Statement of the Issue
I. Organization and Function of the Press
(i) Ownership and purpose
(ii) Self-financing and self-balancing
(iii) Undertakes publications known to be unremunerative to advance education and research, especially in the Delegates' Department (Clarendon Press)
Examples:A. Great works
B. Monographs etc
C. Research journals
D. University textbooks, submitted to be in the nature of equipment or plant for higher education
(iv) The Press a national and international organisation, not for Oxford University only. Considered by University grants Committee in 1928
(v) Departments other than the Clarendon Press Department all concerned, but not exclusively, with the primary purpose and bear part of its charges.
Example: The Printing Department
II. Profits
(i) Profits admitted to tax after charitable expenditure
(ii) But all profits shut up to the primary purpose
(iii) Necessity and destination of profits
III. Government work and its effects
(i) The Government war work done by Printing Department stops expenditure on unremunerative books
Example 1: Specimen book: the Oxford Classical Dictionary
Example 2: General case of textbooks necessary for university courses
(ii) This stoppage not mainly due to shortage of paper, but the Government work monopolizing the necessary special resources
(iii) Learned work cannot now be placed with other printers
IV. Tax Effects
(i) Position in last war compared: the difference is the virtual exclusion of the Delegates' learned work
(ii) Rough calculation showing the net result of Government work for the Printing Department, after taxation, and per contra liabilities
(iii) Future responsibilities left to the Press
(iv) Capital standard not a protection in a business so ancient, where capital expenditure has only recently been distinguished and recorded
(v) Failing relief from E.P.T., a standard based on valuation of the capital actually employed would be some mitigation
V. The position under Income Tax
The Oxford University Press, in many respects a unique organization, is at an exceptional disadvantage under present taxation, especially E.P.T. Being primarily a charity with a necessary function to perform in research and education, its power to carry out that function is at present crippled owing to Government calls on its specialized printing resources; as a consequence, funds normally applied to its charitable purpose appear as excess profits, and are taken in taxation; while its obligations accumulate.
I. Organisation and Function
(i) The Press is a department of the University of Oxford, wholly owned and directed by the University, with the purpose of producing and publishing books and journals for the advancement of learning and research, education and religion.
(ii) It is not endowed, and does not receive capital or grants from the University or the Government, or tax-free income from investments. It has been for centuries a self-balancing, self-financing service, earning by the sale and manufacture of its publications most of what it spends for its primary purpose. A special Committee of the University Council and Chest has the duty of seeing that the operations of the Press do not become a charge on general University funds.
A commercial publisher may lose money on certain books by miscalculation or for a commercial purpose; but the Oxford Press undertakes publications known to be unremunerative, if they advance education and research. Four main classes of such publications are dealt with by the Delegates' central publishing department (Clarendon Press) at Oxford:-
A. Specially large works, most of them involving a continuing charge, e.g. in Science the Index Kewensis of plants, and the Index Londinensis of plant illustration, which are international bases of botanical research; the great Oxford English Dictionary; the maintenance of the Dictionary of National Biography, with the duty of continuing it; Liddell & Scott's Greek Lexicon, of which the last completely revised edition was published in two volumes in 1940; a similar Latin Dictionary is in progress.
B. The usual output of new works in every department of learned research, e.g. the Series of International Monographs on Physics; or standard works on the scientific basis of engineering such as Fluid Dynamics, 2 vols., 1938, for the advancement of Aeronautics.
C. Research journals at a high level where they are not self-supporting: e.g. The Empire Journal of Experimental Agriculture, Quarterly Journal of Mathematics, Quarterly Journal of Medicine, Journal of Theological Studies, Classical Review, Review of English Studies. Several of these journals have been taken over by the Press when they could no longer be supported by the original promoters so that the best channel for the publication of research might be maintained.
D. University textbooks:- University education depends on a wide range of texts and textbooks, priced to be within the reach of scholars, and covering all academic subjects. Many of these are unremunerative because the demand is small and their price must be within the reach of students. The Oxford Press has built up this range over generations and could not bear the financial burden of replacement in a short period. For instance, the Press published before the war many learned grammars, including Russian, Japanese, Serbian, Melanesian dialects, Mesopotamian Arabic, African languages. Each sold a few copies annually, usually not enough to pay interest and the running expenses of publishing, so they were written off as opportunity offered. The war brought an urgent need for some of these books. Thus Sir George Sansom's Japanese Grammar (published in 1928) had an average sale of about 15 copies a year. At the beginning of 1942 we still had 30 years' supply at that rate, all written off as was proper. Now the 30 years' stock is almost gone. The receipts from it appear as an are taken as excess profits, and there would be no special complaint if that was the end. But the book cannot be revised and replaced now for want of printing facilities, and to do it again after the war would be wholly uncommercial. Yet it will be expected, for academic if not for national purposes. There are no alternatives to books of this kind as there are for recreational books.
Such books, it is submitted, are in the nature of plant for university work, and the obsolescence caused by war in many learned subject, e.g. Science or History, is abnormally high.
(iv) These examples show that the Oxford Press does not merely serve its own University. It publishes research work from all sources, and produces textbooks needed in all higher studies in this country and the Dominions. Its place in the national scheme of university education was examined by the University Grants Committee in 1928: it is understood the conclusion reached was that it was carrying out its functions efficiently, and that, with the Cambridge Press, it provided sufficient special facilities for publishing learned books, so that Government grants to universities for that purpose were not then necessary.
(v) The Press works through other wholly owned departments, including a department for making special book papers at Oxford, a large printing house and bindery for learned and Bible work, a London publishing department controlling the sale of books, and publishing branches in New York, Toronto, Melbourne, Capetown, and Bombay. These departments are mainly, but not all exclusively, concerned with the production and publishing of books carrying out the primary purpose of the University, and all are required to bear part of the charges of that purpose by doing services which a commercial firm would not undertake.
Thus the Printing House at Oxford is of special value to the Government in the present emergency because it maintained for learned purposes highly-trained and confidential workmen and staff, with special equipment. These are necessary for the normal work of the Oxford Press and not for commercial printing. But at any time the Printing House may do some work which is not for the primary purpose, as at present it is almost wholly occupied with Government work which is outside that purpose.
II. Profits
(i) It would be impracticable without disproportionate expense to distinguish sharply between primary purposes and other purposes in a business so complex. So the aggregate profits of the whole undertaking, after performing its charitable function, have been submitted to Income Tax: these profits are less by the 'charitable' expenditure than the profits of a commercial business.
(ii) All profits are shut up to the primary purpose, because the Delegates are unpaid; managers and staff are salaried like civil servants, and on a modest scale, with approximately the same maxima as had as they had 50 years ago. There are no shareholders or other destinees for the profits except the primary purpose.
(iii) The profits of the whole undertaking vary from year to year: the publications undertaken, often years in advance of production, and not paid for out of accumulated reserves but by charges on current account, and neither their incidence nor the income on which it falls can be closely estimated for any one year. But over a series of years, the Press as a whole must make substantial profits: to maintain its position against falls in the general value of money; to modernise capital equipment (this also is borne as a current charge, not out of reserves for the purpose); and to develop its general production and publishing with the growth of research and education throughout the Empire.
III. Government work and its effects
(i) The importance and the extent of the Government work falling on the Printing Department may be verified by reference to H.M. Stationery Office or the Secretary of the War Cabinet. For some time it has practically excluded unremunerative learned production, which remains to be done in the future at an enhanced cost.
As an example: in 1941 the MS. of a Classical Dictionary by many contributors was ready to be printed. The outlay then was estimated at £7500 with an expected loss of £3500. Services to the Government made it impossible to begin; production costs have risen by about 50% since; there has been no increase in the salaries of scholars likely to be permit a proportionate increase in the price; and £5000 would be a likelier estimate of the loss to be borne on future accounts. Besides, the work in some points will have gone out of date, which will require further expense in correction.Again, the stoppage of new production and reproduction, combined with the exceptional demand created by war conditions, has reduced the stocks and range of the textbooks mentioned above (I (iii) D), and deferred the necessary modernization. Enforced deferment of modernization has cumulative effects like those at deferred repairs in a factory, and deferred replacement is a heavy liability. The selling out of the stock of these books produces present income, but it creates a future liability to replace at higher cost levels if the book is needed for university courses. There is no such liability when a book for entertainment, e.g. a novel, goes out of print, for such books are largely interchangeable and need not be reproduced or replaced unless that is profitable.
* In the academic publishing department (Clarendon Press) alone, the average number of books going out of print in the years 1936-39 was 80: in the years 1940-43 the average was 242.
In the year ending 31st March 1944, the printing house finished only 10 new books for the learned department: of these 3 were difficult printing, and 2 of them had been delayed for several years. No book sent to the Printer by the Delegates in that year was finished within it.Apart from books out of print, at the end of March 1944 the Clarendon Press department had 83 books out of stock awaiting reprinting, for which the paper had been supplied and reprinting orders given - some as far back as 1941. The corresponding figure at the outbreak of war was 5. At the outbreak of war about 50 books were also out of stock awaiting binding only: at 31st March 1944, 256.
(ii) The reduction in expenditure on unremunerative books is not mainly due to general war conditions affecting all publishers, e.g. shortage of paper. Works on advanced research require relatively little materials. They need mainly specialized equipment and staff, but it is exactly these specialized resources which are no longer available while the printing house is engaged on its present tasks for the Government.
(iii) This is part of the reason why it is not possible to get the learned production done elsewhere. Besides, in a time of shortage, printers reserve their limited resources for publishers who are their regular customers. Difficult learned work cannot now be placed with other printers.
IV. Tax Effects
(i) In the last war, the Press did similar services, but was not liable to E.P.T. because war services did not monopolize the special resources required to produce learned books. In this war, these urgent demands have grown beyond expectations; in the year ending 31st March 1940, roundly £26,000 of printing work was done for H.M. Stationery Office; in the year ending 31st March 1944, this had risen to £207,000, practically all representing skilled work and use of machines, not materials. Thus learned printing has been progressively excluded. In the years to 31st March 1942, there was no liability to Excess Profits after back allowances. In the year ending 31st March 1943, profits rose suddenly, and there appears to be a large liability. In the following year, unremunerative production was virtually excluded and the excess as books are sold out without replacement will be very large.
(ii) A crude calculation will indicate the net result for the Press finances of the present level of Government requirements and taxation. In the best E.P.T. standard year (1937) the book capital was £905,000, which is far below the real capital employed (par.IV (iv) below). The aggregate profits of the Press, before tax but after bearing the charitable charges of the Press, were £54,000. Departmental printing profit included in this was £25,500. Nearly three-quarters of the printing resources had been used for internal purposes, and the rest mostly for external learned purposes.
Taking the Printing Department separately, if all its resources were now used by H.M. Stationery Office, it would retain (very roughly) a maximum of £10,500 net (£25,500 standard minus £14,000 appropriate I.T. and N.D.C., minus W.D.A. £1,000). Against this retainable sum, the Press has supplied in each of the years 1940-43 an average of £8,750 for capital equipment and accommodation for Government printing.
From the Press as a whole, the Government would absorb in E.P.T. (less about 10% net that will be returnable) the large income which is normally devoted to its charitable purposes; as well as the proceeds of selling out its textbooks without providing for replacement (par.I (iii) above esp. D). But, in the Printing Department alone, it is left with the responsibility of finding ordinary employment after the war for a printing personnel of about 800 including nearly 300 employees who are at present in the Services; and it will also have to make good the dislocation in the other departments caused by an exceptional diversion of its production resources.
(iii) After such depletion of its resources, it would be impossible for the Press to carry on its pre-war functions; provide for its deferred unremunerative commitments at post-war price levels; and replace at these levels its range of textbooks that have been sold off. But, besides, there are larger arrears of university education to make good, and the Government promises a post-war expansion. The publication of scientific research has been dammed up for security reasons, and the Government promises to an expansion of research. Nor can Germany provide the advanced books it did before the war, especially as the book-stock and production centre for German-speaking Europe appears to have been destroyed at Leipzig. Unless the Government proposes to meet these obligations in some new way, it must relieve the main non-profit-making organisation on which it has depended in the past.
It might be argued that the price of books can be raised sufficiently to meet the new conditions. The price of books as a whole must be raised if the Press is to have an income for charitable purposes, and many kinds of popular books have already been raised sufficiently to cover the war increase, which is over 60% for production and likely to remain high. But the learned book and the textbook are sold to classes which have not shared in war prosperity. The money income of a Professor at Oxford, after taxation, is less than in 1913, with an enormous increase in general values to be met; the salaries of school teachers have not been raised proportionately; scholarships remain at the old rate. So there is no immediate prospect of raising the prices of this particular kind of book to the new level of costs, and generally we have not raised them at all. It is one of our post-war problems that educational books generally, including those that used to be remunerative, have become uneconomic compared with other books which compete for materials and labour.
(iv) Ordinarily there would be some protection against E.P.T. in the capital standard. But the Oxford Press was the greatest institution of its kind long before Income Tax was thought of. Some of its types go back to the 17th century; some of its book stocks to the end of the 18th; its main site and buildings were acquired over a hundred years ago. Records do not show the early sources of its capital, and until the last 70 years there was no occasion to record and distinguish capital expenditure. There has been no revaluation, so a very ancient learned institution is at a disadvantage compared with any modern business.
(v) If the Press cannot be relieved altogether from E.P.T., in view of its special circumstances and obligations, a revaluation of the capital actually employed would mitigate the extraordinary incidence of E.P.T.
V. The position under Income Tax is different. If Income Tax remained at 10s. in the £1, deferred unremunerative work, if and when it could be done, would be a charge before tax; but the development of the Press's functions in the future (par. II (iii) above) would be much reduced by a liability at this high rate. If income tax is reduced in the early years after the war, it is a hardship that the Press's normal charitable expenditure should be brought under the tax now, with the prospect that relief at a lower rate may be obtainable in the future. The proceeds of the selling off of textbooks (par. I (iii) esp. D) ought not to be subject to Income Tax at all without allowance for replacement.
Kenneth Sisam
8th June, 1944