Clause 24. — (Rate of the profits tax.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 11th June 1947.

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Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North 12:00 am, 11th June 1947

The hon. Member for Chippenham (Mr. Eccles) seemed to have some quaint ideas as to what he regards as "sources of income," and he has been referring to ordinary shares as a source of income. Whatever may be said about ordinary shares and the money invested in the ordinary shares of companies for the purpose of capitalisation, in the sense in which we are discussing them here today we are discussing them rather as a mechanism of distribution than as a source of income. The source of income of a company, after the initial capitalisation, surely lies in the hands of the management and technicians and the workpeople inside the factories themselves, and the Chancellor made it clear from the outset that he had two reasons for the initiation of this tax.

First, he was disturbed, as anybody who has studied statistics must be, by what is described as the inflationary tendency, and secondly, he was concerned with securing the maximum stimulus in order to get companies to plough back their profits into their businesses for purposes of capitalisation. My only doubt about the existing situation is whether, in fact, this proposal will be enough to achieve the purpose which the Chancellor originally set out to achieve. From certain speeches made from the Opposition Benches on 23rd April last, in the Debate on the Budget Resolutions, one would gather that the initiation of this tax was going to have an extremely bad and most depressing effect upon industry generally. The hon. Member for Chippenham talked at some length on the former occasion about the effect on small businesses. I note that today he has dropped that point from his armoury. What are the facts? If one looks at the financial newspapers—and I am referring now to the "Investors' Chronicle," which, after all, does record, broadly speaking, the activities of the investing class—one wonders what has taken place since 23rd April, when the prophets of gloom opposite were saying that this would have a depressing effect on industry. The "Investors' Chronicle," on page 982, said: May was a good month for most sections of the Stock Exchange. Indeed, for industrial equities it was a banner month, to judge from our Industrial Share Index. For this Index last month not only wrote off the fuel crisis losses; it reached a higher level than that established at the end of January, before the crisis. These are not the signs of depression, and they completely belie some of the gloom and despondency which has emanated from the benches opposite for purely party political purposes. I revert to my original contention. I expressed doubt as to the sufficiency of the tax. Since the Debate on the Budget Resolutions, when we were discussing the Profits Tax, other company figures have been issued. I hold here a copy of the issue of the "Investors' Chronicle" for 7th June. It contains a table called "Industrial Annual Results Summarised." I find that the ordinary dividend paid by Messrs. Allied Industrial Services has gone up from 36⅔ per cent. to 50 per cent.; that British Thermostat ordinary dividend has gone up from 18½ per cent. to 23½ per cent. The Leicestershire colliery and pipe company's ordinary dividend has doubled itself, having gone up from 7½ to 15 per cent. for last year. There are many other examples. One is Oddennino's Hotel and Restaurant, whose dividend has also doubled itself by going up from 10 per cent. to 20 per cent.