Orders of the Day — Finance Bill

– in the House of Commons at 12:00 am on 30th June 1944.

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Order for Third Reading read.

Photo of Mr Ralph Assheton Mr Ralph Assheton , Rushcliffe

I beg to move, "That the Bill be now read the Third time."

The House will to-day, I hope, take leave of the legislation required by the seventh war-time Budget. Although this Finance Bill incorporates proposals which will leave the people of this country to carry a greater total burden of taxation than they have yet been called upon to bear, the burden has been readily accepted, because the House and the people appreciate that it is necessary to enable us to put the very greatest effort we possibly can into the prosecution of the war. At this stage of the war, however, it is not surprising that the Finance Bill contains, not only provisions which relate directly to the taxation required to finance the war, but also certain provisions which look forward to the future—provisions, for example, such as those very important Clauses dealing with the treatment for taxation purposes of money spent on scientific research. The dual character of the Budget was further emphasised when my right hon. Friend the Chancellor of the Exchequer outlined other proposals and inquiries which he had in mind with a view to assisting industrial reconstruction and development after the war. I think the House is agreed that that policy is of the first importance to a sound and successful financial structure. During the last five years we have maintained such a structure. Not only has it served to support our war effort; it should also ensure that when the time comes to give all our energies to the problems of reconstruction we shall not be hindered by any avoidable anxiety about the financial and economic health of the country.

When my right hon. Friend, in his Budget speech, spoke of the challenge to our trade and industry after the war and outlined his notable plans for assisting industrial reconstruction, I think he took it for granted that every effort would be made to give industry—both employers and employed—a fair field in the shape of economic stability at home. It is nearly 8o years since Walter Bagehot said: The Treasury is the spring of business". We might well add now that if the waters of our financial policy are thoroughly to irrigate the fields, not only of business but of the whole of our useful national activity, there must be a nation-wide voluntary co-operation between the Chancellor of the Exchequer and the people.

The financial history of this war is an outstanding record of such co-operation. Never before has there been such unity among our people in accepting the heavy burdens of taxation, and in making great voluntary efforts in the field of savings. Although it would be foolish to expect that controversy will be absent from our financial discussions in the future, it is surely not idle to hope that in some directions at any rate our war-time financial experience will prove to be of permanent value. We have recognised, for example, during the war that taxation policy must take account of the spread of taxable national income among the different income ranges, and the White Paper that was presented to the House at the time of the Budget—the analysis of the sources of war finance and the estimate of the national income and expenditure—gave some most interesting and revealing statistics of the distribution of taxable private income and showed that only 6½per cent. of it is now in the hands of those who pay Surtax. Our war-time experience should also help us to realise that the savings which will be required to provide the capital we shall need for reconstruction will have to come from a much wider field than used to be the case. It is obvious to us that the smaller incomes have contributed handsomely to the impressive total of our savings in war-time. We must continue to save all we can. Again, our war-time experience will, I hope, have resulted in a greater appreciation by all sections of the community of the important part which financial policy can play in maintaining a sound economic basis for our national effort. In short, the financial policy of the country, of which this Bill is the present instrument, has been raised above sectional controversy and has been accepted as a means of serving the common weal in the face of a great national need. Let us face the future in the same spirit.

Yesterday, you told us, Mr. Speaker, that you liked short speakers, short questions and short answers. The unanimity with which the House has accepted this Bill makes it unnecessary for me to say more.

Photo of Mr John Wilmot Mr John Wilmot , Lambeth Kennington

I cannot hope to match the right hon. Gentleman in charm or in lucidity, but I will seek to do so in brevity. This Bill, the fifth war Finance Bill, bears upon its front page some glowing words which, when disinterred by future antiquarians, may lead them astray. This page displays the words "beer," "sugar," "entertainments" and "vintage port." If this by some accident were the only page to go down to history, it might well deceive the historians. This Finance Bill is remarkable in several ways. Although it comes at such a time, it imposes no fresh taxation. That, again, will be a matter of financial history. It may well be the last Finance Bill before the defeat of Germany, and it is a remarkable thing, and a great tribute to the management of our finances, that it has been possible towards the end of the war, to avoid any fresh imposition. There is very little in the Bill which is controversial. Some discussion has centred round Clause 33, but I think there is general agreement that, at this time especially, the Chancellor is entitled, not only to take every measure to prevent tax avoidance, but to catch up on those who have used their misplaced ingenuity to devise means by which they can shift their burdens on to other shoulders.

I was very interested—as we always are in the short and clear speeches of the Financial Secretary—to hear the right hon. Gentleman refer again to the Chancellor's Budget proposals for easing the burden of taxation upon industry. I would go so far as to say that I think it would be desirable before another Budget day comes, for the Chancellor to produce another White Paper dealing with this subject in greater detail. The planning of industrial enterprise for peacetime purposes is greatly hampered by the lack of a clear perception of future financial policy. Has not the time come to consider in what way we shall change over from an Excess Profits Tax, a tax measured by comparing what is with what was, to a tax upon profits pure and simple, in which there is no subtraction sum involved, a straight profits tax upon the results of industry, with allowances and adjustments, made for the purpose of directing expenditure into those channels which are, socially and industrially, most desirable? The White Paper carries a remarkable development of this doctrine that taxation is an instrument, not only for meeting the costs of Government, but for effecting social policy, for redistributing income, for encouraging certain expenditures and for discouraging certain enterprises. This use of the instrument of taxation is carried much further than it has ever been before, in the White Paper to which the right hon. Gentleman referred. It is most desirable that a further elucidation of this policy in detail should be made at an early date. I cannot believe that it would be good policy to continue the Excess Profits Tax. It has had the result of taxing most heavily for some years those young and growing industries which are developing new processes, and which will be the basis of our post-war export trade—of taxing them far more heavily than the old-fashioned, static and prosperous industries like breweries. I am sure that it is against the public interest that this discrimination against enterprise should continue.

I hope the Chancellor will set his face firmly against premature all-round reductions of taxation. It would be much better that the easing of the burden of taxation, when it is possible to do it, should be in the direction which he indicates, rather than a flat-rate reduction all round. It is not, of course, industrial allowances only that have to be considered. We have had perforce during the war to take away much of the personal allowances, which were intended to ease the burden of taxation on the large family, on people with special hardship, and so on. There are a number of claims urgently awaiting attention when we can restore these allowances. I have raised, over and over again, the particularly hard position of the people who have aged and sick dependants to maintain. The tax allowances here are particularly meagre. It is that sort of reduction of taxation which I hope the Chancellor will consider in the development of the policy in the use of taxation for social purposes.

There is one other thing which I would like to suggest might find a place in the document which I hope we shall see. That is a development of Estate Duty as a means of encouraging the growing practice of gifts of land to the State or to the National Trust. The practice of preserving great estates from spoliation, and at the same time making them public property, is one which should be encouraged in every way. If by some adjustment of Estate Duty, encouragement could be given to the handing-over of land, rather than the breaking-up of estates in order to realise funds to pay tax a great deal would be done to preserve the beauty and texture of that priceless heritage our English countryside. We have to remember, as is pointed out in that document to which I have referred, that taxation policy is to be a major instrument to be used to iron out the incidence of boom and slump. As soon as the war is over we shall have a situation in which there will be incipient inflation, an enormous, pent-up demand for goods when the supply of many commodities will still be very short. Surely that is the time when taxation should be kept at a high level, in order to check an upswing of prices such as followed immediately on the end of the last war. It would be indefensible to continue the Purchase Tax at its present rate and spread, but a sumptuary tax on luxury articles would, to a certain extent, be a means of preventing the boom psychology which most of us believe to be one of the greatest dangers that will face us at the end of the war.

Finally, I hope that we shall set ourselves against any more talk of the burdens of debt which will be around our necks and that we shall listen not at all to those who say that this will be an obstacle to social progress. Surely it is true that, with the exception of debts we may have incurred to other nations, we cannot pass on the burden to the future even if we would. We have already paid for the war. We have paid for the wages and the food of the workers who made the tanks and the planes. The war has been paid for, and the debt which is recorded in our books, is a debt due from one set of citizens to another. Those with greater resources have made loans. There is a debt standing to be paid between one group of citizens and another. It is an internal book-keeping entry, representing not a cost of the war still to be paid, but a transfer from one set of individuals to another. By and large, those who are the proprietors of this debt are, in the main, the taxpayers who will meet the bill. It is completely false to suggest that this burden of debt, this record of internal indebtedness of the body of citizens to some of them, is in any sense a hampering factor in future development.

The answer to the question, "Can we afford it?" is not to be found by looking up the figures of the war debt but by asking ourselves, "Have we got the materials, the machines and the men?" If we have those three things, we can afford anything that we can make and do. It is in that spirit that the Chancellor of the Exchequer is facing the financial future. There are some timid voices, but I think that, in the main, we have learned a lot during the war about the real meaning of finance. I hope this will be to our lasting profit.

Photo of Mr Irving Albery Mr Irving Albery , Gravesend

I have not spoken so far during the passage of the Bill. I should like to take this opportunity of adding my congratulations to the many which the Chancellor has received, and joining in the general approval with which his Finance Bill has passed through this House. I want to refer only to one point, which I think is important. The Budget follows, in the main, the precedent set by many past Budgets, in that it continues a very great deal of very complicated machinery which has gradually grown up far the collection of taxation. I have often thought that if any Chancellor attempted to introduce into this country or into any other country the complicated system of tax collection which at present exists without its having grown up gradually by tradition, and with the consent, the gradual consent, of the taxpayers, the task would be impossible of achievement.

We live at a time when we are contemplating all kinds of changes, social and financial and changes in all kinds of other directions. I would ask the Chancellor of the Exchequer whether he and his experts at the Treasury are endeavouring to investigate, or to make plans for some simplification of the present method, for some simpler method of collecting the large sums of money which will have to be collected in the future. It is vitally necessary that that should be done, and I hope that the Chancellor can assure us that the matter is receiving attention.

Photo of Sir George Benson Sir George Benson , Chesterfield

I think it is common form that the Second Reading of the Finance Bill should be a sort of commutation service and that the Third Reading should be in the nature of an agapemone. I should, anyhow, like to congratulate the Financial Secretary to the Treasury. Those who hold that office are generally maids of all work, but the right hon. Gentleman has on this occasion been put in charge of our valuable china to the extent that he moved, not only the Third Reading, but the Second Reading also of this Bill. It is unquestionably an outstanding Bill, in that it recognises, in the widest possible way, the overwhelming importance of scientific research in industry. Two or three weeks before the Finance Bill was introduced, there was a Debate upon this subject. I do not think that anybody who took part in it and staked out large and expansive claims, expected that in three weeks the claims would be met in full.

It is rather interesting to consider the reason why the Chancellor has been so open-handed. One thing is quite certain; it is not because industry is short of funds. There are not the slightest grounds for believing that industry cannot afford vastly greater expenditure on research than has been made in the last 20 years, without any help from the Chancellor. If one refers to statistical estimates, one finds that, year by year, very large sums indeed were put to reserve from undistributed profits. For example, I find on reference to Cohn Clarke that in the last three years for which he gives figures, undivided profits for 1933 were £110,000,000, for 1934, £156,000,000 and for 1935, the colossal sum of £228,000,000. In those three years, not exceptionally prosperous years, industry put to financial reserve a sum of £500,000,000. In view of those figures, it is impossible to suggest that industry was in financial need of the assistance which the Chancellor has given to it so open-handedly. The reason why the Chancellor has given the concession is, I suspect, first of all that he realises the overwhelming need for scientific research, and secondly, that he is only too conscious of the appalling shortsightedness of British industry in this regard. He knew that he could not coerce industry into spending money on scientific research, and had to take the only course open to him, to encourage and to persuade. I am sure that the House will hope that the Chancellor's method will be successful.

There is another matter, a very similar and parallel case, where the need for a far-sighted and energetic policy is as great as it is in regard to scientific research. That is in the modernisation of our industrial equipment and in the extension of our plant and machinery. Here again, there is a similar need, and here again, unfortunately, there is the same shortsighted timidity generally, throughout the whole of industry. During the progress of last year's Finance Bill, I, along with certain hon. Members, put down an Amendment asking that a differential taxation should apply to those funds which were ploughed back into industry, in the form of new equipment and new plant. The Chancellor made reference in his Budget speech to a somewhat similar proposal. He said he had been asked to give a differential rate on the accumulation of reserves, which of course is an entirely different proposition, and one which I think the Chancellor was overwhelmingly justified in refusing without further consideration. As I pointed out industry has, throughout the whole of the 20 years between the wars, except in the two or three slump years of 1929 to 1931, steadily piled up enormous reserves, and there is certainly no need for any further encouragement of undue saving.

But when we come to the provision of actual plant we find there is a very different tale indeed. In those three years I have quoted from Colin Clarke—1933 to 1935—although industry put to reserve £500,000,000, Cohn Clarke calculates that they did no more than maintain existing plant, and that on balance not one pennyworth of new equipment was added to British industry. It may well be that this heavy saving on the part of industry, and this inadequate expenditure, was largely responsible for the hard resistant core of our unemployment figures. The policy of industry in the 1930's was diametrically opposed to the policy which the Government have outlined in their White Paper on unemployment. When Colin Clarke estimated that industry had made good its depreciations, although that was an extremely pessimistic conclusion, I am not at all sure that, pessimistic as it may have seemed, he was not a great deal too optimistic. Since Clarke made his estimates, we have had the White Paper on financial resources, and I find, on page 9, that the estimate of the Government, the best estimate that could possibly be made—for no other body or individual has such wide resources of research as the Government have—is that the amount actually spent in 1938 upon the maintenance and renewal of depreciated plant, was £100,000,000, and that in addition to that, there was spent upon new plant the beggarly sum of £20,000,000. That £20,000,000 is terrifyingly small when one thinks of the vast sums that are sunk in plant in this country. To realise that in 1938 a mere £20,000,000 worth of new plant was added gives one cause for thought.

When we look at the amount spent on depreciation in 1938, we find that although only £100,000,000 had been spent on renewals and depreciation, according to the Board of Inland Revenue Report the actual amount of depreciation allowances was £150,000,000. Every hon. Member who attends our financial Debates has heard in this House the case put forward, time and again, that the depreciation allowances of the Board of Inland Revenue were totally inadequate. I have heard Member after Member say that these allowances are so small that no competent firm, no careful firm, would dream of ploughed back so small a sum as the beggarly allowances that were given by the Board of Inland Revenue, and the situation demanded that far more should be ploughed back. That has been the claim advanced; that has been the case on which industry has based its demand for increased depreciation allowances, and when we now, for the first time, get the real facts, what do we find? We find that industry has had allowances for 1938—the last figure we have got—to the tune of £150,000,000, and has spent merely £100,000,000 and put the other £50,000,000 into financial reserves. They have spent two-thirds of the allowances which they themselves have declared, time and time again, are grossly inadequate.

When we add to depreciation, new capital, we still find that the total is something less than 20 per cent. of the allowances given by the Board of Inland Revenue. What does it mean? If we assume that £150,000,000 depreciation represents something like seven to ten per cent. of the value of our capital, the £20,000,000 spent on new plant represents an increase of new plant of one or 1¼ per cent. of the value of the plant in this country. I say that is a very grave revelation. It means two things; first of all that our industrial plant before the war was obsolescent and growing more obsolescent year by year at an appalling rate. But it means something even more terrifying than that. It means that the minds of our industrialists were obsolescent, it means that they were as obsolete as their plant. We can renew plant. Whether we can shift these barnacles of industry as readily is a very different question.

The Chancellor of the Exchequer has made certain proposals with regard to depreciation. He has said that he will allow an additional 20 per cent. on all depreciation allowances in the first year. I was, I think, the sole critic of that proposal. I was a voice crying in the wilderness. The industrialists in the House welcomed it. Of course they did. It means additional cash. The Board of Inland Revenue in 1938 made allowances of £50,000,000 more for depreciation than industry spent upon making good the depreciation, and an addition of another 20 per cent. will not necessarily change this lethargy, which has been the characteristic of our industry.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

Would my hon. Friend be good enough to give me the source of his figure of £150,000,000, as against which only £100,000,000 is spent?

Photo of Sir George Benson Sir George Benson , Chesterfield

Yes, I took it from the 1939 Report of the Board of Inland Revenue, which gives the estimated figure for 1938 of £150,000,000 on depreciation of plant and machinery. The two figures are strictly comparable, if one takes the total in the Report of the Board of Inland Revenue, and the White Paper. I was careful to note that the columns were comparable.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

Has the hon. Member looked at the figures on page 9 of the White Paper?

Photo of Sir George Benson Sir George Benson , Chesterfield

Yes, I compared the £150,000,000 depreciation allowances under the Income Tax, which I took from the figures published in the Report of the Board of Inland Revenue, with the £100,000,000 which was actually spent in 1938, and which is shown on page 9 of the White Paper.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I do not think the hon. Member is comparing like with like. On page 9 of the White Paper, he will see the allowances for maintenance and depreciation in the case of various categories of equipment; and the allowance in 1938 for depreciation of plant and machinery amounted to £100,000,000.

Photo of Sir George Benson Sir George Benson , Chesterfield

May I point out that, on page 9 of the White Paper, these are not allowances, but actual expenditure? The title of the table is "Private Investment."

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

The first column gives private investment. That is split up into investment which is set against allowances for depreciation, and investment of additional capital. That, I think, is the explanation.

Photo of Sir George Benson Sir George Benson , Chesterfield

If the Chancellor takes B.2, he will see that it says "plant and machinery," and the gross investment there was £120,000,000. Is that agreed? Of this amount, £20,000,000 only was new plant. Against that figure, the Chancellor has to put his own Board of Inland Revenue figures for depreciation allowances on plant and machinery. The figure is specified. There, the figure is £150,000,000 for 1938.

Photo of Sir George Benson Sir George Benson , Chesterfield

That I cannot say; but if they are not, there is something very obscure in the wording of the right hon. Gentleman's own White Paper. It says "depreciation allowances on plant and machinery" in the Board of Inland Revenue Report, and gives £150,000,000 for that; and here it says "depreciation allowances for plant and machinery, £100,000,000." I do not think the right hon. Gentleman can say that the figures are not comparable. As the figures are rather startling, I looked at them askance, and rather wondered at first whether I was comparing like with like. But they fit in so clearly with Colin Clarke's figures that I think the right hon. Gentleman will find that I am more or less comparing like with like. Whether the comparison is absolutely accurate or not, I am very much afraid it is sufficiently accurate to be grave and disturbing.

I was saying that I was the sole critic of the Chancellor's additional 20 per cent. It was welcomed by industry because it was an additional cash allowance, without any obligation attached to it to spend that cash allowance. That is what industry has welcomed throughout. I suggest that this gift, without any strings attached to it, is an inadequate approach to the situation. I suggest that the Chancellor should consider very carefully the proposals which he put forward; that there should be a differential rate which attaches only to that part of industrial savings which is ploughed back, in the form of additional plant and equipment; and that not only should he encourage in that way, but also that he should take steps to coerce. He cannot compel industry to spend money on research, but he can penalise industry, through variations in depreciation allowances, when they put those depreciation allowances into the bank, and not into plant. He can coerce industry in half a dozen other different ways. While generous allowances should be given for depreciation, those allowances should be curtailed or depleted if they are not spent on plant and equipment. The right hon. Gentleman has two strings to his bow: persuasion and generosity, and, at the same time, severe coercion. I want the Chancellor to realise that his job is not to fall in with the wishes of industry, but to be a flail. In his Budget speech he referred to motor taxation and said that he was willing to do anything to get agreement— [Interruption] —Well, anything in reason.

Photo of Sir George Benson Sir George Benson , Chesterfield

That is included in "within reason." I understand that the motor industry have agreed, and that the only change they require is that the taxation shall be on engine capacity, instead of on cylinder diameter. That means that the motor industry in this country have chosen to have their taxation levied in such a way that they get enormous protection against American motor imports. It means that the British motor trade are still going to concentrate on the small engine, and that they intend to sacrifice their share in the enormous world market, which demands a large engine; that they are shirking their duty of trying to expand our exports; that they have gone in for the policy of safety first, and exploiting the home market. I put it to the Chancellor that his duty is not to follow industry's demands, but to coerce industry, in the way the national interest requires. He is not doing his duty if he uses his position to foster the timidity and lethargy which have been the characteristic of British industry in the pre-war years.

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , Dorset Southern

II do not wish to detain the House long. I would like to join in the tributes to my right hon. Friend the Chancellor of the Exchequer and my right hon. Friend the Financial Secretary, not so much for the passage of the Finance Bill, which nowadays has become a formal business, and, I think, rightly so, but for the very skilful Budget which they have introduced, and for their conduct of affairs at the Treasury during a very difficult year. I want to refer to two remarks in the speech made by the hon. Gentleman the Member for Kennington (Mr. Wilmot) and also to a remark of my hon. Friend the Member for Gravesend (Sir I. Albery). He was speaking about the break-up of great estates. I hope very much that, before we get to the next Budget, it may be possible to secure something approaching all-party agreement as to what the future of the great estate should be. Looking back into the past, it seems that the great mistake which was made was that the nation became suspicious of the way of life of the landlords of these great estates, before the nation became aware of the virtue of these estates as national assets. Now, I think, we are getting to the time when everyone—landlords, tenants, and the public in general—begins to think of these estates as part of the character of the nation which can be used in the interests of the nation. If we can, during the course of the next year, begin to reach agreement on an all-party basis, I think there is a prospect that the Chancellor might look sympathetically on remission of taxation on the large estates provided sufficient guarantees were given as to how they were used.

The hon. Member for Kennington also spoke about the burden of debt, and, there again, I entirely agree with him. The war has been paid for by current taxation, and by voluntary loans. Its cost is the difference between what would have been spent by the public and what actually has been spent. What people have gone without has paid for the war, There is no great debt continuing which must be cleared off, and of which it can be said that the war has not been paid for until it has been cleared off. The only cost remaining to the nation is that of the salaries of the officials in the National Debt Commissioners' Office, who make the transfer of payments from one person to another. That is the actual cost to the nation of the National Debt, and I think the sooner that is realised, by hon. Members, chiefly on this side of the House, the better.

That brings me to the question raised by the hon. Member for Gravesend of a simpler method of collecting the revenue. It is true that the creation of this great National Debt means that a lot of people are engaged in making transfer payments, and it is to be hoped that everything will be done to simplify the procedure of collecting debts and paying benefits, not only in the realms of taxation but in the realms of social service. On this account as well as others, I think we can look to the future proposals of the Government on social service with some hope. It will simplify the whole process of transfer payments from one section of the nation to another if we can co-ordinate all these schemes and gradually bring them, as it were, under one hat, and that is the more desirable because of the man-power situation in the country. We need to have as few people as possible engaged in the actual business of book-keeping and accountancy and, therefore, I welcome the suggestion made by my hon. Friend, and I hope the Chancellor will consider it.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

My Noble Friend the Member for South Dorset (Viscount Hinchingbrooke) supported what has been said by the hon. Member for Gravesend (Sir I. Albery) in regard to the possibility of simplifying the tax structure and the administration of taxa- tion. I am very conscious indeed, having had for some time close contact with tax administration, of the complexities that have grown up—complexities to a very large extent the result of well-meaning attempts to adjust inequalities and meet special cases of hardship. I have had, in the course of this Finance Bill, to reject proposals which, I was bound to admit, could be defended by valid argument, on the ground that they were not consistent with the principles on which the tax structure has been framed. But, while I do not want to encourage undue optimism in regard to the practicability of making sweeping changes in the direction of simplification, I certainly can assure the House that I have, in this matter, a receptive mind and a desire to simplify where simplification is possible, without producing inequalities or hardships.

My hon. Friend also supported the hon. Member for Kennington (Mr. Wilmot) in certain observations which he had to make as to the significance of the National Debt. I think that what we have to beware of there is not complexity but over-simplification, for the matter is not quite so simple as it can readily be made to appear. I think all of us recognise the difference between external debt and internal debt. We realise that internal debt involves, as has been said, transfer payments. That is not, however, to say that we can afford to be unmindful of the burden of our internal debt. Internal debt means a high level of taxation, and a high level of taxation is cramping to industry and enterprise, which we desire to see encouraged. I developed this matter, to some extent, in a speech on the Government's employment policy, and I then pointed out, and I think it is worth repeating, that we ought to look at the National Debt in relation to the growth of the national income. We ought, in turn, to consider the growth of the national income in relation to the growth of automatic burdens. Expansion of the national income might render us indifferent to a proportionate expansion of the National Debt, but we must beware, because we have to consider how far the national income may be already mortgaged. I pointed out the increasing burden which the taxpayers of this country will, inevitably, have to bear, in consequence of the increasing pro- portion of aged persons in the community.

I think this occasion calls for a short speech, and, therefore, I will not deal in detail with all the points made by previous speakers. The hon. Member for Kennington had some interesting observations to make on the subject of Excess Profits Tax. I was glad to hear what he had to say, because I think it is true that this differential duty imposes a burden, certainly in a number of cases, on enterprise. It has that tendency, and I was very much interested in what my hon. Friend had to say, speaking for hon. Members on those benches. Then there was the point made by the hon. Member for Chesterfield (Mr. Benson), which he developed at some length, and to which I must make some reference. The hon. Member gave us figures, which he had culled from a variety of sources, and sought to draw inferences from them—inferences not at all favourable or complimentary to our industrialists. I think that, here again, there are pitfalls of which we must beware. It is dangerous to take global figures and base conclusions upon them, because, for example, the sums carried to reserve over the whole field of industry may be large in relation to the expenditure incurred on new plant, but the expenditure incurred on new plant in developing industries may be quite a reasonable proportion of the sums carried to reserve in those industries. But global figures include a great variety of cases.

My hon. Friend took a figure from a Board of Inland Revenue Report, and compared it with the figure in the White Paper. I do not know why he preferred to set the Inland Revenue figure against the figure in the White Paper when there was a figure already in the White Paper, which he preferred not to take, corresponding to the figure in the Inland Revenue Report. He did fall into error, as I shall point out in a very few words. He was talking about plant and machinery. The figure of £150,000,000, to which he referred, in that part of the Inland Revenue's Annual Report, gives the total amount allowed by the Revenue authorities in respect of depreciation for taxation purposes over the whole field. It included not merely the income of productive industry; it included the income of non-productive industry, of local authorities and so forth. It even included such items as depreciation on doctors' motor cars. Really the comparison ought to have been between the figure in the first column of Table D of the White Paper, and the figure in the second column. The Inland Revenue figure is really not relevant in this connection at all.

My hon. Friend, in his references to research, speculated on the reasons why I have sought to make special provision in this Bill for research, why I had treated research differently from expenditure on new plant and for development in industry. In addition to the reasons that he indicated, there was one ground of discrimination which was very prominent in my mind. Apart from a desire to do anything I can to make industry more research-minded—and I think there was a good deal of scope for that—I had this in mind. Research, to a very large extent, products results which, in the first place, are not limited to those who undertake the research, and, in the second place, are spread over a long period and do not accrue immediately; and unless research is undertaken without too close a regard to the immediate benefits that may accrue, we shall go without a great deal of very important fundamental general research. That, I think, was a sufficient justification for treating research on a different footing from other development expenditure by industry.

My hon. Friend repeated a point which he had made previously. I am not sure how far I am in Order in referring to something which is not in the Bill, but my hon. Friend made the point and perhaps I may be allowed to comment briefly on it. He said that the 20 per cent. which I contemplate allowing from taxed income, towards expenditure on plant and machinery, does not give direct encouragement to such expenditure. The fact is that this allowance is to be made, not on money that is merely saved, but on money which is saved out of the proceeds of industry and directly applied to the provision of new plant and machinery; and the same applies to the allowance for buildings. I could not follow the hon. Gentleman in that.

Photo of Sir George Benson Sir George Benson , Chesterfield

May I be allowed to clear up the point? Does the right hon Gentleman suggest that 20 per cent. increase in the first year of depreciation allowance, is only made if allowances are spent? The point that I was trying to make was, that here was an increase in depreciation allowance, and that industry was not spending its present depreciation allowances.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I still do not follow my hon. Friend and I think he really has fallen into error here. It is perfectly true —if this was the point he was making—that the initial 20 per cent. can be represented as only an anticipation of depreciation allowance, already available, but the fact that the industrialist, deciding to add to his plant or to instal entirely new plant, can count on being allowed to charge 20 per cent. of the cost immediately against his profit, before tax is levied, must be a direct encouragement to such expenditure. Of course, the position must be considered as a whole. The 20 per cent. increased allowance must be taken in conjunction with the change that is being made in regard to the treatment of the unwritten-off balance, on account of plant which it may be decided to scrap. The effect of the proposals, taken as a whale, will be greatly to ease the burden of renewing plant where the industrialist is pursuing a forward policy, and is ruthlessly scrapping plant as soon as he sees that it can be replaced by more up-to-date machinery. From that point of view, there is, in these proposals, as I think the House recognises, a very direct encouragement to new development.

Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Edinburgh East

Before the Chancellor comes to his peroration on the passage of the Third Reading, may I put to him this question? The House was interested in the controversy between my hon. Friend the Member for Chesterfield (Mr. Benson) and the Chancellor. On this Bill, the House could not follow entirely the merits of the reply which the Chancellor made just now. Would it be possible for the Chancellor to look a little further into this matter, and possibly an agreed Question might be put down for a written answer, if the Chancellor thought it desirable, and the House might thus have, in a form which it could study, the actual reconciliation of the figures, and the answer, if there be an answer, to the argument put forward by my hon. Friend?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I am obliged to my right hon. Friend. As the House will appreciate, this is a little aside from the provisions in this present Finance Bill and I am proposing that a separate Bill should be introduced later, dealing with these allowances for new plant and new buildings, wasted assets and so on to cover a whole range of matters of great moment to industry. I should have thought that, perhaps, it would have been best if the appropriate explanations were made in connection with that Bill when the time comes. I only followed my hon. Friend, because I thought, as he had dealt with the matter at some length, some comment from me by way of answer was called for. I shall be very glad to go into the thing fully in due course, and if it appears that it would be of assistance if a Question were answered on the lines my right hon. Friend has suggested, I shall be very glad to meet the wishes of hon. Members.

Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Edinburgh East

I am referring not so much to the last point that lie made as to the point that was raised concerning the £150,000,000.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I misunderstood my right hon. Friend. Certainly, I shall be very glad to clear up any misapprehension in regard to these figures, and perhaps my hon. Friend will put a Question on the Paper.

I feel that the Third Reading is a very enjoyable stage in the passage through this House of a Finance Bill. This has been my first experience in piloting a Finance Bill through the House, and it has been a very happy experience. I would like to say, very simply, how very grateful I am to hon. Members in all quarters of the House for the manner in which they have received the proposals which have been placed before them, and still more the spirit in which they have received the replies—disappointing inevitably to some hon. Members—which I felt bound to make to proposals in suggestions for Amendments and new Clauses and so forth. It is very natural that proposals should be made for meeting hardships which have been brought to the notice of hon. Members and I think it is also very natural that, for the most part, such proposals should be rejected by a Chancellor of the Exchequer, who must be concerned to see that further anomalies and complications are not allowed to creep into the tax system and that the integrity of the tax structure is maintained. But I do recognise the spirit in which the House has received what my right hon. Friend the Financial Secretary and I have had to say on these various matters.

As has been truly said by more than one speaker, this Finance Bill does carry a stage further the application of a new conception of taxation as an instrument of economic policy, and I feel that the attitude which hon. Members have taken up is a good augury for the future development of that policy, as I, personally, would certainly wish to see it develop. I can assure my hon. Friend the Member for Kennington that I am entirely with him in desiring to see the technique that has been developed in connection with the Budget White Paper carried further into those portions of the economic field which have still to be thoroughly explored, and I hope that successive White Papers will be of increasing value to hon. Members and to the country, in enabling us all to recognise and appreciate the salient facts of our economic situation. I conclude, by saying, once again, how grateful I am to hon. Members.

Question, "That the Bill be now read the Third time," put, and agreed to.

Bill read the Third time, and passed.