I beg to move, "That the Clause be read a Second time."

During the watches of the night last week my right hon. Friend the junior Member for the City of London (Mr. Assheton) urged upon the Chancellor of the exchequer the importance of recognising the converse of the proposition which he was putting forward in regard to bonus shares—that if it was wrong that the capital of a company should be watered, equally it was wrong that it should be dehydrated. That was, in effect, what he was saying. He was urging that the nominal capital of a company should approximate to its real capital. The right hon. Gentleman the Chancellor of the Exchequer very wisely refused to answer that, because there was no answer, and equally wisely arranged that that discussion should take place in the small hours of the morning so that it could not be reported. The Chancellor has laid down, in general, that bonus shares are immoral, but can be allowed on payment of 10 per cent. If he maintains that, that to inflate capital by bonus shares must be immoral, he must hold that to reduce capital must be highly moral, because it would have the effect of increasing the nominal rate of dividend. Both those propositions are equally nonsense, as he knows, I have no doubt, himself. What we say is that the nominal capital of a company should be the true capital; that is to say, that it should represent the real assets employed in that particular business.

11.15 p.m.

Many companies in the past have had to write down their capital and I have no doubt in the future many will have to do so. It is impossible for the present inflation to go on for ever, but, even with it going on, very heavy losses will no doubt happen, because of shortages of raw materials and so on. In addition, changes in our economy are bound to cause certain companies at certain times to go down, just as they cause others to go up. But the whirligig of time does bring its revenges, and often a company which has gone through difficult times is restored to prosperity. What this new Clause seeks to do is this—if a company has had to write down its capital in a difficult period, if and when it is restored to prosperity and writes its capital back, it should not have to pay a 10 per cent. tax for so doing. It is obviously impossible in the case of such a company to argue that the real capital has never been there—it has been saved twice over.

Take the case of a company like Vickers —20 years ago it wrote down the ordinary shares to 6s. 8d. and then some time before the war wrote them up from 6s. 8d. to 10s., where they now remain. Of the capital which had originally been put in, a lot was lost after the last war, but in the 20 years since a conservative policy was followed and there is no doubt at all that the real assets employed in the business now are very much greater than the capital would be if written back to £1 for each ordinary share. This Bill lays down that where you have a company which has written down its capital, and the capital is first saved and then lost and then saved over again, it still has to pay a tax of 10 per cent. to put it back to a level which represents no more than the truth. We clearly recognise that what we are proposing is only a mitigation of the evil the Chancellor of the Exchequer has wrought and quite a small one, but it is a certain mitigation and goes some way towards justice. I therefore commend it to hon. Members.