Clause 24. — (Rate of Corporation Tax for Financial Years 1964 and 1965, and Provisional Collection of Corporation Tax.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 21 June 1966.

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Photo of Mr Frederic Harris Mr Frederic Harris , Croydon North West 12:00, 21 June 1966

I shall speak for only a few minutes, because my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) made such an interesting speech that I am waiting keenly to hear the Chief Secretary's reply.

I was called shortly after the Chancellor of the Exchequer delivered his last Budget speech, and I remember only too well how so many right hon. and hon. Members left the Chamber feeling, with a sigh of relief, that everything was going rather well. I took a very different view very soon afterwards, because it appeared to me, as I tried to calculate the situation with a 40 per cent. Corporation Tax, that on a general basis, apart from the individual cases which can be cited, company tax was going up by about 15 per cent. That was a terrific increase, and a very heavy burden for companies to stand.

In his speech this afternoon, my right hon. Friend the Member for Enfield, West referred to it as a massive increase, which is the right description. As my hon. Friend the Member for Barry (Mr. Gower) has reminded us, when the Corporation Tax was first announced a year ago the reference to 35 per cent, came out time and time again in our discussions. But I also remember that the Chancellor said on at least one occasion that 40 per cent, would be the absolute maximum, or words to that effect.

4.15 p.m.

I cannot find the relevant reference, but this was the indication which he gave. Knowing what a Socialist Chancellor would do, I automatically assumed the maximum, as chairman of a public company, when we were making our calculations before this Budget. I assumed that he would do the worst, and go to the full 40 per cent., and he did. I was even so unfair to him as to think that he might go above 40 per cent.

As has been rightly pointed out, on a broad basis of a 60 per cent, distribution, combined company tax is going up, in effect, from 56¼ per cent, to 64¼ per cent. This means that two-thirds of the profits of the main companies upon whom we depend for so much, particularly exports, will go in taxation. This is a fantastic burden, and, in common sense, there must be a limit to how far one can go.

It is all very well for us in industry to be constantly told that we can step up our efficiency by some mythical means to ease the burdens, or, increase production in one way or another. The real answer is that, sadly, people have to put two and two together and find the answer in the end, and the pressure comes on for increases in costs and prices, both of services and goods. Such a heavy burden of company taxation tragically means increases in costs. This goes on and on, and we return to the hopeless spiral from which everybody is constantly suffering, chasing after higher and higher prices all the time. Industry has no alternative but to do that.

I therefore support the view of my right hon. Friend the Member for Enfield, West that 40 per cent, is far too high. I trust that when we have a Conservative Administration again this percentage of Corporation Tax will be reduced. I realise that although it is right that we should force the Amendment to a vote this afternoon we shall get no change from the Chancellor for the moment. I cannot imagine that he intends to give us satisfaction on this point.