I believe this tax is a good one, and that this is the right time to raise it; and I am prepared to defend it not on grounds of social justice, but on economic grounds. The hon. Member for Chippenham (Mr. Eccles) quoted some figures relating to profits before the war and at the present time, but, to put the matter in perspective, we should remember that if we take the total amount of wages on the one hand, and profits and interest on the other, as a percentage of national income, we find that between 1938 and 1945 profits and interest have risen more than wages. I say that merely to put the matter into perspective.
The hon. Member for Chippenham put a perfectly legitimate argument to the effect that it is undesirable to apply taxation too highly to the enterprising section of the community, as against the rentier section of the community receiving fixed interest. In general, I sympathise with that argument, but I suggest that it is totally irrelevant in the conditions of 1947. The hon. Member has overlooked two facts. First of all, E.P.T. is disappearing, and this tax will take the place of E.P.T. If we have nothing to take the place of E.P.T., a large number
of companies would enjoy enormous increases in income this year, which would not be desirable from any point of view. The second point which the hon. Member has overlooked is the lesson of the Economic Survey, which is that we are living in an extremely inflationary period. In such a period prices, profits and dividends are going up. The argument that we do not want to tax enterprise as against the rentier is completely irrelevant in these conditions. The hon. Member mentioned famous companies which had built themselves up on profits. I have been looking only this morning at reports of company meetings which have been held in the last few days. Practically every one of those companies, as everyone would expect in these conditions, reports larger profits and, in many cases, larger dividends. To quote from the eloquent managing director of Morris Motors this week:
The recommendation of an increased final dividend, bringing the total to 22 per cent. tax free, is fully justified by the level of manufacturing activity of the various companies.
and he added that there was a 2½ per cent. tax-free bonus. I would add that that was in spite of the fuel crisis. The chairman of John Summer, Limited, said that increased profit results for 1946 were due to improved production and greater efficiency all round. That is a very satisfactory state of affairs under a Labour Government. I would also mention that prosperous and successful company, the "Daily Mirror," which raised its dividend from 15 per cent. to 30 per cent. this year, precisely for the reason that E.P.T. had disappeared, and they, therefore, had extra sums to distribute. The "Sunday Pictorial" also showed higher profits. I could also quote the case of Colvilles, the famous Scottish steel company, and many others who are doing equally well. I only mention these to illustrate the fact that profits and dividends are going up, and that, in those conditions, there is a stronger case for increasing the Profits Tax rather than reducing it.
I would like to refer to the classical and orthodox argument which the hon. Member for Chippenham put forward, to the effect that this tax is a restraint on enterprise. That is not really true today. I think the hon. Member knows that the reality in industry today is that we are not suffering from lack of enterprise. In- deed, owing to the financial conditions, we are suffering, if anything, from excessive enterprise, in the sense that far more firms are seeking to build extensions than the Government can possibly admit. If the hon. Member had had the job of licensing factory extensions in the last two years, he would know that the Government's difficulty at the moment is to pick out a small minority of extensions which they can permit to go forward. In those circumstances, the hon. Member's argument has no substance. He is suffering from a throwback to the depressing, deflationary days when his party were in power, and when there was an insufficiency of enterprise. I believe the same applies largely to enterprise in the form of increased investment in plant and machinery, as opposed to building.
There is no lack of money ready to be invested in plant and machinery today. There is any amount of money in excess of the machinery available. What limits enterprise of that kind is the productive capacity of the machinery industries. We all know of the familiar case of the textile machinery industry. Therefore, there is very little substance in that argument. In addition, the truth is that the people who make the active decisions in industry today are the managing directors of companies, the other directors, and also the general managers. To a considerable extent, if the directors can show a large profit for their company, it does not matter a great deal to them if the Treasury intervenes between them and the stockholder. Therefore, I defend this tax as a suitable tax in the conditions of 1947, and I defend it further as a notable part of the Government's general policy of counter-inflation in this year's Budget.