either the present Chancellor of the Exchequer or a future Chancellor of the Exchequer to cease putting an unjust burden upon individuals who merely wish to improve their position in life by spending their wages economically while allowing other individuals who spend their wages in another direction to go free.

Photo of Mr John Sturrock Mr John Sturrock , Montrose District of Burghs

I sincerely trust the Committee will repudiate the Amendment moved very ably and interestingly by the hon. Member for Kettering (Mr. Water-son). We must approach all these proposals with reference to the Finance Bill from the point of view of the revenue of the country. I have listened with great care to these discussions, and I have found no reason whatsoever for thinking for a moment of going into the Lobby in support of the Amendment. I think the hon. Member for Kettering really did the cause of co-operation great disservice when he committed it to this point, that if the Amendment were not carried or the Government remained adamant to the representations of those who represent the co-operators they could so arrange their business that there would be no margin of saving. Hon. Gentlemen opposite know perfectly well that if they were so to arrange their business they would do the worst day's work for the co-operative movement that was ever conceived, because the whole of the co-operative movement, so far as I know, rests upon this, that they so arrange business and fix prices as to distribute what they call their savings—not dividends—among their clients. They have built up what is now an enormous business in this country. Gentlemen opposite talk as though the co-operative movement were some small, struggling concern, which is barely able to keep its head above water. They know very well that it is one of the most powerful organisations, industrially and politically, in this country. [HON. MEMBERS: "Hear, hear!"] They all agree. I know something about it, and I know they have opposed me and they always will oppose me, not that I care in the least about the co-operative movement from the political point of view, although some hon. Members opposite may be timorous about it, I am not. Hon. Members opposite argue against the Chancellor of the Exchequer's action in including them in the Corporation Tax. We have had certain vague utterances to-night about willingness to meet the ordinary obligations of citizenship, but hon. Gentlemen opposite are logical, and they know very well that the co-operative spokesmen have never put forward one single definite tangible proposition in reference to their coming in under any scheme of taxation. They have never said where they were willing to come into the scheme of things. They know as well as I do that they are well able to bear taxation just as every individual is doing in the country. I, who stand like the right hon. Gentleman the Member for Peebles (Sir D. Maclean) for a strong Liberal and individualistic policy?

Photo of Commander Hon. Joseph Kenworthy Commander Hon. Joseph Kenworthy , Kingston upon Hull Central

When did you find that out? Since St. George's?

Photo of Mr John Sturrock Mr John Sturrock , Montrose District of Burghs

—will never support any movement which endeavours to avoid taxation at a time when the great bulk of the wage-earning and small shop-keeping class in my own and other constituencies is suffering from the penalty of taxation, while the co-operative movement sends its spokesmen here to-night to claim that they shall go scot free from all these burdens and taxes. I do not think it is fair. I should like to hear, before we go to a Division—otherwise, reluctantly, I shall be compelled to vote against this Amendment—what really is in the minds of the speakers on behalf of the co-operative movement? Are they prepared to accept a fair burden, which ought to be imposed upon them as citizens of this country? When one reads in the Press, as one frequently does, of the great capital that they possess, of their tea estates, of the enormous tobacco warehouses they have, the shops they own, the jute factories, and of the land they buy—the land, let me add, upon which they find small landholders, whom they sweep away in the most ruthless fashion—

Photo of Mr George Barker Mr George Barker , Abertillery

Following a bad example.

Photo of Mr John Sturrock Mr John Sturrock , Montrose District of Burghs

When we read of all these things, and know that this cooperative movement is a gigantic trust—for that is what it really is—we ought not to have had the professions that we have had from the hon. Member for Kettering, who has really played upon the Committee in rather a minor key, as though he were a man struggling with adversity. We ought to have a definite statement from a responsible source of what the co-operative movement is prepared to do in the matter of meeting its obligation. Otherwise, as representative for the time being of an industrial constituency with a great mass of small shopkeepers, ratepayers and taxpayers, I cannot support the Amendment.


I hope that when the right hon. Gentleman comes to reply he will make plain the actual incidence of the present tax and explain how the provision which we adopted last year after considerable debate has worked So far as I understand paragraph (h) which is referred to in this Amendment, it does exempt from Corporation Tax the profits of these companies, in so far as they are distributed to their members either by way of dividend or bonus or discount on purchases. That disposes, to some extent, of the argument that it is a tax on the savings and purchases of workmen who indulge in co-operative purchases. How far it has been possible to make that distinction in the practical working of the Act I would like to know. The House decided, after considerable discussion last year, that the profits distributed to members, which are distributed, I understand, not according to their holdings, but according to the purchases they make, are not to be considered as coming under the Corporation Tax any more than under the Income Tax. What I would like to know is whether the arguments adduced last year and adduced to-night are to be addressed towards the exemption of profits which are kept in the business and used for increasing the business capacity, plant or buildings, or represent trade with outside purchasers in so far as trade is done with outside purchasers. That is the only portion of the profits which, I understand, it is claimed comes under Corporation Tax.

To my mind it is a question whether the distinction is worth making, or whether the actual working of last year's tax has proved to what extent it is a revenue producing tax, as that part of the profits earned by these companies is probably much smaller than that which is returned to members. At the same time, the tax is producing considerable unrest and criticism, but not because it is levied on dividends or bonus paid to or discount given to members. Personally I think that the operation of the Corporation Tax gives much cause for criticism. I would be glad to see it swept away altogether. It was copied from America, where they had not at the time an active Income Tax such as we have in this country, though they afterwards reverted to our system of Income Tax as being a better form of taxation. Personally I should feel surprised if this Corporation Tax does survive many more Finance Acts; but that is outside this matter, except that I speak as one who does not believe in the Corporation Tax, and therefore I am disposed to support any Amendment excluding anybody from its operation.

Photo of Mr Augustine Hailwood Mr Augustine Hailwood , Manchester Ardwick

I rise to oppose the Amendment. I do so without any hesitation in spite of the phrases used by those who speak on behalf of co-operative societies. We are told that they do not make profit, that they make a surplus, that this surplus arises not from trading but from exchange, and every time there is any kind of legislation which would affect any co-operative society, immediately you find some new reason advanced to show why co-operative societies should not be included. They are really the most unfair and illogical section of the community. While claiming to be exempt from their fair share of taxation they are to-day turning over £350,000,000 per year, and one would think, if they had any sense or judgment, that they would be prepared to pay the same share of taxation as any other trader pays in the course of his business. If, as time goes on, co-operative societies swallow up the whole trade of the community—and it is not only middlemen but manufacturers who will be involved—what is going to happen? Meantime, those traders will be taxed more and more heavily every year, because there is less trade and there are fewer people to pay, because the co-operative people swallow all the trade of the country. If these co-operative societies paid their fair share of Income Tax and Excess Profits Duty, which even to-day under present legislation they do not, Income Tax would be lower and there would be more money raised from the Corporation Profits Tax.

The hon. Member for Kettering (Mr. Waterson) has told us that this will be a tax on thrift. If there is in this country a tax on thrift it is the Income Tax. One might say that all taxation is a tax on thrift. Personally I do not agree with Income Tax. I think that it is the most stupid tax ever invented, because the more a man saves, the more he prospers, the more he is taxed. Not that I have ever experienced it in its higher reaches. I wish I could. But at the same time it is undoubtedly a tax on thrift, but it is no argument to say to the House of Commons that when co-operative societies have to pay a certain tax it is a tax on thrift, because the members of a co-operative society are thrifty people. It is perfectly illogical. In the next breath they say that these people are immune from Income Tax because they are so poor. How can thrifty people be poor? I should like to have the matter cleared up, and to know definitely whether members of co-operative societies are thrifty or whether they are poor, for it is inconceivable that they can be both. In my experience they belong to the better end of working class people and I believe they are thrifty people and not poor.

The right hon. Member for the Gorbals Division (Mr. G. Barnes) told us that the co-operator paid the same as anybody else. I fail to see that, and I do not think he made it clear to the House. What is more, it is making it more difficult for private traders to extend their businesses, having regard to the enormous taxes they have to pay. Income Tax at the rate of 6s. in the £ takes away big slices of the private traders' profit, and prevents them from accumulating money for the extension of their businesses. We see ships and corn mills and factories being taken over by co-operative societies from private traders. An hon. Member instanced three workmen who were exempt from Income Tax. One would think that the next best thing would be for them to change their occupations. The majority of workmen to-day are liable to Income Tax. If they are exempt it is not because the amount of their income exempts them, but because they have wives and children, and are family men. Income Tax goes down low enough to-day to embrace every class of workman. It is, therefore, wrong to cite cases of that sort. I hope the House will reaffirm the decision reached last year and defeat this Amendment by a large majority.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

I dare say I am in the position of many other hon. Members, in that I would rather have spoken on a later Amendment than on this, but as I am afraid the Chancellor of the Exchequer may reply on general grounds, I ask the attention of the Committee while I try to make the position clear as we see it on the Opposition side of the House. What actually was the proposal passed by the House of Commons for the first time last year? Let it be made plain at the outset that the co-operative movement desires no exemption at all as far as its non-mutual trading is concerned. I recognise at once that there is a great difference between the Amendment now before us and that which stands in the name of the hon. Member for Linlithgow (Mr. Kidd). At the beginning of this controversy attention was drawn to a small passage which occurred in a reservation to the Report of the Royal Commission on Income Tax. It was a reservation signed by a minority of the Members of the Commission, and was to the effect that if ever a Corporation Tax was introduced, a cooperative society would fall to make payment. That statement was torn from its context by the Chancellor of the Exchequer last year, and was pressed into service as an argument that the duty should be applied to the undistributed portion of the surplus arising from the, trading of these societies.

If any hon. Member will look at that reservation, and particularly at the last paragraph but one, he will find that, while it makes that statement regarding a Corporation Tax, it immediately proceeds to defend the principle of mutuality, and it is plain to any reader that the first part, of that small paragraph was intended to be read as applying to the profits of a co-operative society of a non-mutual character, and that the theory throughout was that the mutual principle would be safeguarded. Look beyond that to what the Chancellor of the Exchequer actually did. We are not quarrelling with the amount of money involved in this proposal, for from the standpoint of national finance there is no money in it. The whole question at stake is the invasion of what the co-operative movement calls the principle of mutuality. Has that principle been invaded in the proposals of the Chancellor of the Exchequer? In the first place, the Royal Commission on Income Tax made it plain that there was never any proposal to apply taxation to the dividend on purchases, which is paid to the members of the societies from time to time. They also made it plain from the general tenor of their report that they were in favour of safeguarding what was mutually earned. But the Chancellor of the Exchequer came along last year and he said: "I must find that portion of their surplus which is most closely analogous to a profit in the company sense of the term." If I remember aright, that was the precise phrase of the Chancellor of the Exchequer. The right hon. Gentleman fastened upon the undistributed portion of the surplus arising from mutual trading, and he applied the Corporation Profits-Tax to that. Hon. Members will recognise that what is under discussion is a very narrow issue as regards revenue, but it is a very broad issue when the question of the principle of mutuality is concerned. Our aim in taxation is to get something which first of all will be productive, and in the second place fair both from the point of view of principle and of the individual on whom the tax falls. Yet the Chancellor of the Exchequer adopted a device which was thoroughly illogical. In fact, he agreed with the whole tenor of the reasoning of the Royal Commission that this was mutually earned, and he said that what was mutually earned should be exempt, but he selected a portion of this same mutually earned fund and applied the tax to that. It is on that that the whole controversy has arisen. In practice what do the societies do with the undistributed portion? It is quite true that the practice varies. In some cases a part of it is set aside for contingency purposes. In other cases they use it for education and also for certain philanthropic and charitable duties in which they engage from time to time. Look at the effect of the imposition of this tax on a portion of a fund of this kind, devoted in the main to purposes which, if not undertaken by the co-operative societies, would in part fall to be undertaken by the State. For no particular gain in revenue you are applying taxation to a thing which is really used in the public interest. In the first place this device is illogical, and in the second place it operates against a portion of the fund which is devoted to public purposes.

I come now to the criticisms which have been offered from different parts of the House. Some hon. Members have said, with perfect justice, that if this tax is opposed some alternative should be offered. Apart from the fact that I am quite satisfied the co-operative movement is now contributing its fair share of taxation, many hon. Members have confused a principle of taxation with the mere growth of the movement, which of course is recognised—it has now 4,000,000 members. The growth of the movement, however, is one thing and a principle of taxation is quite another. It is no argument in favour of a reversal of an accepted principle merely to say that we must change the principle because this particular movement has grown to an extent which very few were able to foresee. That line of reasoning will hardly bear examination. It is, however, a perfectly reasonable request that the co-operative movement should offer an alternative to the proposals which have been introduced by the Chancellor of the Exchequer. In a great movement of 4,000,000 members, it is undoubtedly difficult to bring home the incidence of taxation to the individual constituents and explain it fully to each one. There is bound to be great difference of opinion, and there is difference of opinion among members of the co-operative movement on what I am going to say now. The proposal I am going to make to the Chancellor of the Exchequer is in no way authoritative. I am not sure that it would be supported by the co-operative movement at this time, but I know there is a volume of opinion in the co-operative movement on the question of taxation of non-mutual earnings, such as I believe would regard what I am going to suggest now, as a fair and reasonable proposal.

10.0 P.M.

In my own constituency of Edinburgh we have the largest society in Scotland with very nearly 66,000 members out of a population, which before the extension of the city, was in round figures about 320,000. There you have a society which might be said to represent the greater part of the life and activity of the capital of Scotland. They have considered this proposal, and after a great deal of discussion came to the conclusion that it would be worth while to recommend taxation under four heads. They propose first that the tax should be applied to the profits of non-mutual trade; on that point there is no difference of opinion at all. In the second place they suggest there should be taxation of the interest on members' share capital. The third proposal is that they should be taxed on the earnings of their reserve funds, and the fourth that they should pay taxation on the returns from investments held outside the co-operative movement. There you have a foundation for a perfectly fair taxation of the co-operative movement which has this great recommendation, that if you adopt it it does not invade the principle of mutuality as your present proposal does. I am bound, however, to direct the attention of the Committee to a difficulty regarding these four heads of taxation. Two of them stand out clearly and distinctly as non-mutual in character. There is an element of doubt regarding the other two—numbers two and three—as to whether or not the mutual factor enters, and I know that as regards those two there has been some controversy in the city of Edinburgh and elsewhere. While I have no authority to speak for the co-operative movement and must not be interpreted as speaking for them on this point, I suggest that there would be no insuperable difficulty in arriving at an agreement in the field of controversy which I have just indicated. Two of these heads, as I say, are recognised, and as regards the other two, a fair and reasonable adjustment is possible. The Chancellor can find in that programme an alternative, and if on those lines he can devise something which the great body of reasonable and moderate opinion will adopt, then he will get a far better scheme than the illogical device which is now in operation, and above all he will get the goodwill and support of 4,000,000 of people as against the unrest and distrust of the present time.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

The speech to which we have just listened has thrown the first new idea into the arena of Debate. All that we have hitherto been privileged to hear has followed the lines of the controversy upon the last occasion when this important matter was debated. I am not sure that one could not have replied to some of the speeches in advance. I do not complain of that for a moment. The topic is one of great and far-reaching importance, and it undoubtedly excites a great deal of interest among vast masses of the people in this country upon one side or the other. I should like to make one remark in connection with a note which was struck in many of the speeches which have been delivered. It seems to be assumed that on one side of the House you will find partisans of the Co-operative movement, and on the other side partisans of the individual trader. I am bound to enter a demurrer to that.

Photo of Mr Thomas Myers Mr Thomas Myers , Spen Valley

In the main it is true.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

The names on the Order Paper attached to the various Amendments make it perfectly clear that you cannot divide the House on any such principle. I, for one, decline to have myself written down as a supporter of one side or the other, because of the general character of my political opinions. No one is more ardent than I am in the tribute I am prepared to pay to the very great work which the Co-operative movement has done in this country. It has been referred to as a great movement towards thrift, and I am perfectly certain that, no matter how prejudiced any individual trader might be, he would be compelled to acknowledge the truth of the claim made for the Co-operative movement that it has probably done more to encourage thrift among the masses of our people than any other single factor of which we are aware. Accordingly, I approach this topic with every desire not only to do justice by the Co-operative movement but even to act generously, because of the feeling which I have that it deserves every support that people who value the institutions of this country can give, and I should like to endorse what my right hon. Friend the Member for the Gorbals Division of Glasgow (Mr. G. Barnes) said, that it is a great, stabilising influence amongst the mass of our people to-day.

Let us approach, accordingly in that spirit, the question as to whether the co-operative movement should be liable for any duties under the Corporation Profits Tax. We have for long in this country recognised the immunity of the co-operative society from Income Tax upon the proceeds of their trade, and even their immunity from Income Tax upon the investments outside of the co-operative societies themselves. I do not. know whether my hon. Friend the Member for Central Edinburgh (Mr. W. Graham) would go so far as to say, not merely that they should pay Corporation Profits Tax upon such investments, but whether they should pay Income Tax. I do not know, and perhaps it is not relevant to the present discussion. But, at any rate, we have recognised their immunity from the ordinary Income Tax law of this country. But the Corporation Profits Tax is something quite new, and it is well to look at the basis upon which it is founded. The theory of a Chancellor of the Exchequed who looked round for some new tax was that corporations enjoyed special privileges under our law, and they do. They have a perpetual existence. They do not become liable to the ordinary obligations which others coming into succession from time to time endure; and, in the second place, they have a system of limited liability which enables individuals to become members of them with confidence that they will not be required to pay more than a certain limited amount of money, no matter what happens. Those are great privileges. Incidentally, they have enormously increased the trade of this country, and been the soul of enterprise in many fields of venture, and it was thought not to be inequitable that corporations, as such, should pay something for these privileges. They are corporations of individuals and every one of them enjoys the privileges which the law in this respect confers.

Could you, therefore, upon any ground, say that the co-operative societies, which in that respect are upon the same platform as all other limited companies, should escape from paying something for that privilege? Do not let us talk about it in the meantime as profits, but let us say that every corporation ought to pay something by way of tax for the privilege that it enjoys as a limited company, carrying on its business under these immunities. It was found that, so far as the ordinary corporation was concerned, the profit which it earned formed the most convenient basis upon which to assess the measure of its liability to the State for some form of revenue, and, accordingly, in the case of the ordinary corporation, the Profit Tax applies. Now you come to the co-operative societies. What can you get that seems in a similar position? Do not let us get into a squabble as to whether they earn profits or not, but let us see where they stand. They enjoy the possession of property which they themselves occupy. They draw rents from property which they let. They draw interest upon large investments outside of the ordinary co-operative society; and, in the last place, and in the most important respect, they have got the proceeds which they enjoy from trading. With regard to one portion of that trading, obviously, on the line of argument upon which I am proceeding at the moment, it would be unfair to tax them upon the basis of something which they divide amongst their members. We have always recognised this argument, that what is divided amongst the members of co-operative societies is, in reality, a discount upon purchases, and, accordingly, it is quite unfair to base any tax upon that part of it. But once they divide that which they regard as appropriate amongst their members, what about the balance?

The theory of co-operative trading, as the right hon. Member for the Gorbals Division has pointed out, is that you do not want to charge more than cost price and the expense of selling the article to your members. You do not want to make profit. That is the theory, and once you have distributed your dividends you are supposed to have fulfilled your obligation in that respect. But you have got something over. What about that balance? I am not going to enter into the controversy whether it is profit or not, or what you choose to call it. There is something other than that which is necessary to keep your obligation to your members to supply the goods at what they cost to supply them, and I do not think it is unfair to treat the balance as something which, whatever you call it, is a measure of the liability of the co-operative societies to contribute to the support of the State. I think that is a fair argument, and I do not think it does any injustice to the theory of mutuality of trade, or discourages that which we all want to encourage and to see prosper. But somebody in the course of debate said, "If you are going to treat the balance like that they will take care to distribute the balance in advance. If they do that, of course, you will lose the measure upon which you profess to assess their contributions to the State." But I do not believe they can do that, and I say that, not merely as a practical question, but by way of indicating a point of view as to what this balance may be considered to be. One of the reasons why you cannot do it is this: You cannot, with regard to each article, tell at any particular moment precisely what your costs are, and therefore, in selling your pound of butter or tea, assess the exact amount you ought to charge.

The Member for Linlithgow (Mr. Kidd) last year, in a notable speech on this subject, gave an illustration of five people buying a chest of tea and distributing it amongst each other at exactly what it cost. That is a prime example of mutuality of trading, but cooperative societies in these days have gone far beyond that. It is not five people known to each other that are carrying out trading operations to-day, but multitudes of people, who never see each other, and you cannot, in regard to each sale and purchase, make a calculation such as my hon. Friend produced in order to make appear to the Committee the simplicity of the whole of this operation. Believe me, co-operative trading is not nearly so simple as that to-day. Not only so, but if I am rightly informed, your distribution now of dividends is not on the basis of what each article a person bought has cost, but it is on the basis of general profit and loss over a large field of trading. You may lose on your butter and gain on your tea, and therefore you are not in a position nowadays, under your system of co-operative trading, with all its ramifications, to perform the operation of mutual division at precisely cost price. I suggest to the Committee, keeping these considerations in view, that it is not an unfair thing for the State, which gives these amenities and privileges to co-operative societies, to assess, as in the case of every other corporation, upon some such measure as I have indicated, what they ought to pay towards the upkeep of the State.

It is said, "But this is an Income Tax," or perhaps I ought rather to say that the hon. Member for Kettering said it was not an Income Tax, and one of his supporters said it was. There seems to be some dubiety as to what it is. I am confident, however, that it is not an Income Tax, which is something charged upon the individual. This is not a charge on an individual at all, but on a corporation, and just like any corporation, although the corporation pays this tax, its individual members also pay Income Tax on their incomes including the share of income they get out of a limited liability company. This is not an Income Tax at all, but it is a Corporation Tax on something perfectly separate, and it has nothing to do with the principles of Income Tax. It is said that it is a tax upon thrift. It is no more a tax upon thrift than any tax which is imposed upon us is a tax upon thrift. You may always say that because a tax takes something from what you have earned there is a less inclination to earn. Let me remind my hon. Friends opposite that if this is a tax upon thrift, it is not the only tax upon thrift. There is a much more severe one that applies to the Income Tax payer. What is unearned income but the savings of thrift? Yet unearned income is far higher taxed. If I make £500 a year and buy with the extra £100 some stock or share, immediately the stock or share I buy with that extra £100 becomes something yielding unearned income, and is more highly taxed than if I earned it, although in point of fact it is the earnings of my labours. Therefore, keep in mind that the Income Tax payers of this country who are paying on unearned income are paying what is really a tax, and a large tax, on thrift.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

If I had not myself, with the sweat of my brow, earned a little in that way, I should be sorry for myself to-day, but I pay Income Tax on that, and I pay at a higher rate on what I previously earned than on what I earn now. What I earned and saved is going into this abyss where you are more highly taxed.

Photo of Mr James Brown Mr James Brown , South Ayrshire

Who is earning it now?

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

Who is earning what I earned? Some more fortunate individual. Let us, however, keep this Debate free from words and names which have nothing to do with the matter. This is not a tax upon the individual, nor is it in the ordinary sense what you would call a tax upon profits. It is a tax paid by which you can measure the services of the State to the co-operative societies. Replying to my hon. Friend (Mr. J. W. Wilson) as to how it will work, I cannot say in practice how it will work. But let me say that the majority of the corporations do not make up their books till December or March, and that after the assessment is made they have a further two months in which to make payment. Accordingly we, although we estimated for some millions last year, have been able so far to get only £650,000. But we do not anticipate any difficulty as to the money remaining in the hands of the co-operative societies. This Amendment is to exempt co-operative societies altogether from this tax. That is not the proposal of the hon. Member for Edinburgh, nor did I think that, in reality, it was the attitude of the co-operative societies. I know that the deputation which recently waited upon me put that forward as the best line of attack, but they retreated from that to a more tenable position at a later stage of the discussion. I do not understand there really is any objection on the part of cooperative societies to pay tax upon the results of non-mutual trading, though my hon. Friend will exclude that by his Amendment. Nor do I understand that they have any objection to paying tax upon the interest of investments which are made outside the co-operative organisation. That also is excluded by this Amendment. Therefore I imagine a good many people not unfriendly to cooperative societies will be unwilling to give their adherence to the Amendment on the Paper. I am sorry to see an Amendment of this kind brought in, not merely because I disagree with it, but because co-operative societies will, if they demand immunities of the kind suggested, alienate in the country a good deal of the sympathy which otherwise they would get. I hope the Amendment will not be persisted in.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

I thought when the Chancellor of the Exchequer rose to reply to the very clear, reasonable, and friendly speech made by the Member for Central Edinburgh (Mr. W. Graham) that he was going to meet him as far as he possibly could. No one on either side went so far as the Member for Central Edinburgh to meet the Chancellor of the Exchequer, for he went a very long way. I want to suggest to the Prime Minister, as well as to the Chancellor of the Exchequer, how important it is at the present moment if we can by any means arrive at a solution of a point of irritation which is so marked in this particular case of the co-operative societies. I believe if the Prime Minister had heard the speech of the Member for Central Edinburgh he would have recognised that there was a real opportunity at this stage and the Report stage of arriving at a genuine settlement of a vexed and difficult question.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

I have not said that my mind is closed on this matter. I have been dealing with the Amendment of my hon. Friend the Member for Kettering (Mr. Waterson), which was not withdrawn. I am not prepared to say until after a closer study what I might be able to do in regard to the hon. Member for Edinburgh's suggestion. I am not in a position to say anything now on that point.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

This will be the only Amendment upon which the Committee will have an opportunity of dealing with this point.

Photo of Mr John Whitley Mr John Whitley , Halifax

If this Amendment be rejected, the following Amendment will not be out of Order. The rejection of the greater Amendment will not reject the lesser.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

I did not know how the selection of Amendments might have been exercised. What I have got from the Chancellor of the Exchequer is something which I am glad to have elicited. I have got a shadow of what I hoped to have got in the right hon. Gentleman's speech, namely, that he does not shut his mind to the possibility of taking what my hon. Friend the Member for Central Edinburgh has laid before the Committee as the foundation for a possible settlement of this vexed question.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

I want to see first how the hon. Member for Central Edinburgh's proposal is going to work out, and I must have some information about that before I can say anything at all.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

Then it amounts to this: that the Chancellor of the Exchequer prefers this question to be debated on the succeeding Amendment. If that is so, I will say no more, and allow the Division to be taken on this Amendment. That is the real point which has come out in this Debate as to what possibility there is of a settlement.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

I think my right hon. Friend is treating me rather unfairly. We have had a proposition made by the hon. Member for Central Edinburgh (Mr. W. Graham) who said that he does not profess to speak for any co-operative society. The hon. Member for Kettering (Mr. Waterson) does represent the cooperative movement, and he has tabled an Amendment which seeks to make co-operative societies entirely immune from this tax. We really must deal with this Amendment. In the meantime, I am not in a position to say that I should accept my hon. Friend's suggestion. It contains a great deal more than has been suggested by the co-operative societies at any time or by their officials, and obviously the hon. Member for Kettering does not think he could give any support to that suggestion. Under these circumstances I do think it is too much for the right hon. Gentleman to press me as he is doing.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

Perhaps the best thing would be for us to dispose of this Amendment at once. I will therefore say no more.

Photo of Mr Thomas Myers Mr Thomas Myers , Spen Valley

It has been suggested that if the Chancellor of the Exchequer's proposals were pushed to their logical conclusion the co-operative societies might be compelled to eliminate from their operations the making of a surplus. That suggestion met with a quite ready response from the opposite side of the House. I believe that that spirit prevails in many quarters, and there is an opinion very widely held in some circles that if anything that can be brought to bear on the co-operative movement should force them to that position there would be a corresponding improvement in the relationship between the working people of the country and private traders. There are people who hold the view that the dividend which is paid to members of co-operative societies is the magnet that attracts them there and if that could be removed they would take their custom from the co-operative movement and give it to the private traders. There are those who believe that if this policy is pursued it might ultimately force the co-operative movement to take that step, and there are those who believe, too, that the intention behind this proposal is to effect that policy and to compel it to be done. The Chancellor of the Exchequer just now suggested that the motive behind the procedure of the co-operative movement was to sell at cost price, and, having regard to the fact that they are able to fix prices to fit in with the cost of production a certain margin has to be created which is paid back to members after three months or so. After surplus has been repaid, the Chancellor of the Exchequer has stated, there is a balance still remaining, and that balance ought, it is said, to be made the subject of taxation in some form or another. It is quite true that after the dividends have been paid out to the co-operative members, there is very often a substantial balance remaining, but I would remind this House of the objects to which this balance is devoted. In the first place, large contributions are made every year by the cooperative movement to charitable institu- tions, and, in addition to that, a large volume of educational work is done, Any tax that is imposed upon the balances of the co-operative movement after dividend has been paid is a tax upon the movement's educational work and upon its association with the charitable institutions of the country. [HON. MEMBERS; "Divide!"] I just want to make one more point, to meet the suggestion of the Chancellor of the Exchequer that he declined to recognise the dividing of the Committee upon the partisan spirit of the co-operative versus the non-co-operative point of view; and the hon. Member for Heywood (Mr. Halls) asserted that that very largely is the dividing line in the House of Commons. I believe that if that had not been so there would have been no proposal to tax co-operative societies. I have here—[HON. MEMBERS: "Divide, divide!"]—the Report of the Royal Commission on Income Tax, and I should like to quote from it this statement. [Interruption.] I know that hon. Members opposite are familiar with this quotation, and that there is a lack of desire on their part to hear it again. It speaks of: The great and rapid growth of the cooperative movement in recent years, and the number of individual trading competitors who are adversely affected by its progress"… The number of individual private traders who are adversely affected by the progress of the co-operative movement, in my judgment and in that of many more outside the House of Commons, is behind this; proposal to tax the co-operative societies. There is no logic or equity in the proposal to impose upon the co-operative movement in this country a tax which in its initiation was intended to apply to large corporations trading under the Companies Acts. The Corporation Profits Tax was intended to get at large shipping companies, for instance, which made as much profit out of one voyage as the ship cost, and at the large profits of our colliery companies, in the cotton trade, in the brewing industry, and in all the great trusts and syndicates which operate-from one point only. The object of these large concerns is to make profit out of the mass of the community, and when that profit has been made none of it goes back to the community from which it was gained. It goes into the hands of a small number of shareholders who own these large organisations. Where a surplus or profit is made in the co-operative movement, every penny of it goes back to the people who created it, and there is no analogy whatever between the operations of the co-operative movement on the one hand and of the great profit private trading corporations on the other.

We assert, as co-operators, that the right hon. Gentleman's designation of the co-operative movement as a corporation cannot be sustained when the movement is submitted to close analysis and investigation. We assert that there is no affinity whatever between the great private shipping, brewing, or cotton companies and the co-operative movement; and all the argument in the direction of endeavouring to prove that the one is the same thing as the other falls to the

ground under even a cursory investigation. Our protest is that it is the growing strength of the co-operative movement, adversely affecting private interests—as is shown in the Report of the Royal Commission on Income Tax—that is behind this proposal, and if we can force our co-operative movement back to a change of policy, eliminating their surplus and working just at cost price, and the smallest possible margin of surplus in their turnover, we believe we shall play into the hands of the private interests which we believe to be the motive behind this attack upon our co-operative societies.

Question put, "That those words be there added." there added."

The Committee divided: Ayes, 59; Noes, 188.

Division No. 178.]AYES.[10.40 p.m.
Barker, G. (Monmouth, Abertillery)Grundy, T. W.Rendall, Athelstan
Barnes, Rt. Hon. G. (Glas., Gorbals)Guest, J. (York, W. R., Hemsworth)Richardson, R. (Houghton-le-Spring)
Barnes, Major H. (Newcastle, E.)Hall, F. (York, W.R., Normanton)Robertson, John
Barton, Sir William (Oldham)Halls, WalterRose, Frank H.
Benn, Captain Wedgwood (Leith)Hartshorn, VernonRoyce, William Stapleton
Bowerman, Rt. Hon. Charles W.Hayday, ArthurSexton, James
Bowyer, Captain G. W. E.Hayward, EvanShaw, Hon. Alex. (Kilmarnock)
Bramsdon, Sir ThomasHodge, Rt. Hon. JohnSpencer, George A.
Bromfield, WilliamHogge, James MylesStanton, Charles Butt
Brown, James (Ayr and Bute)Irving, DanSwan, J. E.
Cairns, JohnJohnstone, JosephThomson, T. (Middlesbrough, West)
Carter, W. (Nottingham, Mansfield)Kennedy, ThomasWalsh, Stephen (Lancaster, Ince)
Davies, A. (Lancaster, Clitheroe)Kenworthy, Lieut.-Commander J. M.White, Charles F. (Derby, Western)
Denniss, Edmund R. B. (Oldham)Kenyon, BarnetWilliams, Aneurin (Durham, Consett)
Edwards, Hugh (Glam., Neath)Maclean, Rt. Hn. Sir D. (Midlothian)Wilson, James (Dudley)
Entwistle, Major C. F.Mallalieu, Frederick WilliamWood, Major M. M. (Aberdeen, C.)
Finney, SamuelMorgan, Major O. WattsYoung, Robert (Lancaster, Newton)
Galbraith, SamuelMurray, Dr. D. (Inverness & Ross)
Glanville, Harold JamesMyers, ThomasTELLERS FOR THE AYES.—
Graham, R. (Nelson and Colne)Newbould, Alfred ErnestMr. Waterson and Mr. Lawson.
Graham, W. (Edinburgh, Central)Parkinson, John Allen (Wigan)
Addison, Rt. Hon. Dr. ChristopherBriggs, HaroldEyres-Monsell, Com. Bolton M.
Agg-Gardner, Sir James TynteBruton, Sir JamesFalle, Major Sir Bertram Godfray
Ainsworth, Captain CharlesBuckley, Lieut.-Colonel A.Fell, Sir Arthur
Amery, Leopold C. M. S.Burn, Col. C. R. (Devon, Torquay)Foxcroft, Captain Charles Talbot
Archer-Shee, Lieut.-Colonel MartinButcher, Sir John GeorgeFraser, Major Sir Keith
Astbury, Lieut.-Com. Frederick W.Carr, W. TheodoreFremantle, Lieut.-Colonel Francis E.
Austin, Sir HerbertCarter, R. A. D. (Man., Withington)Ganzoni, Sir John
Bagley, Captain E. AshtonCautley, Henry StrotherGee, Captain Robert
Baird, Sir John LawrenceChamberlain, Rt. Hn. J. A. (Birm. W.)George, Rt. Hon. David Lloyd
Baldwin, Rt. Hon. StanleyChamberlain, N. (Birm., Ladywood)Gibbs, Colonel George Abraham
Balfour, George (Hampstead)Churchman, Sir ArthurGilmour, Lieut.-Colonel Sir John
Banbury, Rt. Hon. Sir Frederick G.Clay, Lieut.-Colonel H. H. SpenderGould, James C.
Barlow, Sir MontagueCoats, Sir StuartGoulding, Rt. Hon. Sir Edward A.
Barnett, Major Richard W.Cockerill, Brigadier-General G. K.Grant, James Augustus
Barnston, Major HarryColvin, Brig.-General Richard BealeGray, Major Ernest (Accrington)
Barrand, A. R.Coote, Colin Reith (Isle of Ely)Green, Joseph F. (Leicester, W.)
Barrie, Charles Coupar (Banff)Cowan, D. M. (Scottish Universities)Greig, Colonel Sir James William
Bellairs, Commander Carlyon W.Cowan, Sir H. (Aberdeen and Kinc.)Gritten, W. G. Howard
Bennett, Sir Thomas JewellCraik, Rt. Hon. Sir HenryGuinness, Lieut.-Col. Hon. W. E.
Birchall, Major J. DearmanCurzon, Captain ViscountHacking, Captain Douglas H.
Bird, Sir A. (Wolverhampton, West)Davidson, J. C. C.(Hemel Hempstead)Hailwood, Augustine
Bird, Sir William B. M. (Chichester)Davidson, Major-General Sir J. H.Hamilton, Major C. G. C.
Blair, Sir ReginaldDawes, James ArthurHannon, Patrick Joseph Henry
Borwick, Major G. O.Dewhurst, Lieut.-Commander HarryHarmsworth, C. B. (Bedford, Luton)
Bowles, Colonel H. F.Doyle, N. GrattanHaslam, Lewis
Boyd-Carpenter, Major A.Du Pre, Colonel William BaringHennessy, Major J. R. G.
Brassey, H. L. C.Edgar, Clifford B.Henry, Denis S. (Londonderry, S.)
Breese, Major Charles E.Elliot, Capt. Walter E. (Lanark)Herbert, Dennis (Hertford, Watford)
Bridgeman, Rt. Hon. William CliveEvans, ErnestHilder, Lieut.-Colonel Frank
Hinds, JohnMoore-Brabazon, Lieut.-Col. J. T. C.Sprot, Colonel Sir Alexander
Hohler, Gerald FitzroyMurray, C. D. (Edinburgh)Stanley, Major Hon. G. (Preston)
Hood, JosephNeal, ArthurStarkey, Captain John Ralph
Hopkins, John W. W.Newman, Colonel J. R. P. (Finchley)Sturrock, J. Leng
Hopkinson, A. (Lancaster, Mossley)Nicholson, William G. (Petersfield)Taylor, J.
Horne, Edgar (Surrey, Guildford)Norris, Colonel Sir Henry G.Thomas, Sir Robert J. (Wrexham)
Horne, Sir R. S. (Glasgow, Hillhead)Parker, JamesThomson, F. C. (Aberdeen, South)
Hunter, General Sir A. (Lancaster)Pearce, Sir WilliamThomson, Sir W. Mitchell- (Maryhill)
Hurst, Lieut.-Colonel Gerald B.Pease, Rt. Hon. Herbert PikeTownley, Maximilian G.
Jackson, Lieut.-Colonel Hon. F. S.Pennefather, De FonblanqueTownshend, Sir Charles Vere Ferrers
James, Lieut.-Colonel Hon. CuthbertPerkins, Walter FrankTryon, Major George Clement
Jameson, John GordonPerring, William GeorgeTurton, Edmund Russborough
Jephcott, A. R.Pollock, Sir Ernest MurrayWalters, Rt. Hon. Sir John Tudor
Jones, Sir Evan (Pembroke)Pownall, Lieut.-Colonel AsshetonWard, Col. L. (Kingston-upon-Hull)
Jones, G. W. H. (Stoke Newington)Pratt, John WilliamWard, William Dudley (Southampton)
Jones, Henry Haydn (Merioneth)Purchase, H. G.Warner, Sir T. Courtenay T.
Kellaway, Rt. Hon. Fredk. GeorgeRandles, Sir John ScurrahWatson, Captain John Bertrand
Kiley, James DanielRankin, Captain James StuartWeston, Colonel John Wakefield
King, Captain Henry DouglasRawlinson, John Frederick PeelWhite, Col. G. D. (Southport)
Lane-Fox, G. R.Rees, Sir J. D. (Nottingham, East)Williams, C. (Tavistock)
Lewis, Rt. Hon. J. H. (Univ., Wales)Richardson, Alexander (Gravesend)Williams, Col. Sir R. (Dorset, W.)
Lindsay, William ArthurRoberts, Samuel (Hereford, Hereford)Wills, Lt.-Col. Sir Gilbert Alan H.
Lister, Sir R. AshtonRoberts, Sir S. (Sheffield, Ecclesall)Wilson-Fox, Henry
Lloyd, George ButlerRoundell, Colonel R. F.Wise, Frederick
Lloyd-Greame, Sir P.Royds, Lieut.-Colonel EdmundWood, Hon. Edward F. L. (Ripon)
Locker-Lampson, G. (Wood Green)Samuel, A. M. (Surrey, Farnham)Wood, Sir H. K. (Woolwich, West)
Lorden, John WilliamSamuel, Samuel (W'dsworth, Putney)Worsfold, T. Cato
Lyle, C. E. LeonardSanders, Colonel Sir Robert ArthurWorthington-Evans, Rt. Hon. Sir L.
M'Lean, Lieut.-Col. Charles W. W.Sassoon, Sir Philip Albert Gustave D.Young, E. H. (Norwich)
McMicking, Major GilbertSeddon, J. A.Young, Sir Frederick W. (Swindon)
Manville, EdwardSeely, Major-General Rt. Hon. John
Middlebrook, Sir WilliamShaw, Capt. William T. (Forfar)TELLERS FOR THE NOES.—
Mitchell, William LaneShortt, Rt. Hon. E. (N'castle-on-T.)Mr. McCurdy and Colonel Leslie
Montagu, Rt. Hon. E. S.Simm, M. T.Wilson.
Moore, Major-General Sir Newton J.Smith, Sir Malcolm (Orkney)

Photo of Mr John Whitley Mr John Whitley , Halifax

As I have already indicated, the next Amendment, standing in the name of the hon. Member for Linlithgow (Mr. Kidd) is in order, but it would not be in order to repeat the general discussion as to the position of co-operative societies in regard to taxation. The discussion will have to be confined to specific proposals for partial exemption.

Photo of Mr James Kidd Mr James Kidd , Linlithgowshire

I beg to move, at the end of the Clause, to add the words And where the profits are profits or surplus arising from the trading with its own members of a society registered under the Industrial and Provident Societies Acts no such Corporation Profits Tax shall be charged. I shall keep before me the fact that I am speaking at a very late hour of the evening. It is always disagreeable to repeat old arguments; and I am very glad that you, Sir, have given me a hint that I am not to do so on this occasion. Even without your ruling, I should have noticed part of the ground which I should otherwise have had to cover has already been thoroughly explained. To-night one hon. Member committed himself to the view that many hon. Members of this Committee started with a prepossession against co-operative societies. I want at the outset to disclaim, as far as I am concerned, any such suggestion. The support which was given last year to an Amendment in similar terms to that which I am moving was a splendid proof of the sense of fairness of this House, more particularly if we keep before us the fact that it was inevitable that a large number of hon. Members, particularly on this side, might quite reasonably be under some misapprehension with regard to the history, purpose and achievements of the co-operative movement. On that occasion the present Lord Privy Seal, then the Chancellor of the Exchequer, used many mixed arguments. I am not sure but that the present Chancellor of the Exchequer himself relies upon all these same arguments to-night. The first line of defence in support of his proposal last year, which was taken up by the then Chancellor of the Exchequer, was, that he was warranted in making his proposal, having regard to the unhappy terms of the Minority Report of the Royal Commission on Income Tax. I am not desirous to touch the feelings of any hon. Members who were members of that Commission, but it was hardly fair to the minority to represent them as being in support of this tax. The intrinsic evidence supplied by that Minority-Report, however, conclusively went to establish this fact, that no corporation which did not earn profits was to be subjected to a Corporation Tax. It is only fair to the Lord Privy Seal to say that the debates on last year's Bill had not gone far when, with the frankness, generosity, and courage which we associate with him, he abandoned that particular line of defence.

The right hon. Gentleman's next line of defence discussed necessarily the character of co-operative societies. I do not wish to go into that to-night, or to indulge in the mathematical formulae with which I wearied the Committee on the last occasion. The Chancellor of the Exchequer explained that he was not bound by a profit basis, but what is truly the basis of this tax, not as a matter of speculation, but as a matter of express terms of his own view, is profit, and the basis is never anything else until you try to rope in co-operative societies. The mere fact that co-operative societies are introduced in this violent and unnatural and purely artificial manner is primâ facie proof that they have no right to be there at all. My hon. Friends on the other side are worrying very much about the confused minds of Members here about co-operative societies. They need not charge Members on this side with confusion of mind with regard to cooperative societies when they themselves constantly exhibit still worse confusion. They seem to believe that co-operative societies are of the nature of charitable organisations. They are nothing of the kind. They represent the most conspicuously successful capitalist movement in this country.

Photo of Mr John Whitley Mr John Whitley , Halifax

The hon. Member is going rather beyond the scope of the Amendment. He is lapsing into a general discussion which took place on the last Amendment.

Photo of Mr James Kidd Mr James Kidd , Linlithgowshire

My whole intention, as I understood it to be my duty, was to reply to previous arguments, and I am now deprived of that joy which I had hoped for. This Amendment differs from the last not in degree but in kind. It seeks to exempt simply the results of the mutual trading between members of cooperative societies, and in putting forward such an Amendment I simply ask for co-operative societies treatment precisely similar to that which has been given to insurance companies. If you look at the Act of 1920, Section 53, you will see, in paragraph (b), of Sub-section (2), under which you propose to make this assessment: Profits shall include, in the case of mutual trading concerns, the surplus arising; from transactions with members, and in the case of societies registered under the Industrial and Provident Societies Act (1893) any sum paid by way of bonus, discount, or dividend on purchases shall be treated as trade expenses, and a reduction shall accordingly be allowed in respect thereof. 11.0 P.M.

Then take the next paragraph, (i): In the case of a company carrying on the business of life assurance the part of the profits belonging or allocated to, reserved for or expended on behalf of policy holders or annuitants shall be apportioned between the profits of the company directly liable to assessment to Corporation Profits Tax and the profits not so liable, and a deduction shall be allowed of the amount so apportioned to the profits so liable. What does that mean? That where a mutual insurance company does outside business, as a co-operative society sometimes does, that part of its business which is represented by "profits belonging or allocated to, reserved for or expended on behalf of policy-holders or annuitants" is exempt from this taxation. I ask for nothing more in my Amendment. The phraseology is altered in order to meet the case of a trading society as distinguished from an insurance society. The right hon. Gentleman is worried about figures. I disclaim any idea of exempting co-operative societies from taxation on that outside trading. Why is Income Tax paid by a company trading for profit? In the course, of their trading they have to rely on the law. The law supports the credit which they give, and as against that support they ought to make a contribution towards the cost of maintaining the law. But in a mutual trading society there is no such credit, no such requirement for support of the law, and for that reason they should make no contribution. I am bringing about me like a hive of angry bees such good friends as the right hon. Baronet (Sir F. Banbury). With all respect to the right hon. Baronet, taxes are not imposed for mere fun. There is always some theory of justification for them. I hope the Committee will agree that the case I make for the exemption of co-operative societies from this tax, as far as mutual trading is concerned, is not a demand that any special favour should be shown to co-operative societies. It is simply a demand that they be accorded the strictest justice. The Chancellor of the Exchequer may ask me what I would propose to do. I would recognise as he has done that mutual trading cannot result in a profit, and, as he has done, I would exempt that part of the surplus which is paid away in so-called dividends. What becomes of the balance of the surplus? It is represented by stocks of groceries, drapery and other goods. Let me illustrate. Supposing I give the Chancellor of the Exchequer £100 to spend for me on something which I anticipate will cost £100. If he makes the desired purchase at an expenditure of £80, then there is a saving of £20 which he could not, by any process of reasoning, say was liable to taxation, nor is the remaining £10, represented it may be by stocks. Suppose further, he returns me £10, that obviously must be exempt from taxation. I entirely agree with the proposal of the hon. Member for Central Edinburgh (Mr. Graham). It seemed to me that the four little lambs which he offered for the slaughter were preeminently my own. My Amendment only wants to exempt all that he wants to exempt. If the exemptions for which I ask are conceded, there will still be open for taxation the four items specified by the hon. Member for Central Edinburgh. What is the answer of the Chancellor of the Exchequer? He asks that we should give him a night to think it over. Last year the right hon. Gentleman chaffed me about my calculations and about my metaphysics. I wonder who has excelled in metaphysics to-night? The right hon. Gentleman wants a night for calculations to find out how much he can make out of the offer of the hon. Member for Central Edinburgh. I do not think I shall differ with the hon. Member for Central Edinburgh; my difference is with the Chancellor of the Exchequer. I do not care whether he makes £100,000, £10,000, or 10d.—in this Amendment, I offer for his attention everything he is entitled to have. With me it is a matter of principle. The specific proposal which has been put forward illustrates what he can have under this Amendment, and what he cannot have, and exhausts the possibilities of the societies so far as this tax is concerned. The plea that incorporation justifies the tax is the most unsound of all. A co-operative society is not a company trading for profit, and precisely because it has not exploited the public as a trading company, it pays no capital duty. My right hon. Friend starts off with his tax as a tax based upon profits, until he ropes in co-operative societies, when he shifts his ground by saying it is not a tax based upon profits, but a tax based upon incorporation. My reply to that is that if it is regarded as based on profits, it is a further Income Tax, but if regarded as based on incorporation, it is only a second edition of capital duty.

Photo of Mr John Whitley Mr John Whitley , Halifax

the hon. Member is now again back to his former argument about the general position of co-operative societies. The question of the Amendment is whether profits or surplus arise from trading with its own members should be taxed or not. We cannot go into the whole status of the societies.

Photo of Mr James Kidd Mr James Kidd , Linlithgowshire

I accept your ruling. It was the one argument last year which was not replied to. I can understand that this House is sick of the co-operative societies; they are not more sick than I am; but I am putting forward this Amendment with the conviction that what I ask for these societies is nothing more nor less than simple, undiluted justice. I urge it, not as a co-operator or as one interested in co-operation, but as one who appreciates the misconception that will arise in the minds of millions of our people if a tax like this is imposed, which, with all the ability and dialectical skill of two successive Chancellors of the Exchequer, cannot be justified to the sense of this House. It is for that reason that I have pressed my Amendment.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

I was a little surprised that my hon. Friend who has just sat down described this Clause as violent. It is rather, difficult to discover violence in a Clause of a Bill or Statute, and the only thing that I could think of when he was talking was a remark of Sidney Smith, that he always liked the Second Book of Euclid best, because if anything it was more impassioned than the others. I think my hon. Friend carried a little of that enthusiasm into his speech which was lacking in the cold Clauses of my Bill. I was also a little surprised at one line of argument he used. He said, "Give me what you put in your previous Act with regard to life insurance societies." That is exactly what we have done. I have had again before me the particular provision to which he referred, and I discovered that with regard to these life insurance societies, what is set aside for immediate or ultimate division amongst the members of the society itself is not subject to tax. In the same way we propose not to tax that which is divided as dividends amongst the members of the co-operative societies. But whatever is surplus to that does form the subject of taxation, just as we propose to make that surplus in the case of the co-operative societies the measure of the revenue which they should render to the State, and accordingly you have got a complete analogy in the life insurance societies for what we propose to do in this connection.

Photo of Mr James Kidd Mr James Kidd , Linlithgowshire

I think the right hon. Gentleman misunderstood me. Will he tell me what provision he makes for the stocks, which represent part savings, as surely as the part paid away as so-called dividends?

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

As far as what is put to reserve is concerned, we propose to make it subject to the tax. My hon. Friend said that his Amendment is the same as the proposal made by the hon. Member for Central Edinburgh (Mr. W. Graham). He is under a complete delusion in regard to that. The proposals of the hon. Member for Central Edinburgh went much further than my hon. Friend's Amendment. It only shows how much he has misunderstood either his own Amendment or the proposals of my hon. Friend. In point of fact, his proposals would yield not a fifth of the revenue which the hon. Gentleman's proposals would yield. He proposes by his Amendment to exclude from tax the earnings of the reserve fund, which came within the purview of the proposals of the hon. Member for Central Edinburgh. He asked me whether I would accept the other proposals, but how can I accept the other proposals, in view of the attitude that the co-operative societies have themselves taken? It is not going to bring peace in regard to this question. It will not rid us of this controversy in the slightest, so far as I can, gather from the attitude of the hon. Member for Kettering (Mr. Waterson), and in the course of the debate it is clear that the hon. Members opposite who supported the co-operative societies on the previous Amendment are by no means inclined to go so far as the hon. Member for Central Edinburgh. Under the circumstances I think it is very little use saying to-night that I shall be prepared to accept the proposal. What I should rather be inclined to do is this: If there is any real movement in the cooperative societies themselves which would show that they are anxious to find a way to contribute some proper share of the revenue of the State upon some other basis than this, and if mutuality is really the crucial position so far as they are concerned, we shall have to work it out in the next twelve months. In the absence of any indication of a suggestion from the societies that will really yield an appreciable sum to the revenue, I cannot for my part accept the proposal, still less can I accept the proposed amendment.

Photo of Sir William Adkins Sir William Adkins , Middleton and Prestwich

I desire—[HON. MEMBERS: "Divide, divide!"] For my own sake, I will not detain the Committee more than a moment. I fully appreciate the terrible position of any mere Englishman who intervenes in this contest of Caledonian dialectics. The position, I desire to say simply, to-night represents very closely the position of the debate on the Report Stage of the Finance Bill last year. Then, as now, this particular Amendment was moved; then, as now, certain suggestions were mentioned; and though the Chancellor of the Exchequer did not altogether slam the door, the opening narrowed as the debate went on. This Amendment merely seeks to exclude from tax those operations of the Co-operative Societies which are strictly mutual. It may or may not be possible —I hope it will be—to attain some agreement on the general question which arises on this, and I thank the hon. Member for Edinburgh for the ingenuity and importance of his suggestion. Until something is agreed upon it becomes necessary to mention the protest made last year by a larger number of Members against the taxation of the purely mutual operations of the co-operative societies.

Lieut.-Colonel Sir J. HOPE:

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

I appeal to the Chancellor of the Exchequer to accept this Motion so that he may have the right to think over the effect of the Amendment, and also to see whether peace cannot be attained between the co-operative societies and the Government. It seems to me that there is very little separating the Chancellor of the Ex- chequer and those of us who wish to remove some of the taxation from the co-operative societies. A night's thought might enable an arrangement to be arrived which the Chancellor would accept, and which would satisfy the cooperative societies. I do appeal to the right hon. Gentleman.

Question put, "That the Chairman do report Progress, and ask leave to sit again."

The Committee proceeded to a Division.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

(seated and covered): Am I right in saying that the hon. Baronet (Sir J. Hope) did not

move to report progress, and that the Motion should not have been put, as it was never moved?

Photo of Mr John Whitley Mr John Whitley , Halifax

I understood that the hon. Baronet did move it, and nobody rose to speak. Consequently I put the motion.

Sir J. HOPE:

I only appealed to the Chancellor of the Exchequer to accept a Motion to report Progress, but I did not intend to move it.

Photo of Mr John Whitley Mr John Whitley , Halifax

Then the Motion when put a second time can be negatived by consent.

The Committee divided: Ayes, 56; Noes, 166.

Division No. 179.]AYES.[11.28 p.m.
Astor, ViscountessHall, F. (York, W.R., Normanton)Robertson, John
Austin, Sir HerbertHalls, WalterRose, Frank H.
Barker, G. (Monmouth, Abertillery)Hartshorn, VernonRoyce, William Stapleton
Barnes, Major H. (Newcastle, E.)Hayday, ArthurShaw, Capt. William T. (Forfar)
Barton, Sir William (Oldham)Hayward, EvanSpencer, George A.
Benn, Captain Wedgwood (Leith)Hogge, James MylesSprot, Colonel Sir Alexander
Bird, Sir A. (Wolverhampton, West)Hope, Lt.-Col. Sir J. A. (Midlothian)Stanton, Charles Butt
Bramsdon, Sir ThomasIrving, DanSwan, J. E.
Brown, James (Ayr and Bute)Johnstone, JosephThomson, Sir W. Mitchell- (Maryhill)
Cairns, JohnKennedy, ThomasThorne, G. R. (Wolverhampton, E.)
Carter, W. (Nottingham, Mansfield)Kiley, James DanielWalsh, Stephen (Lancaster, Ince)
Davies, A. (Lancaster, Clitheroe)Lawson, John JamesWilliams, Col. P. (Middlesbrough, E.)
Entwistle, Major C. F.Maclean, Rt. Hn. Sir D. (Midlothian)Wilson, James (Dudley)
Finney, SamuelMorgan, Major D. WattsWintringham, Thomas
Glanville, Harold JamesMyers, ThomasWood, Major M. M. (Aberdeen, C.)
Glyn, Major RalphNewbould, Alfred ErnestYoung, Robert (Lancaster, Newton)
Graham, R. (Nelson and Colne)Parkinson, John Allen (Wigan)
Graham, W. (Edinburgh, Central)Pennefather, De FonblanqueTELLERS FOR THE AYES.—
Grundy, T. W.Rendall, AthelstanLieut.-Commander Kenworthy and
Guest, J. (York, W. R. Hamsworth)Richardson, R. (Houghton-le-Spring)Mr. Hodge.
Addison, Rt. Hon. Dr. ChristopherCautley, Henry StrotherHailwood, Augustine
Adkins, Sir William Ryland DentChamberlain, Rt. Hn. J. A. (Birm. W.)Hamilton, Major C. G. C.
Agg-Gardner, Sir James TynteChamberlain, N. (Birm., Ladywood)Hannon, Patrick Joseph Henry
Amery, Leopold C. M. S.Churchman, Sir ArthurHarmsworth, C. B. (Bedford, Luton)
Archer-Shee, Lieut.-Colonel MartinClay, Lieut.-Colonel H. H. SpenderHennessy, Major J. R. G.
Astbury, Lieut.-Com. Frederick W.Coats, Sir StuartHenry, Denis S. (Londonderry, S)
Bagley, Captain E. AshtonCockerill, Brigadier-General G. K.Herbert, Dennis (Hertford, Watford)
Baird, Sir John LawrenceColvin, Brig.-General Richard BealeHilder, Lieut.-Colonel Frank
Baldwin, Rt. Hon. StanleyCoote, Colin Reith (Isle of Ely)Hinds, John
Balfour, George (Hampstead)Cowan, D. M. (Scottish Universities)Holmes, J. Stanley
Banbury, Rt. Hon. Sir Frederick G.Cowan, Sir H. (Aberdeen and Kinc.)Hood, Joseph
Barlow, Sir MontagueDavidson, J. C. C. (Hemel Hempstead)Hopkins, John W. W.
Barnett, Major Richard W.Davidson, Major-General Sir J. H.Home, Edgar (Surrey, Guildford)
Barnston, Major HarryDawes, James ArthurHome, Sir R. S. (Glasgow, Hillhead)
Barrand, A. R.Dean, Commander P. T.Hurd, Percy A.
Bellairs, Commander Carlyon W.Dewhurst, Lieut.-Commander HarryJameson, John Gordon
Benn, Sir A. S. (Plymouth, Drake)Du Pre, Colonel William BaringJephcott, A. R.
Bennett, Sir Thomas JewellElliot, Capt. Walter E. (Lanark)Jones, Sir Evan (Pembroke)
Birchall, Major J. DearmanEvans, ErnestJones, Henry Haydn (Merioneth)
Bird, Sir A. (Wolverhampton, West)Eyres-Monsell, Com. Bolton M.Kellaway, Rt. Hon. Fredk. George
Bird, Sir William B. M. (Chichester)Falle, Major Sir Bertram GodfrayKing, Captain Henry Douglas
Borwick, Major G. O.Foxcroft, Captain Charles TalbotKinloch-Cooke, Sir Clement
Boscawen, Rt. Hon. Sir A. Griffith-Fraser, Major Sir KeithLane-Fox, G. R.
Bowerman, Rt. Hon. Charles W.Fremantle, Lieut.-Colonel Francis E.Lewis, Rt. Hon. J. H. (Univ., Wales)
Bowyer, Captain G. W. E.Ganzoni, Sir JohnLindsay, William Arthur
Boyd-Carpenter, Major A.Gee, Captain RobertLloyd, George Butler
Brassey, H. L. C.Gibbs, Colonel George AbrahamLloyd-Greame, Sir P.
Breese, Major Charles E.Gilmour, Lieut.-Colonel Sir JohnLocker-Lampson, Com. O. (H'tingd'n)
Bridgeman, Rt. Hon. William CliveGreen, Joseph F. (Leicester, W.)Lorden, John William
Briggs, HaroldGreene, Lt.-Col. Sir W. (Hack'y, N.)Lowther, Major C. (Cumberland, N.)
Bruton, Sir JamesGreig, Colonel Sir James WilliamLyle, C. E. Leonard
Buckley, Lieut.-Colonel A.Gritten, W. G. HowardM'Curdy, Rt. Hon. Charles A.
Burn, Col. C. R. (Devon, Torquay)Guinness, Lieut.-Col. Hon. W. E.McLaren, Robert (Lanark, Northern)
Carr, W. TheodoreHacking, Captain Douglas H.M'Lean, Lieut.-Col. Charles W. W.
McMicking, Major GilbertRawlinson, John Frederick PeelWalters, Rt. Hon. Sir John Tudor
Manville, EdwardRichardson, Alexander (Gravesend)Ward, Col. L. (Kingston-upon-Hull)
Montagu, Rt. Hon. E. S.Roberts, Samuel (Hereford, Hereford)Waterson, A. E.
Moore, Major-General Sir Newton J.Roundell, Colonel R. F.Weston, Colonel John Wakefield
Moore-Brabazon, Lieut.-Col. J. T. CRoyds, Lieut.-Colonel EdmundWheler, Col. Granville C. H.
Murray, C. D. (Edinburgh)Samuel, A. M. (Surrey, Farnham)White, Col. G. D. (Southport)
Neal, ArthurSamuel, Samuel (W'dsworth, Putney)Williams, Aneurln (Durham, Consett)
Newman, Colonel J. R. P. (Finchley)Sanders, Colonel Sir Robert ArthurWilliams, C. (Tavistock)
Newman, Sir R. H. S. D. L. (Exeter)Seddon, J. A.Williams, Col. Sir R. (Dorset, W.)
Nicholson, Reginald (Doncaster)Seely, Major-General Rt. Hon. JohnWills, Lt.-Col. Sir Gilbert Alan H.
Nicholson, William G. (Petersfield)Shaw, Hon. Alex. (Kilmarnock)Wilson, Rt. Hon. J. W. (Stourbridge)
Norman, Major Rt. Hon. Sir HenryShortt, Rt. Hon. E. (N'castle-on-T.)Wise, Frederick
Parker, JamesSimm, M. T.Wood, Hon. Edward F. L. (Ripon)
Pease, Rt. Hon. Herbert PikeStanley, Major Hon. G. (Preston)Wood, Sir H. K. (Woolwich, West)
Perkins, Walter FrankStarkey, Captain John RalphWorthington-Evans, Rt. Hon. Sir L.
Perring, William GeorgeTaylor, J.Young, E. H. (Norwich)
Pickering, Colonel Emil W.Thomas, Sir Robert J. (Wrexham)Young, Sir Frederick W. (Swindon)
Pollock, Sir Ernest MurrayThomson, Sir W. Mitchell- (Maryhill)Younger, Sir George
Poison, Sir Thomas A.Townley, Maximilian G.
Pownail, Lieut.-Colonel AsshetonTownshend, Sir Charles Vere FerrersTELLERS FOR THE NOES.—
Pratt, John WilliamTryon, Major George ClementColonel Leslie Wilson and Mr.
Purchase, H. G.Turton, Edmund RussboroughDudley Ward.
Randles, Sir John ScurrahWallace, J.

Photo of Captain William Benn Captain William Benn , Leith

May I ask on what Motion by an hon. Member you put the Question that you report Progress?

Photo of Mr John Whitley Mr John Whitley , Halifax

On the Motion of the hon. and gallant Member for Midlothian.

Photo of Captain William Benn Captain William Benn , Leith

Are you aware that the hon. and gallant Baronet has stated that he never made the Motion.

Photo of Mr John Whitley Mr John Whitley , Halifax

I understood him to make it, and when I put it he did not repudiate it.

Original Question again proposed.

Photo of Mr Alfred Waterson Mr Alfred Waterson , Kettering

We have had several invitations from the other side of the Committee to state how far the co-operative movement would be prepared to go in this matter. I think that the difficulty of the position of one speaking for the movement will be generally recognised. Since those remarks were made, I have had a hurried interview with one or two of those who have to deal with this matter in the movement, and am now deputed to say one or two brief words with regard to it. If the Amendment that has been so ably put forward by my hon. Friend really means that, firstly, annual values of property shall be liable to tax, secondly, income from investments, if not previously taxed, and, thirdly, profits from sales to non-members—if that is all that is contained in the Amendment, then I am able to say that it could be accepted, and if that

be the real intention of the Amendment, I would appeal to the right hon. Gentleman to accept it. We feel that it goes a very long way, particularly when there is a section of the movement that is somewhat in a difficulty as to paying anything at all. We are using all our powers and influence to endeavour to see that justice is done all round, and I think the Chancellor of the Exchequer will be able to get a reasonable sum that will be satisfactory to the Government if he accepts the Amendment, which, as I have said, we are prepared to accept if its principles are those which I have stated.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

I appreciate the trouble my hon Friend has taken, in the interval, to discover how far the co-operative movement would be prepared to go. He declared that the proposal he has made goes a very long way, but in point of fact the annual value of land held by the cooperative societies, and the profits of trading with non-members, which he seems to represent as a concession, are already automatically taxed to income tax. The only thing that is added is taxation upon interest on investments which are outside the movement altogether. I do not think that that can be represented as a very big advance, and I am sorry to say that I am not prepared at the moment to accept it.

Question put, "That those words be there added."

The Committee divided: Ayes, 95; Noes, 125.

Division No. 180.]AYES.[11.40 p.m.
Adkins, Sir W. Ryland D.Barnes, Major H. (Newcastle, E.)Birchall, Major J. Dearman
Astbury, Lieut.-Com. Frederick W.Barrand, A. R.Bowerman, Rt. Hon. Charles W.
Astor, ViscountessBarton, Sir William (Oldham)Bowyer, Captain G. W. E.
Bagley, Captain E. AshtonBenn, Sir A. S. (Plymouth, Drake)Bramsdon, Sir Thomas
Barker, G. (Monmouth, Abertillery)Benn, Captain Wedgwood (Leith)Breese, Major Charles E.
Bromfield, WilliamJameson, John GordonRose, Frank H.
Brown, James (Ayr and Bute)Jephcott, A. R.Royce, William Stapleton
Cairns, JohnJohnstone, JosephSeely, Major-General Rt. Hon. John
Carter, W. (Nottingham, Mansfield)Jones, Sir Evan (Pembroke)Shaw, Hon. Alex. (Kilmarnock)
Coote, Colin Reith (Isle of Ely)Kennedy, ThomasShaw, Capt. William T. (Forfar)
Cowan, D. M. (Scottish Universities)Kenworthy, Lieut.-Commander J. M.Spencer, George A.
Davies, A. (Lancaster, Clitheroe)Kinloch-Cooke, Sir ClementSprot, Colonel Sir Alexander
Elliot, Capt. Walter E. (Lanark)Lane-Fox, G. R.Stanton, Charles Butt
Entwistle, Major C. F.Lawson, John JamesSwan, J. E.
Finney, SamuelLloyd, George ButlerTaylor, J.
Gee, Captain RobertLowther, Major C. (Cumberland, N.)Thomson, T. (Middlesbrough, West)
Glanville, Harold JamesMcLaren, Robert (Lanark, Northern)Thorne, G. R. (Wolverhampton, E.)
Glyn, Major RalphMaclean, Rt. Hn. Sir D. (Midlothian)Waddington, R.
Gould, James C.McMicking, Major GilbertWallace, J.
Graham, R. (Nelson and Colne)Mallalieu, Frederick WilliamWaterson, A. E.
Grundy, T. W.Manville EdwardWheler, Col. Granville C. H.
Guest, J. (York, W.R., Hemsworth)Morgan, Major D. WattsWilliams, Aneurin (Durham, Consett)
Hall, F. (York, W.R., Normanton)Mosley, OswaldWilliams, Col. P. (Middlesbrough, E.)
Halls, WalterMyers, ThomasWilson, James (Dudley)
Hartshorn, VernonNewbould, Alfred ErnestWilson, Rt. Hon. J. W. (Stourbridge)
Hayday, ArthurNewman, Sir R. H. S. D. L. (Exeter)Wintringham, Thomas
Hayward, EvanParry, Lieut.-Colonel Thomas HenryWood, Sir H. K. (Woolwich, West)
Hodge, Rt. Hon. JohnPennefather, De FonblanqueYoung, Robert (Lancaster, Newton)
Hogge, James MylesPickering, Colonel Emil W.Younger, Sir George
Holmes, J. StanleyPoison, Sir Thomas A.
Hopkinson, A. (Lancaster, Mossley)Rendall, AthelstanTELLERS FOR THE AYES.—
Hurd, Percy A.Richardson, R. (Houghton-le-Spring)Mr. Kidd and Lieut.-Colonel Sir
Irving, DanRobertson, JohnJohn Hope.
Addison, Rt. Hon. Dr. ChristopherFraser, Major Sir KeithParker, James
Agg-Gardner, Sir James TynteFremantle, Lieut.-Colonel Francis EPease, Rt. Hon. Herbert Pike
Ainsworth, Captain CharlesGanzoni, Sir JohnPerring, William George
Amery, Leopold C. M. S.Gibbs, Colonel George AbrahamPollock, Sir Ernest Murray
Archer-Shee, Lieut.-Colonel MartinGilmour, Lieut.-Colonel Sir JohnPownall, Lieut.-Colonel Assheton
Austin, Sir HerbertGrant, James AugustusPurchase, H. G.
Baird, Sir John LawrenceGreen, Joseph F. (Leicester, W.)Bandies, Sir John Scurrah
Baldwin, Rt. Hon. StanleyGreene, Lt.-Col. Sir W. (Hack'y, N.)Raw, Lieutenant-Colonel Dr. N.
Balfour, George (Hampstead)Greig, Colonel Sir James WilliamRawlinson, John Frederick Peel
Banbury, Rt. Han. Sir Frederick G.Gritten, W. G. HowardRichardson, Alexander (Gravesend)
Barlow, Sir MontagueGuinness, Lieut.-Col. Hon. W. E.Roberts, Samuel (Hereford, Hereford)
Barnett, Major Richard W.Hacking, Captain Douglas H.Roundell, Colonel R. F.
Barnston, Major HarryHailwood, AugustineRoyds, Lieut.-Colonel Edmund
Bellairs, Commander Carlyon W.Hamilton, Major C. G. C.Samuel, A. M. (Surrey, Farnham)
Bird, Sir A. (Wolverhampton, West)Hannon, Patrick Joseph HenrySamuel, Samuel (W'dsworth, Putney)
Bird, Sir William B. M. (Chichester)Harmsworth, C. B. (Bedford, Luton)Sanders, Colonel Sir Robert Arthur
Borwick, Major G. O.Hennessy, Major J. R. G.Seddon, J. A.
Boscawen, Rt. Hon. Sir A. Griffith-Henry, Denis S. (Londonderry, S.)Shortt, Rt. Hon. E. (N'castle-on-T.)
Boyd-Carpenter, Major A.Herbert, Dennis (Hertford, Watford)Simm, M. T.
Brassey, H. L. C.Hilder, Lieut.-Colonel FrankStanley, Major Hon. G. (Preston)
Bridgeman, Rt. Hon. William CliveHinds, JohnStarkey, Captain John Ralph
Briggs, HaroldHood, JosephThomas, Sir Robert J. (Wrexham)
Bruton, Sir JamesHopkins, John W. W.Thomson, Sir W. Mitchell- (Maryhill)
Buckley, Lieut.-Colonel A.Home, Edgar (Surrey, Guildford)Townley, Maximilian G.
Burn, Col. C. R. (Devon, Torquay)Home, Sir R. S. (Glasgow, Hillhead)Townshend, Sir Charles Vere Ferrers
Carr, W. TheodoreJones, Henry Haydn (Merioneth)Tryon, Major George Clement
Cautley, Henry StrotherKellaway, Rt. Hon. Fredk. GeorgeTurton, Edmund Russborough
Chamberlain, Rt. Hn. J. A. (Birm. W.)King, Captain Henry DouglasWalters, Rt. Hon. Sir John Tudor
Chamberlain, N. (Birm., Ladywood)Lewis, Rt. Hon. J. H. (Univ., Wales)Ward, William Dudley (Southampton)
Churchman, Sir ArthurLindsay, William ArthurWeston, Colonel John Wakefield
Clay, Lieut.-Colonel H. H. SpenderLloyd-Greame, Sir P.White, Col. G. D. (Southport)
Coats, Sir StuartLocker-Lampson, Com. O. (H'tingd'n)Williams, C. (Tavistock)
Cockerill, Brigadier-General G. K.Lorden, John WilliamWilliams, Col. Sir R. (Dorset, W.)
Colvin, Brig.-General Richard BealeLyle, C. E. LeonardWills, Lt.-Col. Sir Gilbert Alan H.
Davidson, J. C. C. (Hemel Hempstead)M'Lean, Lieut.-Col. Charles W. W.Wise, Frederick
Davidson, Major-General Sir J. H.Montagu, Rt. Hon. E. S.Wood, Hon. Edward F. L. (Ripon)
Dean, Commander P. T.Moore, Major-General Sir Newton J.Worthington-Evans, Rt. Hon. Sir L.
Dewhurst, Lieut.-Commander HarryMoore-Brabazon, Lieut.-Col. J. T. C.Young, E. H. (Norwich)
Du Pre, Colonel William BaringMurray, C. D. (Edinburgh)Young, Sir Frederick W. (Swindon)
Evans, ErnestNeal, Arthur
Eyres-Monsell, Com. Bolton M.Newman, Colonel J. R. P. (Finchley)TELLERS FOR THE NOES.—
Falle, Major Sir Bertram GodfrayNicholson, William G. (Petersfield)Mr. McCurdy and Colonel Leslie
Foxcroft, Captain Charles TalbotNorman, Major Rt. Hon. Sir HenryWilson.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Photo of Commander Hon. Joseph Kenworthy Commander Hon. Joseph Kenworthy , Kingston upon Hull Central

I should like to put a question on a matter which was ruled out of order earlier this evening. We ought to have an explana- tion why the proceeds of the 3½per cent. Conversion Loan should be exempted from Corporation Profits tax. This seems to be singling out one respective Government security from a tax from which we have just refused to exempt Co-operative funds. The poorer classes have not the money to invest in these loans. This means exemption for the rich class of investors. It is only rich people who can afford to invest in Government loans today.

Photo of Captain William Benn Captain William Benn , Leith

Is the Chancellor of the Exchequer going to give an explanation?

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

It is not really necessary to give an explanation. Hon. Members who followed what was done in connection with the Conversion Loan must have been aware that the prospectus announced that a concession was to be given, and therefore you find in the Bill the proposal necessary to carry that into legislation. The reason for giving this particular concession is not entirely new. There have been other Government loans which have been issued free of particular taxes. It was considered proper and wise under present circumstances to free the Conversion Loan of anything in the shape of Corporation Profits Tax. Those who advised the Government thought it would make the desire to convert very much greater if this advantage was given. It is a complete error on the part of my hon. Friend to suggest that poor people had no investments in the war bonds which have been converted. There were very considerable investments by the working classes in these War Bonds, and it is an entire error to suggest that this is anything in the way of a concession to rich investors. It is a concession which covers many thousands of investors, and those who get the benefit include many of those for whom the hon. Member professes to make his appeal.

Photo of Mr Aneurin Williams Mr Aneurin Williams , Consett

As one interested in the co-operative movement for many years, I wish to put a question to the Chancellor of the Exchequer. I understand the position of the Chancellor of the Exchequer with regard to the Conversion Loan where the conditions were declared some time ago, but why is power taken to exempt any securities "forming part of any loan which may be issued at any time—"

Photo of Mr John Rawlinson Mr John Rawlinson , Cambridge University

Is the hon. Member in order in asking questions when the matter has been debated, and the Committee has divided and come to a decision on this?

Photo of Mr John Whitley Mr John Whitley , Halifax

The Question is, "That the Clause stand part of the Bill." The hon. Member is in order.

Photo of Mr Aneurin Williams Mr Aneurin Williams , Consett

I am taking up the argument where the Chancellor of the Exchequer left it. Although the right hon. Gentleman's argument may be sound as to the Conversion Loan, with regard to which a declaration was made long ago, it certainly is not just now—when the Committee has refused to exempt the working man's ordinary investments—to take powers to exempt these other investments. It may have been all very well when the case of the working man's investment was not decided. Now that it has been decided it is unfair to take these wide powers to exempt any of these investments which the Government like to issue. If I am in order, I would move that these words be omitted.

Question put, "That the Clause stand part of the Bill."

The Committee divided: Ayes, 150; Noes, 36.

Division No. 181.]AYES.[11.54 p.m.
Addison, Rt. Hon. Dr. ChristopherBoscawen, Rt. Hon. Sir A. Griffith-Cowan, D. M. (Scottish Universities)
Adkins, Sir William Ryland DentBowyer, Captain G. W. E.Davidson, J. C. C. (Hemel Hempstead)
Agg-Gardner, Sir James TynteBoyd-Carpenter, Major A.Davidson, Major-General Sir J. H.
Ainsworth, Captain CharlesBrassey, H. L. C.Dean, Commander P. T.
Amery, Leopold C. M. S.Breese, Major Charles E.Dewhurst, Lieut.-Commander Harry
Archer-Shee, Lieut.-Colonel MartinBridgeman, Rt. Hon. William CliveDu Pre, Colonel William Baring
Astor, ViscountessBriggs, HaroldElliot, Capt. Walter E. (Lanark)
Austin, Sir HerbertBruton, Sir JamesEvans, Ernest
Baird, Sir John LawrenceBuckley, Lieut.-Colonel A.Eyres-Monsell, Com. Bolton M.
Baldwin, Rt. Hon. StanleyBurn, Col. C R. (Devon, Torquay)Falle, Major Sir Bertram Godfray
Balfour, George (Hampstead)Carr, W. TheodoreFoxcroft, Captain Charles Talbot
Banbury, Rt. Hon. Sir Frederick G.Chamberlain, Rt. Hn. J. A. (Birm. W.)Fraser, Major Sir Keith
Barlow, Sir MontagueChamberlain, N. (Birm., Ladywood)Fremantle, Lieut.-Colonel Francis E.
Barnett, Major Richard W.Churchman, Sir ArthurGanzoni, Sir John
Barnston, Major HarryClay, Lieut.-Colonel H. H. SpenderGee, Captain Robert
Bellairs, Commander Carlyon W.Coats, Sir StuartGibbs, Colonel George Abraham
Benn, Sir A. S. (Plymouth, Drake)Cockerill, Brigadier-General G. K.Gilmour, Lieut.-Colonel Sir John
Bird, Sir William B. M. (Chichester)Colvin, Brig-.General Richard BealeGlyn, Major Ralph
Borwick, Major G. O.Coote, Colin Reith (Isle of Ely)Greene, Lt.-Col. Sir W. (Hack'y, N.)
Greig, Colonel Sir James WilliamMcLaren, Robert (Lanark, Northern)Shortt, Rt. Hon. E. (N'castle-on-T.)
Guinness, Lieut.-Col. Hon. W. E.M'Lean, Lieut.-Col. Charles W. W.Simm, M. T.
Hacking, Captain Douglas H.Mallalieu, Frederick WilliamSprot, Colonel Sir Alexander
Hailwood, AugustineManville, EdwardStanley, Major Hon. G. (Preston)
Hamilton, Major C. G. C.Montagu, Rt. Hon. E. S.Starkey, Captain John Ralph
Hannon, Patrick Joseph HenryMoore, Major-General Sir Newton JSugden, W. H.
Harmsworth, C. B. (Bedford, Luton)Moore-Brabazon, Lieut.-Col. J. T. C.Thomas, Sir Robert J. (Wrexham)
Hennessy, Major J. R. G.Murray, C. D. (Edinburgh)Thomson, F. C. (Aberdeen, South)
Henry, Denis S. (Londonderry, S.)Neal, ArthurThomson, Sir W. Mitchell- (Maryhill)
Herbert, Dennis (Hertford, Watford)Newman, Colonel J. R. P. (Finchley)Townley, Maximilian G.
Hilder, Lieut.-Colonel FrankNewman, Sir R. H. S. D. L. (Exeter)Townshend, Sir Charles Vere Ferrers
Hinds, JohnNorman, Major Rt. Hon. Sir HenryTryon, Major George Clement
Hood, JosephParker, JamesTurton, Edmund Russborough
Hope, Lt.-Col. Sir J. A. (Midlothian)Pease, Rt. Hon. Herbert PikeWalters, Rt. Hon. Sir John Tudor
Hopkins, John W. W.Pennefather, De FonblanqueWard, William Dudley (Southampton)
Home, Edgar (Surrey, Guildford)Pickering, Colonel Emil W.Weston, Colonel John Wakefield
Home, Sir R. S. (Glasgow, Hillhead)Pollock, Sir Ernest MurrayWheler, Col. Granville C. H.
Jameson, John GordonPownall, Lieut.-Colonel AsshetonWhite, Col. G. D. (Southport)
Jephcott, A. R.Purchase, H. G.Williams, C. (Tavistock)
Johnstone, JosephRandles, Sir John ScurrahWilliams, Col. Sir R. (Dorset, W.)
Jones, Henry Haydn (Merioneth)Raw, Lieutenant-Colonel Dr. N.Wills, Lt.-Col. Sir Gilbert Alan H.
Kellaway, Rt. Hon. Fredk. GeorgeRawlinsoh, John Frederick PeelWise, Frederick
Kidd, JamesRichardson, Alexander (Gravesend)Wood, Hon. Edward F. L. (Ripon)
King, Captain Henry DouglasRoberts, Samuel (Hereford, Hereford)Wood, Sir H. K. (Woolwich, West)
Lane-Fox, G. R.Roundell, Colonel R. F.Worthington-Evans, Rt. Hon. Sir L.
Lewis, Rt. Hon. J. H. (Univ., Wales)Royds, Lieut.-Colonel EdmundYoung, E. H. (Norwich)
Lindsay, William ArthurSamuel, A. M. (Surrey, Farnham)Young, Sir Frederick W. (Swindon)
Lloyd, George ButlerSamuel, Samuel (W'dsworth, Putney)Younger, Sir George
Lloyd-Greame, Sir P.Sanders, Colonel Sir Robert Arthur
Locker-Lampson, Com. O. (H'tingd'n)Seely, Major-General Rt. Hon. JohnTELLERS FOR THE AYES.—
Lorden, John WilliamShaw, Hon. Alex. (Kilmarnock)Colonel Leslie Wilson and Mr
Lowther, Major C. (Cumberland, N.)Shaw, Capt. William T. (Forfar)McCurdy.
Barker, G. (Monmouth, Abertillery)Halls, WalterSpencer, George A.
Barnes, Major H. (Newcastle, E.)Hartshorn, VernonStanton, Charles Butt
Barton, Sir William (Oldham)Hayday, ArthurSwan, J. E.
Bowerman, Rt. Hon. Charles W.Holmes, J. StanleyThomson, T. (Middlesbrough, West)
Bromfield, WilliamKennedy, ThomasWaterson, A. E.
Brown, James (Ayr and Bute)Kiley, James DanielWilliams, Aneurin (Durham, Consett)
Cairns, JohnLawson, John JamesWilliams, Col. P. (Middlesbrough, E.)
Carter, W. (Nottingham, Mansfield)Morgan, Major D. WattsWilson, James (Dudley)
Davies, A. (Lancaster, Clitheroe)Newbould, Alfred ErnestYoung, Robert (Lancaster, Newton)
Glanville, Harold JamesRichardson, R. (Houghton-le-Spring)
Graham, R. (Nelson and Colne)Robertson, JohnTELLERS FOR THE NOES.—
Grundy, T. W.Rose, Frank H.Sir Thomas Bramsdon and Lieut.
Guest, J. (York, W. R., Hemsworth)Royce, William StapletonCommander Kenworthy.
Hall, F. (York, W. R., Normanton)

Question put, and agreed to.

Clauses 41 (Amendment of s. 6 of 8 Edw. 7, c. 16) and 42 (Construction, short title, and repeal) ordered to stand part of the Bill.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Sir B. Horne.]

Committee report Progress; to sit again To-morrow.