Clause 16. — (Increase in Initial Allowances, etc., in Respect of Machinery or Plant.)

Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 23 June 1949.

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Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden 12:00, 23 June 1949

I beg to move, in page 8, line 25, at the end, to insert: (2) Where on or after the sixth day of April, nineteen hundred and forty-seven, but before the sixth day of April, nineteen hundred and forty-nine, a person carrying on a trade has incurred any capital expenditure on the provision of machinery or plant for the purposes of the trade he shall be treated for the purposes of subsection (1) of this section as having incurred on the sixth day of April, nineteen hundred and forty-nine, capital expenditure on the provision of that machinery or plant equal to the amount of that expenditure and there shall be made to him an initial allowance equal to two-fifths of the expenditure less any initial allowance already made to him under subsection (1) of section fifteen of the Income Tax Act, 1945, and any annual allowances made to him under Rule 6 of the Rules applicable to Cases I and II of Schedule D for any year of assessment before the year ended fifth April, nineteen hundred and fifty-one. I must apologise for being obliged to discuss some rather serious economic arguments on this Amendment. Listening to the Debate, and especially to the speech of the Economic Secretary to the Treasury, I imagined myself at Hyde Park Corner, listening to a stump orator giving a false picture of his opponents' political views. Fortunately, it is not my turn to give an answer, and I am sure you would rule me out of Order, Mr. Mathers, if I were to try to do so now.

The rather serious arguments I wish to advance deal with what are known as the wear-and-tear allowance for industry. This Clause increases the initial allowance for wear and tear, or depreciation, from 20 to 40 per cent. To that extent we are grateful to the Chancellor of the Exchequer for making a concession in this matter, but, as the Financial Secretary has stated, this is no gift to industry; it is simply an advance of money which is taken back at a later date; and to the extent that it is an advance of money it helps a certain number of companies for an intermediate period provided they are large enough and well enough off to have the capital to take advantage of the offer—that is, to buy their machinery from undistributed profits.

But the only circumstance, as I read this concession, in which an industry or company gets any definite advantage is when there is by any chance a reduction in direct taxation in the intervening period during which the allowances run. The chances of getting a reduction in taxation, judging by the speeches of the Economic Secretary and the Financial Secretary hitherto, are absolutely nil, and I am quite certain that the speeches made by Government spokesmen today, in direct insult to the capital of this country, and the companies and industries of this country, are not going to create any confidence in industry at all. I am convinced, therefore, that we cannot in any way rely on this Government's producing any reduction in direct taxation to help legitimate and honourable companies with the task which is absolutely vital to our competitive power—that is, of improving their machinery and thereby helping the workers a great deal more than the capitalists, because no worker can do proper work unless he has the proper tools, and no company can compete in the markets of the world with British products unless the equipment be absolutely up to date.

The concession which the Chancellor has made in the form of increasing the initial allowance and letting it run over a certain period, and then get it back, does not, unfortunately, help small industries. Nor does it help with the major problem of industry, which is, that the law does not keep pace with the rise in the cost of living—that is to say, the cost of replacing machinery, which now is, according to all the most expert figures I have been able to obtain from the most reliable sources, something like three times up on what it was in 1948. Businesses at the same time have to meet the extra cost which is necessary in the replacement of capital out of their own resources, which are themselves taxed. I have already given some indication of the importance of improving our competitive power and of improving working conditions by establishing machinery. I will go further, and say that in moving this Amendment, in moving subsequent Amendments later, and in moving a new Clause later, as we hope to do, our sole idea is to make the productive industry of this country better able to compete by having better machinery.

There is a sort of idea, according to the speech of the Economic Secretary today, that the making of profit by industry is immoral. I should like to warn the Government and their supporters that the State cannot escape responsibility for this subject, and for the possible modernisation of the plant of industry itself. If they doubt my word, I shall only draw attention to a big industry—the cotton trade—which has been unable, out of its own resources, to modernise its machinery, with the result that the State, in the shape of the taxpayer, in the shape of hon. Members opposite, has had to come to the relief of the spinning section of the cotton industry already, and has had to provide out of taxes a State subsidy. So the State is going to get it put upon its shoulders and the taxpayer has to have the burden of making it possible for an industry—an honourable industry—to make provision for its own re-equipment out of its own resources and its own undistributed profits. The weaving section of the cotton industry has not yet had a subsidy, but I can well believe that unless it is able out of its own resources to provide for itself, we shall have to help it to enable the cotton industry to compete in the markets of the world. I hope, therefore, I have made the case for moving an Amendment of this sort.

8.15 p.m.

The only other general matter I want to refer to at the outset is that the Chancellor has himself set up an inquiry. This inquiry we welcome, and I trust that this inquiry will receive evidence from all those in industry who are acquainted with this subject. I do not mind saying that it will receive a variety of advice, because there are a great many suggestions as to how this depreciation allowance should be improved, and, in particular, how a special allowance might possibly be provided to help industry. I should like to say that I hope that this inquiry will report without undue delay, and that, as a result of it, the Chancellor will be able to take some further action at a future date if this Government still remain in power and he still remains Chancellor.

Before I come to deal with the detail of the Amendment itself, I just want to dispose of the question of the supposed piled up profits which exist in industry itself and which, it is said, makes it unnecessary for this Committee to take any interest in this question of allowing for depreciation. My figures show me that between 1938 and 1948 rents, dividends and interest increased by roughly 33 per cent., and that wages and salaries increased over that period by 105 per cent. After making deduction for tax, I work out that wages, the workers' share, have gone up from some 31 per cent. in 1938 to 40 per cent. in 1948. Of course, I am not saying anything to suggest that that is anything but a good thing; but I am simply drawing attention to these figures. Profits, interest and rents, on the other hand, have gone down from 34 per cent. to 28 per cent.

If we look at these matters fairly and squarely, and not in the extremely unfair way the Chancellor did on Second Reading in answer to my speech, I think we see that the Chancellor, at Blackpool, was a great deal more to the point on the profits of industry than he was on the Second Reading of the Finance Bill; because at Blackpool, returning to his senses—at least to a certain extent—he said that profits had been a great deal lower in 1948 than in 1947. I can assure the Chancellor that it is likely that these industrial profits will be lower this year. It is true to say also that distributed profits since 1938 have gone up by 45 per cent., but the cost of consumer goods has gone up by 80 per cent., and the wage bill has gone up by 130 per cent.

I do not want to revert to the Chancellor's speech on the Second Reading of the Finance Bill, because it has already been pointed out that, with extreme unfairness, he did not make any statement indicating the amount of undistributed profits which are taken in taxation. The sum of no less than £670 million is taken by him in taxation. This leaves a comparatively small figure, which, I am assured by all those who have taken an interest in this subject in industry, is insufficient for dealing properly with depreciation, judging the cost of replacement machinery now to be three times what it was before the war.

Photo of Mr Ronald Chamberlain Mr Ronald Chamberlain , Lambeth Norwood

While agreeing the figure, may I ask the right hon. Gentleman if he will agree that free reserves after taxation are more than three times what they were before the war?

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

I have no figure for that. I am merely giving the Committee an indication of the figures I have available to me here.

Photo of Mr Ronald Chamberlain Mr Ronald Chamberlain , Lambeth Norwood

They are officially recorded.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

That brings me to the details of the Amendment. We suggest in this Amendment, which is a very modest one, that the concession shall go back for a two-year period. That might mean that this concession, if made by the Government, would, in fact, taking into account a firm which had already taken advantage of the initial allowance, and of the first year's allowance, and of the second year's allowance, mean a very small additional cost for individual firms that had taken advantage of the depreciation allowances already existing. The Amendment, therefore, is not dealing with the whole major issue of depreciation. We hope to raise that later, when we come to our proposed new Clause suggesting the provision of some special allowances for depreciation. This Amendment simply extends the Chancellor's concession, and makes it refer back for a two-years' period.

We do not think, subject to any information which may be given us by the Government, that this is an unreasonable suggestion. Indeed, we go further and say that, not only is it not unreasonable but it is a more moral solution than the Chancellor's of a very difficult problem, because it does help to give this concession on depreciation allowances to firms which looked ahead and dealt with the problem of replacement earlier than some firms which will now be able to get advantage from the Chancellor's own concession, which only dates from a later period. I move this Amendment on the understanding that we shall not only have a good deal to say on depreciation later on further Amendments, but that on the proposed new Clauses we shall hope to ventilate the subject of a special allowance.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

This Clause is a direct result of the inflationary tendency which has existed in this country over the past few years. We are now reaping the dubious benefit of the period of "Daltonian" prosperity, and of course the previous inflationary effect of the war while it was in progress. We therefore find that, whereas firms have only been allowed to accumulate out of untaxed profits depreciation allowances up to the original cost of the old asset, they are now faced with bills considerably in excess of those repairs for the purchase of replacement machinery. It appears to be quite clear that the community as a whole has been living, to a large extent, on the capital of industry. We have been draining away in current taxation certain of the capital of industry which should have been retained by industry for the purpose of re-equipping itself at the new and higher post-war prices.

The problem does not, of course, rest with plant and machinery alone. This same eroding process has been going on in regard to stocks of commodities and work in progress, where stocks have acquired higher monetary values as a result of the purely paper increase in values which has been taxed. Firms now faced with the need to replace those stocks at the new high prices are faced with a real difficulty in finding the money. What we have been doing through the operation of a taxation system designed for stable values of the £ is draining away from industry a very important part of its lifeblood, and mainly its capital.

As the magnitude of this problem became apparent to everybody, so a number of solutions were suggested, but it is significant that not one solution has been found to provide a satisfactory formula for this very complicated matter. I will not weary the Committee with all the various suggestions which have been made. One formula which seemed to commend itself to a number of industries was put forward by the Federation of British Industries, who advocated the granting of an additional depreciation allowance for the years 1945 and 1946. Of course, such a solution, apart from the immense amount of work it would necessitate, would prove of some advantage to those firms which had largely written down their assets before the datum years of 1945 and 1946.

It seems that, in fact, there really is no solution for compensating firms for past taxation which has been taken from them. It therefore looks as though we shall not be able to get much further than the ad hoc and simple solution implemented by the Chancellor in this Clause. It is a relief, certainly, and industry is naturally grateful for all relief at the present time. But it is not a very great relief, for the simple reason that it represents no more than a tax-free loan for a period of several years. While the relief comes now, a greater amount of tax will have to be paid later unless the standard rate of Income Tax is reduced, so that in the end industry will have to bear the same burden as it has been bearing. I believe that, while this Clause does afford an immediate relief of some consequence, the relief at present envisaged is of limited value since it provides relief only to those firms who can finance their replacements out of profits. I know certain hon. Gentlemen opposite, including particularly the hon. Member for Norwood (Mr. Chamberlain)—who seems to have come into collision with a balance sheet, or something like that—suffer from the delusion that all companies make very large profits.

Photo of Mr Ronald Chamberlain Mr Ronald Chamberlain , Lambeth Norwood

I said no such thing. I said that the general run of profits is extremely high and excessive. I never said that all firms made big profits. Let us get it right.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

In view of his explanation, the hon. Member will doubtless subscribe to my contention that there are many firms, most of them small firms, who will find this relief of comparatively little value, since in the period of declining trade activity in which we find ourselves today sufficiently large profits will not necessarily be earned to enable full advantage to be taken of this relief. It is a relief limited only to those firms which can afford it. It seems a strange way indeed of giving relief. This Amendment seeks to rectify that situation to a certain extent, because a far bigger proportion of firms were making reasonable profits in the two preceding years, so that if this retrospectively acting Amendment were accepted they would get a benefit which will probably be denied to them if the Clause goes through in its present form.

The relief afforded by the Clause in its present form is a relief to the slothful. It is very tiresome to hear from, for example, the Lord President of the Council that enterprise must be really enterprising and then to come here and find a Clause designed to give relief not to the enterprising but to the slothful. This Clause puts a premium on enterprise; it gives reward to people who sat tight and did nothing, who ignored the Government's call, nay, the nation's call, to re-equip and modernise, who said "It is expensive. We will go slow. We will not do it now." These firms get all the benefits as a result of this Clause, whereas the keen and efficient firms, the firms we Conservatives believe in, which we regard as the best examples of the private enterprise system, are as one would expect from a Socialist Government, heavily penalised. This Amendment seeks to rectify that injustice, and I sincerely hope that the Government will see their way to accept it.

8.30 p.m.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

I am sorry to say that my right hon. and learned Friend feels he cannot accept this proposal, which would further extend the relief the Bill affords for the purposes of replacement of machinery. The purpose of the relief is to come to the aid of companies in order to enable them to replace their machinery now and in the future. Putting the matter quite broadly, we do not see that retrospective relief, such as this Amendment would give to companies, really contributes much by way of incentive for the purpose of replacing machinery now and in the future. That is past relief, and what is required, and what is in fact given by Clause 16 as it stands, is a double initial allowance now and in the future.

The hon. Member for Altrincham (Mr. Erroll) said that it would only operate in favour of the slothful who had postponed replacement. He has not sufficiently taken into account one set of circumstances. The right hon. Member for Saffron Walden (Mr. R. A. Butler) also made the point that only large companies would be aided by this, because they were the only ones which could afford to pay the higher price of machinery now in comparison with 1938. Both have failed to take into account that the company which desires now to buy new machinery in order to replace old machinery will have been able to write off over the years the expenses of the machinery which it is replacing.

I will give an example. Suppose that in 1938 a company bought a machine for £1,000 and desires to replace it in 1948 at a cost of £2,000. Under the provisions of the Bill, the company gets an initial allowance of 40 per cent. against the new machine. It will also get in the first year in which it replaces the machine five-fourths multiplied by the amount of the fraction regarded as reasonable wear and tear. If that is taken at 10 per cent., the result is that in the first year it replaces the new machine it gets 40 per cent. plus 10 per cent., so that it gets an allowance of 50 per cent. against the cost of the new machine. In other words, it replaces the new machine at £2,000, and by way of the initial allowance and the first annual allowance it gets £1,000, or 50 per cent. of the cost.

But not only that. It will have been writing off over the years the cost of the machine it bought in 1938. Suppose that it bought that machine in 1938 at £1,000. It will have written off and placed to reserve, by being able to write off the cost, £1,000, so that when it comes to replace the machine with the £1,000 it has placed to reserve by writing off the allowances it has previously enjoyed, plus the new increased initial allowance and the first annual allowance, it will have the £2,000 necessary to replace the new machine at the increased cost. That is the position. Of course, I am taking an extremely simple example, which obviously is not characteristic of all cases.

What I am seeking to establish is that both Members have failed to take into account the fact that the company will have placed to reserve what it has been able to write off against the cost of the old machine.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

The Solicitor-General's argument is quite fallacious, in that it supposes that the cost to replace a machine has doubled since 1938. Every figure I have had from companies with which I have been in touch shows the cost has increased three times. That makes the figure in the case mentioned £3,000. Will the Solicitor-General address himself to that?

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

If the company has to pay £3,000, the initial allowance and the first year's allowance come to £1,500, and if the company has £1,000 against the old machine, it will have to find only £500. It is not correct, therefore, to say that only the big companies are advantaged, companies which can afford to pay large sums for machinery. There is a gap, but it is a much smaller gap than Members opposite have seemed to indicate. I wanted to make that position clear in answer to the first point.

What I have said is that we want to enable companies to replace their machinery now, and in those circumstances we do not think that it will greatly assist them for this purpose to give them retrospective allowances referable to an earlier period. Quite apart from that, the extension proposed by the Amendment to be given to companies under Clause 16 would be an extremely expensive one. In point of fact, the drafting of the Amendment is a little ambiguous. It is not clear whether the new allowance is to be two-fifths of the excess of the expenditure over the allowances already given, or whether it is to be calculated by first taking two-fifths of the expenditure and then deducting from that the allowance already given. That is an ambiguity in the drafting but it makes a difference in the expense.

On the first construction of the Amendment the cost would be £140 million in the year 1950–51 and £30 million in the year 1951–52. On the alternative construction it would still be expensive—£50 million in 1950–51 and £10 million in 1951–52. That has to be taken into account with the cost of the original concession, which is granted by Clause 16 as it already stands, for an increase of initial allowances from 20 per cent. to 40 per cent., which in the year 1950–51 will be £40 million and in 1951–52, £75 million. For those reasons it would be extremely expensive to make this further concession, and for the reason which I gave, that it is unnecessary when one takes into account the full circumstances of the result of writing off the allowances in respect of the original and new machinery, we feel that we cannot go any further than the concession we have made. We, therefore, ask the Committee to reject this Amendment.

There was, of course, a case of granting retrospective allowances in the Income Tax Act, 1945, which brought in initial allowances in the first place. That is no analogy to the present case, because the then Chancellor of the Exchequer had already previously promised that he would as from a post-war date introduce a system of initial allowance, and that is why, when he came to introduce it, he had to make it retrospective to a date two years before the Income Tax Act, 1945, became operative. For those reasons we feel that a case has not been made out for this substantial, and, indeed, extremely expensive concession.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

What is the alternative cost on the different readings of the wording of the Amendment? I think the right hon. and learned Gentleman only gave one.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

I gave both but I will give them again. The first reading is two-fifths of the excess of the expenditure over the allowances already given. The other is to take two-fifths of the expenditure deduct the allowances already given. The cost of the proposed extension of the relief on the first construction would be about £140 million in 1950–51 and about £30 million in 1951–52, and on the alternative construction it would be £50 million in 1950–51 and £10 million in the year 1951–52. Hon. Gentlemen opposite will agree that this is a substantial increase in expenditure, which my right hon. and learned Friend feels he cannot at the moment accept.

The right hon. Member for Saffron Walden who moved the Amendment, intimated, although he began his speech with more general references to the situation, that he and his hon. Friends desire a full discussion on the question of these initial allowances at a later stage of the Bill when we come to the new Clauses. I have, therefore, limited myself in the answer to the arguments he put in his speech. I hope that the Committee will agree with us that this Amendment is not one that we should accept.

Photo of Sir Arnold Gridley Sir Arnold Gridley , Stockport

I tried to follow the argument put forward by the Solicitor-General, but I think that he is perhaps not quite so familiar with what is going on in the way of replacing industrial machinery as I am myself, because in the last three years I have been very heavily engaged in that process. The argument which he put forward and the figures which he gave, were, I assume, based upon the assumption that if new machines are bought those which they are intended to replace are entirely scrapped or written off. That is not necessarily what is going on. Perhaps I may give a concrete case. Only last week I was considering the scrapping of a number of tools in a certain factory and replacing them with new—

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

Perhaps it would assist the hon. Gentleman in his argument if I venture to put in something now which I left out. He has mentioned the possibility of machinery not being scrapped. If it is scrapped, of course, and the trader has not written off the full cost of the machine, he is entitled to a balancing allowance. If he sells it or disposes of it in some way or other for a price, then he has not only the amount which he has been able to write off but the price of the machine which he has disposed of. If the price of that machine exceeds the unwritten-off value of the machine, then he has to pay a balancing charge, a tax upon the balance. That is a charge represented by the excess of the price which he gets over the unwritten-off value of the machine. I do not think that fact makes much difference to the principle of the argument which I was advancing.

Photo of Sir Arnold Gridley Sir Arnold Gridley , Stockport

Perhaps I may continue the explanation which I was trying to make. Frequently it is a case of not scrapping the machine but putting it on one side as no longer useful for the particular purpose. In our drive for exports, we have to put down new machinery in order to develop new products. That position is not taken care of under any of the points which have been made by the Solicitor-General. As one who has not been idle in this matter, but in 1946 and in 1947 incurred a great deal of expenditure in the process, which is still going on, I feel that it is indeed a hardship if firms with whom I may find myself in competition are to get an advantage because they have been lazy in the process of modernising compared with myself, who have endeavoured to carry out the exhortations of the Chancellor of the Exchequer that industry should bring its equipment up to date. I think there is a case here which needs reconsideration.

The figure of £150 million or £50 million as the cost of the concession certainly seems to be staggering and I do not understand how it can possibly have been arrived at. I am sure that the example which I have given is being repeated in many of our industrial establishments, which are putting aside for the time being machines whose useful life is not yet finished but are not fitted at the present time for the particular purpose of producing products which one has to sell in these times, if one is to do any business at all. This situation always comes after every great war. New industries develop, or have to be developed. We should be in a very sorry state in this country now if new industries had not been discovered as the result of the first world war and had not been quickly developed in the intervening period. The same thing is happening now.

8.45 p.m.

If we are to be in a position to compete with industries overseas, British industrialists must not be handicapped but must be given every possible relief to enable them to produce as cheaply as possible. We have appreciated the help which the Chancellor has given us in various ways, but it was a disappointment to industry when this concession was first made to find that it was only a temporary loan. This writing off of 40 per cent. initial allowance in the first year does not mean that we shall get more than 100 per cent. over a period of years. It comes to the same thing in the long run, but we get immediate relief now. The advantage of that is that it should encourage firms who have to face expenditure on capital goods to spend that money and so increase the trade of the country and put us in a position to develop our export trade with greater hope of competing with our opposite numbers overseas.

I hope that the Solicitor-General will agree that further consideration of this is justified by the argument I have submitted, that it is a question not necessarily of writing off machine tools which are out of date but of replacing a great number which are not worn out with more modern plant or special-purpose machines required for the special purposes of present circumstances.

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

I was glad to see the Solicitor-General at the Box just now as an indication that we are moving into a calmer and more courteous period of treatment from the Government Front Bench compared with the truculent orations to which we were subjected recently. In spite of that, I was rather shocked at the opening sentence of the Solicitor-General. I hope he will not take it amiss if I say why. It is frequently the case when the Chancellor is absent from the Chamber that the Minister who deputises tells us that his right hon. and learned Friend regrets that he is unable to accept an Amendment, having, of course, considered the situation in the light of the Debate. It is rather a new departure to be told that his right hon. and learned Friend is unable to accept an Amendment when his right hon. and learned Friend left for Brussels in the small hours of this morning.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

That is not exactly what I meant to say. Naturally, my right hon. and learned Friend had carefully considered the proposal as soon as it was put on the Order Paper. He had carefully considered it with his expert advisers and had come to the provisional conclusion, which is subject to further arguments which may be advanced in the Debate. I meant to imply by what I said that I did not feel from anything which had been said in the Debate up to that moment, that there was sufficient reason for a change in the provisional decision to which my right hon. and learned Friend had come.

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

I am relieved to hear the Solicitor-General say that the decision was provisional. He did not make that plain before. At the beginning and the end of his speech he said that his right hon. and learned Friend could not accept the Amendment. I am glad to hear that there is a certain flexibility in this matter and that the arguments which have been put have not merely fallen on deaf ears. I am glad to hear the Solicitor-General say that because there is a matter which requires further consideration between now and the Report stage.

There is a certain amount of luck in this matter. It is possible that firms which are neither slothful nor tardy in their arrangements received their plant and machinery on the right side of the line subsequent to 6th April, 1949, and will get the qualification although they may have put in the order at precisely the same moment as firms which got a quicker delivery and will, therefore, be disqualified. This is a somewhat arbitrary arrangement and the right hon. and learned Gentleman should look into this matter again for two reasons. The first, I admit, is not one of great strength, but it is worth while putting across to him, that in the present financial year under review in this Bill there will be no cost to the Exchequer. Incidentally the sums which the right hon. and learned Gentleman mentioned for 1950–51 and 1951–52 seemed to me to be excessive and I was surprised at the figures he gave.

Would the Solicitor-General apply his mind to the real problem with which we are faced? It was well put by my hon. Friend the Member for Stockport (Sir A. Gridley). Surely the main consideration which should weigh with the Government is the heavy drain on industrial capital involved at a time when all of us know that there has to be a tremendous effort made, not only to capture fresh foreign markets, but to hold the markets which we have at this moment, and modernisation and re-equipment is a number one priority in that struggle. I hope that the Solicitor-General may be persuaded to say that, when his right hon. and learned Friend returns from the important conference which he is attending, he will represent to him the strong opinions which have been put. I do not think he would lose anything at all if he would say that, and on the Report stage tell us if anything can be done.

Photo of Sir George Benson Sir George Benson , Chesterfield

If the Solicitor-General has any desire that this Amendment should be accepted by the Chancellor, I hope he will not call the attention of his right hon. and learned Friend to the Debate we have had so far, because nothing I have heard from the other side suggests any persuasive effect upon the Chancellor. To begin with, hon. Gentlemen opposite have not made up their minds why they want this Amendment. Do they want it as a reward to the firms that put in plant two years ago or do they want it as an incentive? They ought to make up their minds. Obviously this Amendment cannot be an incentive to put in plant as it only refers to plant already put in during the last two years. What effect could it have, except to hand over a certain amount of tax relief? Does the hon. and gallant Member wish to say something?

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

I was merely remarking that it was discriminatory as between one firm and another.

Photo of Sir George Benson Sir George Benson , Chesterfield

Every Act we pass is discriminatory between the people affected by it and the people who are not affected by it. In new legislation it is completely impossible to make retrospective every Amendment which gives a concession for future activities. If it is discriminatory, why stop at two years? Why not go back over the last 15?

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

I am sorry to interrupt the hon. Gentleman again but I am trying to follow his argument. If he objects to these reliefs being made retrospective, has he the same objection to taxation which is made retrospective?

Photo of Sir George Benson Sir George Benson , Chesterfield

Taxation is never made retrospective except after warning has been given on Surtax avoidance, and the hon. and gallant Gentleman knows it. Even then it is seldom made retrospective. It ought to be, but it is not. Here it is a question of giving a concession, and the purpose for which the Chancellor gave this concession was to facilitate future installations of machinery, not to reward past installations. The hon. Member for Stockport (Sir A. Gridley) referred to the estimate by the Solicitor-General of £140 million as astonishingly high. What is being asked for is two years' concessions, or approximately double the extent of the cost of the Clause, which is £70 million as stated by the Chancellor himself.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

The Solicitor-General's reading of the Amendment is not correct in relation to the £140 million. It is correct in relation to the £50 million; that was the intention of the Amendment.

Photo of Sir George Benson Sir George Benson , Chesterfield

The reason why this concession is so very high is that, despite what the right hon. Member for Saffron Walden (Mr. R. A. Butler) has said, the amount of new plant put in under the Labour Government is between two and three times as much—in volume, not in value—as under the Tory Government before the war. That is why these concessions are so costly. I am, in fact, sceptical whether the original concession given by the Chancellor is really necessary. Never in the history of this country has more new plant been put into industry than at present. Industry is extremely liquid. Certain firms are tight, but industry has never been more liquid financially than it is today. For evidence of this we need only look at the bank reserves, a very large amount of which are held by industrial firms. There are now something like £24,000 million of gilt-edged securities as compared with £7,000 million before the war. A very large part of that figure is reserves piled up by industrial companies. The financial position of industry is more liquid than ever before, and firms are putting in between two and three times as much plant as before the war.

The right hon. Member for Saffron Walden said that machinery was now costing about three times as much as before the war. I am very sceptical about that. A very good measure is the cost per ton of machinery exported from this country; we are exporting very large quantities of machinery, and of every type. If the right hon. Gentleman will refer to the trade returns he will find that the cost per ton of machinery exported today is exactly double—and not a penny more—what it was in 1938. Great exaggeration is frequently made in statements about the increasing cost of plant. What may, and no doubt frequently does, happen is that plant is replaced not by identical machinery, but by far more efficient, modern and larger machinery. That does not mean that the costs of replacement are now doubled, for not only is plant being replaced but productive capacity is being expanded.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

One important factor which the hon. Gentleman omits from his comparison is the cost of installation, which is a proper part of the cost of replacement, does not appear in the export figures.

Photo of Sir George Benson Sir George Benson , Chesterfield

The cost of replacement has not gone up so greatly that it raises the price of the machine plus installation to three times what it was before.

Photo of Sir George Benson Sir George Benson , Chesterfield

If anything, the Chancellor has been over-generous. Whatever may be the position in four or five years' time, there is at present no pressing need for the concessions that have been given, and the demand that this concession should be retrospective is fantastic.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I shall attempt to deal with some of the arguments of the hon. Member for Chesterfield (Mr. Benson). Before doing so, let me reiterate the remarks of my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) that in view of what the Solicitor-General has said we feel that we are pleading this case to a sort of absentee judge who has already given his decision against us. We hope that these arguments will receive serious consideration, for there is very much more in this question than the hon. Member for Chesterfield would have the Committee believe.

9.0 p.m.

I listened to the right hon. and learned Gentleman very carefully. His point was that retrospective relief does not provide any incentive and I agree with him in that regard. He went on to talk of an example of a machine purchased in 1938 and replaced in 1948. I understood him to say that if it were replaced in 1948 the allowance would be 40 per cent., plus an extra 10 per cent. by way of wear and tear allowance—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I thought the right hon. and learned Gentleman said 1948.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

We are asking the right hon. and learned Gentleman to take 1948 and in that case the amount would be 20 per cent. and not 40 per cent. In spite of what the hon. Member for Chesterfield (Mr. Benson) said, I think it is the experience of many of us that the figure for increased cost is between two and three times and not limited to twice the amount. The right hon. and learned Gentleman used a very favourable figure for himself when he spoke of 10 per cent., but in many cases the wear and tear allowance is not 10 per cent., nor is it the figure of which 10 per cent. is five-fourths. If I followed his argument he suggested that the 10 per cent. was five-fourths of the amount.

Leaving those figures on one side, because they do not affect cases of machinery bought in 1947–48, the next point was that this Amendment would be very expensive. In the long run it would not cost anything, because it is simply a re-arrangement of an allowance which would be made in any case. It is only bringing forward the burden in exactly the same way as the Chancellor's original proposal was a bringing forward of the burden. Although it may impose an additional burden for certain years, in the long run it would not cost the taxpayer anything, but would simply be a re-arrangement.

We were invited to give our arguments for putting the proposal forward. The first argument is to be found in the Chancellor's Budget speech in which he said: During the past year, I have received representations from many quarters as to the difficulty which industrial companies are experiencing."—[OFFCIAL REPORT, 6th April, 1949; Vol. 463, c. 2097.] In other words, he admitted that it was during the past financial year that he has been receiving representations. He decided to do something about it and fixed the date at which the relief was to take place as the date of his Budget speech. If he were satisfied that the representations made to him during the year were good and valid, one would have thought he would have made the remedy designed to meet them retrospective at least to the extent of a year. The difficulty must have been existing throughout that fiscal year and, as we suggest, during the former year. It is another case of the slothful getting the benefit and the active and enterprising not receiving a just reward for their enterprise.

When one is asked what benefit the State will get out of making a thing of this sort retrospective, the answer is that it will be the feeling on the part of people in industry that it will not be to their detriment in the future to be active and enterprising in this regard. If, as difficulties get greater, there is a feeling that further concessions will possibly be made, one will find people hanging back to find out what the Chancellor's policy is to be before embarking on expensive new enterprises of replacement. It is in order to do justice and in order that there shall be no discrimination that we desire this Amendment to be made retrospective.

The second reason is to enable the companies which have incurred this expenditure at inflated rates during the past two years to be better able to face the difficulties of the future. I gave the example during the Second Reading Debate of a company the depreciation allowances of which for tax purposes are something like one-fifth of the amount which they have to set aside in order to maintain the productive capacity of their plant. There are many cases such as that. There are many companies which, in order to re-equip themselves, to replace their plant, have had to dip into reserves which should really be maintained as free reserves simply because the level of depreciation allowed them by the Treasury in the past has not been adequate to cover the replacement cost.

Our point is to enable companies which have not been treated fairly from this point of view in the past to be better able to face the difficulties with which they may be confronted in the future. The difficulty in which one is left after hearing the Government's answer on this sort of matter, particularly after hearing the sort of remarks which the hon. Member for Chesterfield (Mr. Benson) has just addressed to us, is that we do not quite know where we are, so far as the Government are concerned, on the question of profits and on the question of the resources of industry.

We are told by the Chancellor that he is not at all certain that profits are correctly assessed for tax purposes. He has said that the technical issues which arise in—

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

I hardly think that the hon. and learned Member's remarks are appropriate or relevant to this Amendment.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I quite appreciate that you ruled, Major Milner, or it was the desire of the Committee, to keep the Debate on the Amendments within fairly narrow limits in order that at a later stage we might have a wider Debate on the general question of depreciation should a certain new Clause be selected. The purpose of my remarks is to try to show to the Committee that this concession should be made retrospective for two years because the level of the profits made by companies during the past two years has not been adequate to enable them, taxed on the basis upon which they have been taxed, to make adequate provision for this sort of replacement. That is the point I wished to make. Having made that observation by way of explanation to you, Major Milner, I will not develop it further.

We are left in a state of complete uncertainty as to the Government's views on profits. One moment they are "frightfully high"; the next moment they are not, because we have to have this inquiry as to whether they had been correctly computed. The Economic Secretary said yesterday that the profits of the match industry were not very high and that they needed the assistance proposed. Then he indicated to us that their profits were high after all. We do not know where we are or what is the attitude of the Government in this matter. [An HON. MEMBER: "They do not know either."] I suspect that they do not know either.

Leaving out of account the question of profits, the second matter in considering whether this suggestion should be made retrospective is, have depreciation reserves been adequate; during the past two years were adequate depreciation reserves set aside? On that matter I would remind the Committee of an article which I am sure all Members, particularly the hon. Member for Chesterfield, studied and analysed with great care. It was by Mr. Chambers in "Lloyds Bank Review" of January, 1949. He was dealing with the question of depreciation reserves for 1947, which is one of the years embraced by this Amendment. I will not weary the Committee with all the details of the argument, but he comes to the conclusion that owing to replacement costs the £600 million set aside for depreciation should in fact have been £1,000 million. The total reserves set aside having been insufficient owing to the unfair method of computing profits, it is really essential that the funds which have been drawn upon during the past two years should have this extra allowance made to replenish them.

Photo of Mr R.A. Butler Mr R.A. Butler , Saffron Walden

I do not think it would be possible to adduce more telling arguments than have already been adduced by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd). We do not propose to press this Amendment to a Division. We are very keen to discuss the next Amendment on the building question. There has been some doubt expressed by the learned Solicitor-General as to the exact meaning of the Amendment. I should like to explain that its effect was to give for capital expenditure incurred in 1947 the 40 per cent. allowance, less any initial and annual allowances already received. Thus if a business expended, for example, £100 in 1947 they have already received an initial allowance of 20 per cent. plus the first year's allowance of say 10 per cent. and a second year's allowance of 7 per cent. making a total of 37 per cent. The object of the Amendment would be to bring it up to 40 per cent.

I cannot believe that the cost can be so great as has been computed by the Treasury, but in view of the doubt about the cost and the inquiry sitting on this matter, we think it wiser to leave this question, at any rate, until the Chancellor's return, and perhaps raise the matter again on the Report stage. In those circumstances we shall not press it.

Amendment negatived.

Photo of Mr Osbert Peake Mr Osbert Peake , Leeds North

I beg to move, in page 8, line 25, at the end, to insert: (2) In relation to expenditure incurred on or after the sixth day of April, nineteen hundred and forty-nine, section one of the Income Tax Act, 1945 (which provides for initial allowances in the case of expenditure on the provision of industrial buildings or structures), shall have effect as if for the words 'equal to one-tenth thereof' there were substituted the words equal to one-fifth thereof.' The purpose of this Amendment is quite clear from the wording. The Income Tax Act, 1945, with which I had something to do when it was passing through this House, provided for the 20 per cent. initial allowance on industrial plant and machinery, which of course was coupled with the annual wear-and-tear allowance and final balancing allowance or charge in order to clear the matter up at the end of the life of the industrial plant and machinery; but coupled with that was a corresponding proposal, a novel proposal at the time, for an initial allowance upon industrial buildings. The initial allowance upon industrial buildings was 10 per cent., that is to say half the rate of the initial allowance upon industrial plant and machinery, and the annual allowance upon industrial buildings was at the rate of 2 per cent. per annum giving a notional life of 45 years on the industrial building.

The Chancellor has conceded the point that the initial allowance for plant and machinery is not adequate owing to the rise in costs, and he is doubling the initial allowance upon plant and machinery. What we suggest in this Amendment is that he should do exactly the same thing in respect of the industrial buildings which are essential for the housing of the plant and machinery and make an initial allowance upon industrial buildings of 20 per cent. in place of the 10 per cent. provided by the Act of 1945.

The Government, of course, have complete control, owing to the licensing system, over the erection of all industrial buildings; and it cannot be supposed that any extravagant or unnecessary industrial buildings will be erected, at any rate in the near future. It would therefore seem logical, and it would maintain the balance between plant on the one hand and buildings on the other which was the considered basis of the Act of 1945, if the Government would accept the Amendment to double the initial allowance upon industrial buildings in the same way as they are doubling the initial allowance upon industrial plant and machinery.

9.15 p.m.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

The Government have a curious reluctance to grant the same measure of relief or subsidy to industrial building as they propose to grant from time to time to plant and machinery. We had a similar trouble when we considered the Cotton Spinning (Re-equipment Subsidy) Bill. Subsidy was to be granted to plant and machinery purchased under the terms of that Bill, but no subsidy was to be permitted in respect of new buildings required to house the machinery. Surely this position can only arise through the phrase "plant and machinery" becoming a catch-phrase. A phrase which is constantly used is that "industry requires plant and machinery." Therefore, we find written into this Bill a relief in respect of new plant and machinery.

But new plant and machinery very often require new industrial buildings to house them. Surely it is right in logic to grant a proportionate relief to any new building which may be required for any re-equipment programme. That is especially important where the fabric of the building makes a definite contribution towards the functioning of the plant inside it. The most obvious example is that type of industrial building the walls of which support the rails of an overhead crane, the crane being an essential part of the equipment required to operate the plant inside the premises.

The industrial building, however, is not to qualify for relief: only the machinery inside the building will qualify. Our Amendment seeks to remove the anomaly and to grant a corresponding relief to industrial building. Some people might be afraid that this would lead to a spate of unnecessary industrial building. I would remind the Committee that all industrial building is fully controlled by the Government. First, the capital necessary for the new building must be approved by the Capital Issues Committee, unless the money is found out of current income. Second, the actual physical work can only be executed when a building licence has been given. There is no danger of any run-away spate of new industrial building. Here is an opportunity for the Government to be logical and equitable in their treatment of an industry very much in need of relief and assistance today.

Photo of Mr William Hall Mr William Hall , Colne Valley

It will come as no surprise to any hon. or right hon. Gentleman opposite when I say that I must ask the Committee to reject this Amendment. As has already been pointed out, the proposal is that the initial allowance should be doubled—that is that the figure should be turned into 20 per cent. instead of 10 per cent.—for expenditure on new industrial building. The hon. Member for Altrincham and Sale (Mr. Erroll) said that there could be no real difference between plant and machinery and industrial buildings, and that the Government have been rather sticky about refusing to extend the allowance to the latter. The short answer is that there is a real difference between plant and machinery and industrial buildings.

There is at the present time not the same great need for the replacement of industrial buildings as there is for the replacement of machinery and the installment of new machinery. A further argument is that with the shortage of materials and the other overriding need for as much concentration as possible to be devoted to the provision of houses, it does appear to us unreasonable that this allowance should at the moment be given. In our view, considering the life of an industrial building, the present allowance of 10 per cent. plus 2 per cent. a year is not ungenerous and does bear some reasonable relationship to the life of buildings. There is, of course, too, the question of cost. My right hon. and learned Friend cannot lose sight of that. In the present year it would be negligible, but in the next financial year, 1950–1, the cost would be £4,500,000, and in the financial year 1951–2, £8,000,000. I hope this argument will clinch the matter for the Committee.

As the Committee knows, the system of computation of allowances for industrial buildings, with other matters, is to be considered by the committee which my right hon. and learned Friend announced when he opened his Budget. As that committee is to be set up to review the computation of net trading profits for taxation purposes, and can hardly consider those matters without considering also the particular point which is the subject of this Amendment, I hope that, the Committee will agree that now is not the time to make this change.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Will not that committee also consider the question of the replacement of machinery and plant?

Photo of Mr William Hall Mr William Hall , Colne Valley

I take it that it will be within the competence of that committee to consider all relevant matters, including the one to which the hon. and learned Gentleman has just referred; nevertheless, it should, I think, certainly consider this one, and for that reason, as well as others which, I think, are substantial, and which I have endeavoured to give quite briefly, I hope the Committee will reject this Amendment.

Photo of Mr Christopher Hollis Mr Christopher Hollis , Devizes

I really think that the right hon. Gentleman's reasons for rejecting this Amendment are even more frail and unreal than the reasons to which we are accustomed from him. We were told to begin with—and so far as it went it is true—that industrial buildings were one thing and that plant and machinery were another thing. Then we advanced from that great truism to the purely arbitrary statement, which we had to take upon his saying so, that there was no need for the replacement of buildings. He gave us no evidence whatsoever for that statement the apparent probability of which must surely be evident to everybody. But if there really is no need for replacement then, if that is absolutely true, this Amendment would at least be innocuous, because then there would be no replacement.

Then we come to the right hon. Gentleman's second reason, in which he reminded us of the profound truth that there is a shortage of building materials in this country and that it was very necessary that the greater part of those building materials should be used for the building of houses. Profoundly true; but what conceivable bearing has that upon this Amendment? My hon. Friends have pointed out that the Government already have adequate powers to be quite certain that reckless industrial building could not be indulged in in any event, whether this Amendment were passed or not. It is therefore quite irrelevant to argue whether there could be much building or little building. The argument is on whether there should be just financial terms for the building that does take place.

We then came again to the question of cost. As far as this Amendment is concerned, we must always bear in mind that right hon. Gentlemen opposite are slipping into the habit of talking as if this were absolute cost which would be lost to the Government for ever, as if the £4½ million we are talking about was to be spent entirely. In that absolute sense nothing under this Amendment, or indeed this Clause, will cost anything eventually. It is merely a question of timing. On costs, the Government already have absolute control over what building should take place, so that again we need not bear in mind any possibility of this leading to reckless industrial building, because of the nature of things it could not do so.

The Financial Secretary, having adduced all those arguments, and perhaps having a certain suspicion that the Committee would not be very deeply convinced by them, played his trump card, which was that we really had no business to be considering this matter at all, because the whole question was to be considered by a committee. I really do not know why one rule should apply to pool betting and another to industrial building. The trouble is that this country is facing a desperate economic and industrial crisis; time is not unlimited, and we cannot afford to sit around saying, "We will think about the problem of industrial re-equipment when a committee, which has not yet started to function, has seen fit to report." We must do something about it now. Industrialists must do something about it now, and there have to be conditions in which they can do something. Of all the arguments, in face of the difficulties with which this country will be faced in the future, to say that we can do nothing about industrial building until a committee has reported, is the least convincing I have yet heard.

Photo of Mr Charles Hale Mr Charles Hale , Oldham

I think that the answer of the Financial Secretary, that this matter is shortly to be considered by a committee, is an adequate one, because this is a subject which needs careful consideration, a good deal of evidence, and a good deal of thought. However, I feel this Amendment to be one which merits and which ought to have more consideration. One of the problems we have to face with regard to our industries in the future is, not merely whether the building is adequate to house the machinery that makes the goods but whether the building is adequate to house the workmen who have to work in it. Anyone who knows anything about industrial conditions in Lancashire will know that that is a very real problem. Anyone who has seen cotton industries abroad will know that in the future hon. Members on all sides ought to hope to see much more adequate buildings, much more space being utilised, much better and more favourable conditions, and more room made available for the workers. If we are to get that, we must at some stage consider the granting of additional depreciation allowances to encourage it to be done.

There is a second and very serious point. There are some industries in which the line of demarcation between buildings and plant and machinery is almost impossible to ascertain. In the pottery industry, in which we are now trying to introduce moving mechanical kilns, it is very difficult to say just what is building, what is plant, and what is machinery. Anyone who knows the pottery industry in Staffordshire at the moment will know that the work Wedgwood's did some years ago, in moving their plant to a new, large, capacious and well-developed site, was not merely of great value to the industry, as it is of value to the country today, but was of real value to the health of the workers. That must be faced in Staffordshire, where the present position is that some of the best pottery workers are working in grossly overcrowded conditions; where the kilns have to be pushed up in odd corners to fill up space; where workers are going up and down steps carrying pots on planks balanced on their heads.

Sometime or other we have to face the real problem of rehousing industry. It is worth considering, although I accept what the Financial Secretary has said, that this is not the moment to judge the matter in view of the fact that it is being considered by a committee.

9.30 p.m.

Photo of Lord John Hope Lord John Hope , Midlothian and Peeblesshire Northern

On a point of Order. I did not wish to interrupt the hon. Member for Oldham (Mr. Hale) when he was speaking and appear to be discourteous, but is it in Order, Major Milner, for a Member to stand on one leg when making a speech? It looks extremely comfortable, and I might want to do it myself sometime.

Photo of Mr Charles Hale Mr Charles Hale , Oldham

Further to that point of Order. May I point out that not all Members have two legs, and so I cannot see how it can possibly be out of Order?

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

I do not see that a point of Order arises. In my experience quite a number of politicians frequently stand on one leg—in more senses than one.

Photo of Mr Nigel Birch Mr Nigel Birch , Flintshire

I should like to pick up what the hon. Member for Oldham (Mr. Hale) has just said. Metaphorically, at any rate, he was standing on two legs when he made his speech. The fact is we cannot dissociate buildings from plant. It is nonsense for the Financial Secretary to say that buildings are less antiquated than plant—at least that is what I understood him to say. This point was made very strongly by the Pottery Working Party. They said: We are convinced that Depreciation Allowances for Income Tax purposes have a direct bearing on the conduct of an industry, and that there is a close association between the small pre-war allowances and the continuing employment of antiquated buildings and processes. I believe that to be profoundly true in many cases.

It is impossible to have new processes unless there are new buildings. What has happened is that the initial allowances for plant have been increased, but the initial allowances for buildings have not. But the inquiry about to take place will cover both the question of allowances for plant and the question of allowances for buildings. Why is it, therefore, that the fact that an inquiry is to take place is held to be a good defence for doing nothing about buildings, but is not held to be a good defence for doing nothing about plant? I think that the right hon. Gentleman owes us a more logical argument than he has vouchsafed.

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

The Committee divided: Ayes, 119; Noes, 267.

Division No. 173.]AYES[9.33 p.m.
Agnew, Cmdr P. G.Grimston, R. V.Osborne, C.
Assheton, Rt. Hon. R.Hannon, Sir P. (Moseley)Peake, Rt. Hon. O.
Astor, Hon. M.Hare, Hon. J. H. (Woodbridge)Peto, Brig. C. H. M.
Birch, NigelHarris, F. W. (Croydon, N.)Pickthorn, K.
Boles, Lt.-Col. D. C. (Wells)Harvey, Air-Comdre. A. V.Ponsonby, Col. C. E.
Boothby, R.Head, Brig. A. H.Poole, O. B. S. (Oswestry)
Bowen, R.Hinchingbrooke, ViscountPrescott, Stanley
Bower, N.Hogg, Hon. Q.Raikes, H. V.
Boyd-Carpenter, J. A.Hollis, M. C.Ramsay, Maj. S.
Braithwaite, Lt.-Comdr, J. G.Holmes, Sir J. Stanley (Harwich)Rayner, Brig. R.
Bromley-Davenport, Lt.-Col. W.Hope, Lord J.Roberts, Emrys (Merioneth)
Buchan-Hepburn, P. G. T.Howard, Hon. A.Roberts, H. (Handsworth)
Bullock, Capt. M.Hulbert, Wing-Cdr. N. J.Ropner, Col. L.
Butcher, H. W.Hutchison, Lt.-Cm. Clark (E'b'rgh W.)Ross, Sir R. D. (Londonderry)
Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Hutchison, Col. J. R. (Glasgow, C.)Shepherd, W. S. (Bucklow)
Carson, E.Lancaster, Col. C. G.Spearman, A. C. M.
Challen, C.Legge-Bourke, Maj. E. A. H.Stanley, Rt. Hon. O.
Channon, H.Linstead, H. N.Stoddart-Scott, Col. M.
Clarke, Col. R. S.Lloyd, Selwyn (Wirral)Strauss, Henry (English Universities)
Corbett, Lieut.-Col. U. (Ludlow)Low, A. R. W.Stuart, Rt. Hon. J. (Moray)
Crookshank, Capt. Rt. Hon. H. F. C.Lucas, Major Sir J.Sutcliffe, H.
Cuthbert, W. N.Lucas-Tooth, Sir H.Taylor, C. S. (Eastbourne)
Darling, Sir W. Y.MacDonald, Sir M. (Inverness)Teeling, William
Davidson, ViscountessMacdonald, Sir P. (I. of Wight)Thorneycroft, G. E. P. (Monmouth)
De la Bère, R.McFarlane, C. S.Touche, G. C.
Dodds-Parker, A. D.Mackeson, Brig. H. R.Turton, R. H.
Dower, Col. A. V. G. (Penrith)Maclean, F. H. R. (Lancaster)Wadsworth, G.
Drewe, C.Macmillan, Rt. Hn. Harold (Bromley)Wakefield, Sir W. W.
Eccles, D. M.Maitland, Comdr. J. W.Walker-Smith, D.
Erroll, F. J.Manningham-Buller, R. E.Ward, Hon. G. R.
Fletcher, W. (Bury)Marples, A. E.Webbe, Sir H. (Abbey)
Foster, J. G. (Northwich)Marsden, Capt. A.Wheatley, Colonel M. J. (Dorset, E.)
Fraser, H. C. P. (Stone)Marshall, D. (Bodmin)White, J. B. (Canterbury)
Fraser, Sir I. (Lonsdale)Marshall, S. H. (Sutton)Williams, Gerald (Tonbridge)
Fyfe, Rt. Hon. Sir D. P. M.Mellor, Sir J.Willoughby de Eresby, Lord
Gage, C.Molson, A. H. E.York, C.
Galbraith, Cmdr. T. D. (Pollok)Mott-Radclyffe, C. E.Young, Sir A. S. L. (Partick)
Galbraith, T. G. D. (Hillhead)Neven-Spence, Sir B.
George, Lady M. Lloyd (Anglesey)Nicholson, G.TELLERS FOR THE AYES:
Gomme-Duncan, Col. A.Odey, G. W.Major Conant and
Gridley, Sir A.O'Neill, Rt. Hon. Sir H.Mr. Wingfield Digby.
NOES
Acland, Sir RichardChamberlain, R. A.Follick, M.
Adams, Richard (Balham)Champion, A. J.Foot, M. M.
Albu, A. H.Chetwynd, G. R.Forman, J. C.
Allen, A. C. (Bosworth)Cobb, F. A.Freeman, J. (Watford)
Alpass, J. H.Cocks, F. S.Gaitskell, Rt. Hon. H. T. N.
Anderson, A. (Motherwell)Coldrick, W.Ganley, Mrs. C. S.
Attewell, H. C.Collick, P.Gibbins, J.
Austin, H. LewisCollindridge, F.Gibson, C. W.
Awbery, S. S.Colman, Miss G. M.Gilzean, A.
Ayles, W. H.Corbet, Mrs. F. K. (Camb'well, N. W.)Glanville, J. E. (Consett)
Ayrton Gould, Mrs. B.Corlett, Dr. J.Goodrich, H. E.
Bacon, Miss A.Cove, W. G.Gordon-Walker, P. C.
Baird, J.Crossman, R. H. S.Greenwood, A. W. J. (Heywood)
Balfour, A.Cullen, Mrs.Grey, C. F.
Barnes, Rt. Hon. A. J.Daggar, G.Grierson, E.
Barstow, P. G.Daines, P.Griffiths, Rt. Hon. J. (Llanelly)
Barton, C.Dalton, Rt. Hon H.Griffiths, W. D. (Moss Side)
Battley, J. R.Davies, Edward (Burslem)Guest, Dr. L. Haden
Bechervaise, A. E.Davies, Ernest (Enfield)Gunter, R. J.
Benson, G.Davies, Haydn (St. Pancras, S. W.)Guy, W. H.
Berry, H.Davies, R. J. (Westhoughton)Hale, Leslie
Beswick, F.Davies, S. O. (Merthyr)Hall, Rt. Hon. Glenvil
Binns, J.Deer, G.Hamilton, Lieut.-Col. R.
Blenkinsop, A.Delargy, H. J.Hannan, W. (Maryhill)
Blyton, W. R.Dobbie, W.Hardman, D. R.
Bowden, Fig. Offr. H. W.Dodds, N. N.Hardy, E. A.
Braddock, Mrs. E. M. (L'pl, Exch'ge)Donovan, T.Harrison, J.
Braddock, T. (Mitcham)Driberg, T. E. N.Hastings, Dr. Somerville
Brook, D. (Halifax)Dugdale, J. (W. Bromwich)Haworth, J.
Brooks, T. J. (Rothwell)Dumpleton, C. W.Henderson, Joseph (Ardwick)
Broughton, Dr. A. D. D.Evans, Albert (Islington, W.)Holman, P.
Brown, T. J. (Ince)Evans, John (Ogmore)Holmes, H. E. (Hemsworth)
Bruce, Maj. D. W. T.Evans, S. N. (Wednesbury)Horabin, T. L.
Burden, T. W.Fairhurst, F.Houghton, A. L. N. D.
Burke, W. A.Farthing, W. J.Hoy, J.
Butler, H. W. (Hackney, S.)Fernyhough, E.Hudson, J. H. (Ealing, W.)
Carmichael, JamesField, Capt. W. J.Hughes, Hector (Aberdeen, N.)
Hughes, H. D. (W'lverh'ton, W.)Morris, Lt.-Col. H. (Sheffield, C.)Sparks, J. A.
Hynd, J. B. (Attercliffe)Morris, P. (Swansea, W.)Steele, T.
Irvine, A. J. (Liverpool)Mort, D. L.Strauss, Rt. Hon G. R. (Lambeth)
Irving, W. J. (Tottenham, N.)Moyle, A.Stross, Dr. B.
Isaacs, Rt. Hon G. A.Murray, J. D.Stubbs, A. E.
Janner, B.Nally, W.Swingler, S.
Jay, D. P. T.Naylor, T. E.Sylvester, G. O.
Jeger, G. (Winchester)Neal, H. (Claycross)Symonds, A. L.
Jeger, Dr. S. W. (St Pancras, S. E.)Nichol, Mrs. M. E. (Bradford, N.)Taylor, H. B. (Mansfield)
Jenkins, R. H.Oldfield, W. H.Taylor, R. J. (Morpeth)
Jones, D. T. (Hartlepool)Oliver, G. H.Taylor, Dr. S. (Barnet)
Jones, Elwyn (Plaistow)Orbach, M.Thomas, D. E. (Aberdare)
Jones, P. Asterley (Hitchin)Paget, R. T.Thomas, George (Cardiff)
Keenan, W.Paling, Rt. Hon. Wilfred (Wentworth)Thomas, I. O. (Wrekin)
Kenyon, C.Paling, Will T. (Dewsbury)Thomas, John R. (Dover)
Key, Rt. Hon. C. W.Palmer, A. M. F.Thurtle, Ernest
King, E. M.Parker, J.Titterington, M. F.
Kinghorn, Sqn.-Ldr. E.Parkin, B. T.Tolley, L.
Kinley, J.Paton, Mrs. F. (Rushcliffe)Turner-Samuels, M.
Kirby, B. V.Paton, J. (Norwich)Ungood-Thomas, L.
Lang, G.Pearson, A.Vernon, Maj. W. F.
Lavers, S.Peart, T. F.Viant, S. P.
Lee, F. (Hulme)Piratin, P.Walkden, E.
Lee, Miss J. (Cannock)Popplewell, E.Wallace, H. W. (Walthamstow, E.)
Leonard, W.Porter, E. (Warrington)Warbey, W. N.
Levy, B. W.Proctor, W. T.Webb, M. (Bradford, C.)
Lewis, A. W. J. (Upton)Pursey, Comdr. H.Wells, P. L. (Faversham)
Lewis, J. (Bolton)Randall, H. E.Wells, W. T. (Walsalf)
Lindgren, G. S.Ranger, J.Wheatley, Rt. Hon. John (Edinb'gh, E.)
Lipton, Lt.-Col M.Rankin, J.White, H. (Derbyshire, N. E.)
Logan, D. G.Reid, T. (Swindon)Whiteley, Rt. Hon. W.
Lyne, A. W.Rhodes, H.Wigg, George
McAdam, W.Richards, R.Wilkes, L.
McAllister, G.Roberts, Goronwy (Caernarvonshire)Wilkins, W. A.
McEntee, V. La T.Robertson, J. J. (Berwick)Willey, F. T. (Sunderland)
McGhee, H. G.Rogers, G. H. R.Willey, O. G. (Cleveland)
McGovern, J.Ross, William (Kilmarnock)Williams, D. J. (Neath)
Mack, J. D.Royle, C.Williams, J. L. (Kelvingrove)
McKay, J. (Wallsend)Scott-Elliot, W.Williams, Ronald (Wigan)
Mackay, R. W. G. (Hull, N. W.)Segal, Dr. S.Williams, W. T. (Hammersmith, S.)
McKinlay, A. S.Shackleton, E. A. A.Williams, W. R. (Heston)
McLeavy, F.Sharp, GranvilleWillis, E.
MacPherson, Malcolm (Stirling)Shawcross, Rt. Hn Sir H. (St. Helens)Wills, Mrs. E. A.
Mallalieu, J. P. W. (Huddersfield)Shurmer, P.Wilson, Rt. Hon. J. H.
Mann, Mrs. J.Silverman, J. (Erdington)Woodburn, Rt. Hon A.
Manning, C. (Camberwell, N)Silverman, S. S. (Nelson)Wyatt, W.
Mathers, Rt. Hon GeorgeSimmons, C. J.Yates, V. F.
Messer, F.Skeffington-Lodge, T. C.Young, Sir R. (Newton)
Middleton, Mrs. L.Skinnard, F. W.Younger, Hon. Kenneth
Mitchison, G. R.Smith, H. N. (Nottingham, S.)
Monslow, W.Smith, S. H. (Hull, S. W.)TELLERS FOR THE NOES:
Moody, A. S.Sorensen, R. W.Mr. Snow and
Morley, R.Soskice, Rt. Hon. Sir FrankMr. George Wallace

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I beg to move, in page 8, line 27, to leave out from "April," to "section."

The subsection as it stands at present extends to machinery intended for research purposes. By specifically including this machinery, the subsection excludes the benefits of the relief from being extended to the laboratory buildings themselves. We seek to remove that anomaly and to extend the relief to the laboratory buildings. In the course of the last few days the Labour Party have issued a pamphlet called "The Labour Party and Science." It was one of those brightly written documents designed to attract scientists into the Socialist fold. If any scientists have been deluded by the pamphlet, they will have been strangely shocked to see this Clause and this subsection because they show how very ignorant the Labour Party are about science if they think the major part of any laboratory installation consists of plant and machinery.

9.45 p.m.

I feel that the drafters of this subsection and the Minister have in mind the sort of laboratories which are to be found in provincial technical institutes and they have not in mind a modern specialised laboratory, specially built for a particular research programme. It is not possible to take over any existing building. The argument which was applied against our Amendment a little earlier, that there is not a shortage of industrial buildings, certainly cannot apply in the case of specialised laboratories, because such special laboratories do not exist until they are built, and it is very rarely possible to convert ordinary buildings, such as a block of offices or an old school or a group of temporary Nissen huts, into a satisfactory laboratory for a specialised piece of research.

I hope the Committee will bear with me if I give one or two examples. For instance, there are acoustic laboratories where the structure of the walls and the chambers is an integral part of the whole research which is to be carried out, and the plant and machinery which may be installed, such as motors, microphones and switchgear, is a relatively small part of the whole expenditure. In the case of aeronautical research and the provision of wind tunnels, the building is by far the most expensive and complicated part of the laboratories. The plant and machinery for which extended relief alone is to be given is a minor part of the total expenditure. As to atomic research, some of us were privileged to see the new laboratories being built at Harwell last Summer and there we saw what very complicated buildings are necessary for examination of the developments in atomic research. These complicated laboratories will not be reserved solely for Government research; industrial undertakings attempting any aspect of industrial atomic research will require to be similarly equipped with special chambers specially insulated and ventilated and specially provided with means for removing radiation phenomena which would be harmful to the laboratory assistant.

It is therefore less than fair to exclude laboratory buildings from the relief and to confine the relief only to the plant and machinery. A modern laboratory being built for a special piece of research is a very specialised undertaking and should get the relief at present only granted in respect of the machinery, such as it is, which may be installed inside.

Photo of Mr William Hall Mr William Hall , Colne Valley

It may shorten our labours on this Amendment if I indicate straight away that, on behalf of the Government, I have very much pleasure in accepting it.

Amendment agreed to.

Photo of Lord John Hope Lord John Hope , Midlothian and Peeblesshire Northern

I beg to move, in page 9, line 5, at the end, to add: (4) Where there is a contract for the sale of a ship and either—

  1. (a) the price becomes payable before the sixth day of April, nineteen hundred and forty-nine, but the ship is delivered in performance of the contract on or after that date; or
  2. (b) the price is payable in instalments, some of which are payable before that date, and some of which are payable on or after that date,
so much of the price as becomes payable before that date shall for the purposes of the provisions of the Income Tax Acts relating to initial allowances be deemed to have become payable on that date:Provided that where—
  1. (i) an initial allowance falls to be made by virtue of this subsection in respect of the price or any part thereof for any year of assessment; and
  2. (ii) an initial allowance in respect of the price or, as the case may be, that part of the price, has been given, or, apart from this subsection, falls to be given, for a year of assessment earlier than that year.
the allowance given or to be given for that earlier year shall not be affected by the provisions of this subsection but the amount of the allowance to be given by virtue of this subsection shall be correspondingly reduced.
The purpose of this Amendment is to secure that instalments paid for a ship during the course of construction as well as on final delivery, rank for the increased wear-and-tear allowance. I do not intend to delay the Committee more than a moment or two because a similar Amendment to this was moved during the Debate on the Income Tax Act, 1945, and was accepted by the Government, and obviously the Government will treat this Amendment in the same way.

The test for the granting of the increased 40 per cent. initial allowance under Subsection (1) of this Clause is the incurring of expenditure on or after 6th April, 1949. The first part of the Amendment covers the case of a ship delivered on or after that date, but where the purchase price is payable before that date. In such a case the Amendment provides that payment shall be deemed to have been made on that date. The second part of the Amendment provides that where, in the case of the purchase of a ship, its price is payable by instalments, any of which are paid on or after 6th April, 1949, the preceding instalments shall be considered to have been paid on the same date. I need not dwell on the proviso, the need for which will be as obvious to the right hon. Gentleman as it is to me.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

Again I am happy, on behalf of the Government, to accept this Amendment.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.