§ (1) Income Tax for the year beginning on the sixth day of April, nineteen hundred and fourteen, shall be charged at the rate of one shilling and fourpence.
§ (2) All such enactments relating to Income Tax as were in force with respect to duties of Income Tax granted for the 573 year beginning on the sixth day of April, nineteen hundred and thirteen, shall have full force and effect with respect to any duties of Income Tax hereby granted.
§ (3) The annual value of any property which has been adopted for the purpose either of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of Inhabited House Duty, for the year ending on the fifth day of April, nineteen hundred and fourteen, shall be taken as the annual value of such property for the same purpose for the next subsequent year; provided that this Sub-section—
- (a) so far as respects the duty on inhabited houses in Scotland shall be construed with the substitution of the twenty-fourth day of May for the fifth day of April; and
- (b) shall not apply to the Metropolis as defined by the Valuation (Metropolis) Act, 1869.
§ Mr. MOUNT
I wish to ask for a ruling upon a point of Order before Clause 2 is taken. My question is, whether it is outside the scope of the Bill? If we look at paragraph (3) of the Clause, it will be seen that reference is made to the Inhabited House Duty, but there is no mention of that in the title of the Bill. The Rule of the House is that a Bill must not include matters outside the title. This Clause is the same as the one which has appeared in previous Finance Bills, but it has always been covered by the title of the Bill, and if I may draw attention to the title of last year's Finance Bill, before the new procedure was adopted, it will be seen that it reads as follows:—
"To continue the Duty of Customs on Tea, and to reimpose Income Tax (including Super-tax) and to apply with respect to Income Tax (including Super-tax) and the annual value of property, the like provisions as were applied in the last preceding year."
That title seems to specifically cover the point, but there is no mention of this duty in the title this year, and therefore I ask for a ruling whether the Clause is not outside the scope of the Bill?
§ The CHAIRMAN
The hon. Member's question as to provisions of the Bill going beyond the title should have been raised at an earlier stage, namely, before the Bill received its Second Reading. Certain other points were raised, but, as Chairman of Committee, I am concerned only to deal with the Bill as it reaches me from the 574 House after the Second Reading. Therefore, I do not feel myself competent to deal with the point raised by the hon. Gentleman.
§ Mr. JAMES HOPE
Will it be in the competence of the Committee, before reporting the Bill, to amend the title if necessary?
§ The CHAIRMAN
Certainly; we occasionally amend titles of Bills where it is necessary to bring them into conformity with their provisions.
§ The CHAIRMAN
Certainly, I see no ground as at present advised for omitting, them. If the hon. Member has any further point to urge when we reach the Amendment, I will deal with it then. But, as at present advised, I see no reason why these words should not be proceeded with.
§ Mr. JAMES HOPE
Can you suggest why it was necessary to include other words in the title of last year's Bill, when the provision is exactly the same in both years?
§ The CHAIRMAN
I think, if I recollect rightly, the title was very tightly drawn last year—more tightly than this year. The point was then raised before Mr. Speaker, and I followed his ruling in Committee in allowing Amendments which were relevant to the Bill, although at first sight they did not appear to be covered by the title.
§ Mr. GRETTON
Is it not a fact that the Committee can only alter the title if the scope of the Bill is enlarged before the Bill goes to Committee? Is it not the fact that the Committee has no power to alter the title of a Bill except on the instructions of the House?
§ The CHAIRMAN
I think the hon. Member is wrong there. The Committee can alter the title of a Bill so as to bring it into conformity with the Bill. With regard to the first Amendment on the Paper, standing in the name of the hon. Member for East Northamptonshire, that goes beyond the Resolution in Ways and Means.
§ Mr. CHIOZZA MONEY
May I ask whether upon the next succeeding Amendment on the Paper, that in the name of 575 the Chancellor of the Exchequer, it will be open to Members of the Committee to discuss the Income Tax question generally, including such matters as are raised in my Amendment?
§ Mr. T. M. HEALY
As it is admitted that one part of the Clause goes beyond the Resolution in Ways and Means, may I ask why the Amendment should not also be allowed to go beyond that Resolution?
§ The CHAIRMAN
The hon. Member is mistaken. If there are Clauses in the Bill which, when we reach them, are found not to be authorised, it is my duty to draw attention to them and not to put any Question upon them. With regard to the question of the hon. Member for East Northamptonshire, I think generally it will be possible in the discussion on the Amendment of the Chancellor of the Exchequer to discuss matters which are relevant to his proposal.
§ 4.0 P.M.
§ The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)
I beg to move in Sub-section (1) to leave out the words "four pence" ["one shilling and four pence"] and to insert instead thereof the words "three pence."
The reasons that lead the Government to propose this alteration have already been given in the House, and have been discussed at considerable length. I have had no opportunity of ascertaining to what extent it will be relevant to enter into these considerations to-day. For the moment, I will assume that the question of the temporary relief of rates is outside the purview of the discussion. If it is not, I shall be able later on to address observations to the Committee on that subject. I will now deal purely and simply with the alteration which is proposed to be made, and one or two aspects of it. The moment the Government decided to postpone the relief of rates from the 1st of December this year till the 1st of April next year, it was inevitable some proposal of this kind should be made in the taxes proposed to be levied under the Budget. There were only two alternatives: one was that there should be relief in the additional taxes that were proposed, and the other was that the additional taxes should be adhered to, and that the relief should be given in respect of some of the older taxes. With regard to the first, the relief of the additional taxes, the alternative was between relieving the taxation on in- 576 come generally, relieving the taxation on the Super-tax, and relieving the taxation on the Death Duty. Coming to the Death Duties, the total amount which we expect to raise this year is only about £900,000. So that any relief which was given to the Exchequer by the postponement of the temporary Grants this year would not be met by an alteration in the Death Duties. Therefore, the alternative was between giving relief to the Super-tax payer, and giving relief to the ordinary Income Tax payer. As between the two, we thought it fairer that we should relieve the Income Tax payer in the lower rates of income. That is why we have elected in favour of this proposal instead of a proposal to relieve the Super-tax payer. It has been suggested that we might, as an alternative, have relieved the indirect taxpayer The objections to that course were stated by the Prime Minister and by myself. The first is, that we could not this year, with the amount at our disposal, have got rid of the Sugar Duty, because we should still have been £600,000 short. Apart altogether from that, inasmuch as the operation which we announced to the House is purely a postponement of the relief to the ratepayer, and inasmuch as next year, for the whole of the financial year, the whole burden of the relief will fall upon the Exchequer, if we had given permanent relief to the indirect taxpayer, the result would have been that instead of putting back a penny next year, we should have had to put back at least twopence in order to meet the deficit. The relief is purely a temporary one, and in order to meet the liabilities we should be incurring under Part IV. of the Bill we should have to put back that penny next year. That is why we think it simpler and fairer, in the circumstances, to take a penny off this year and to put it on next year.
I should like to say one word about the alleged inconvenience to bankers, agents and taxpayers who have already had the penny deducted. I have made a good deal of inquiry into this subject, and I say without any hestitation, upon the authority of men who know such matters well, that the inconvenience has been grossly exaggerated. I should not have said that on my own authority, or even on the authority of the Inland Revenue, but I have instituted inquiries among people who have enormous business in this particular line, and they tell me, without 577 hesitation, that the inconvenience has been grossly exaggerated. What they have said to me is, that as long as there was an uncertainty as to whether they should deduct 1s. 4d. or 1s. 3d., there was a good deal of perplexity and worry, but the moment the circular was issued to make it clear that the 1s. 4d. must be deducted until the House otherwise determines—these were the words used to me by a very leading banker:—The position was then simple, and as soon as the uncertainty was determined, perfectly simple.That is the view taken by very leading bankers who are in a position to advise me upon the subject.
§ Mr. LLOYD GEORGE
I am coming to that. In answer to a question put to me by the hon. and learned Member for York (Mr. Butcher), I stated that steps would be taken to do all in our power to minimise the inconvenience to bankers and agents. I do not say that there is no inconvenience, all I have said is that it is grossly exaggerated. What are the steps that have been taken? The steps that have been taken have been to intimate to bankers and agents that they could take one of two courses—they could either retain the 1s. 4d. they have collected and deal with their own clients, so that when their clients asked for a refund the bankers and agents themselves could make it, or the Inland Revenue would do the whole of that for them. They have intimated to those who have already collected these sums that if they hand over to the Inland Revenue the amount collected, the Inland Revenue will deal with all cases of refund.
§ Mr. LLOYD GEORGE
I understand so, certainly. It includes all banks in the United Kingdom. That will entail an increase in the clerical work for the Inland Revenue, but it takes over the difficulty from the bankers, except in one respect which I will point out.
§ Mr. LLOYD GEORGE
Let me take the case of dividends. As the hon. Member knows very well, you have attached to your dividend warrant, a document which is a certificate of the amount which is deducted. That is generally attached as a counterfoil to the dividend warrant. That is done for the convenience of the subject, because a 578 good many of them claim a rebate as it is, so the bankers attach a document of that kind to enable the subject to go to the Inland Revenue Department and claim the rebate for himself.
§ Mr. LLOYD GEORGE
I am dealing with dividend warrants, not coupons; I am coming to those later on. In this case it is perfectly simple. There is the document which is issued as a matter of course by the bankers; the money will be paid over to the Inland Revenue, and the subject has only got to claim the amount back from the Inland Revenue and send the document along, and the money will be refunded. So much for dividend warrants. With regard to coupons, the difficulty is greater. In the case of securities to bearer, you do not attach, as a matter of course, a document of that kind to the coupons, but even in these cases agents and bankers invariably supply certificates of that kind to all those who ask for them, because even now men who have paid in respect of those coupons claim a rebate under the present Income Tax Law, so that these agents and bankers are in the habit, in the course of their normal business, of supplying documents of that character. In these circumstances, it may involve an extension of the number of claims, but it is only an extension, after all, of the business they are in the habit of transacting. They assure me that the inconvenience is very grossly exaggerated, and not only that, but a leading banker whom I saw, who has an enormous business of this kind, told me he had been speaking to several bankers, and that they had also said the same thing to him. May I also point out that these agents are in the habit of getting a certain sum of money, not perhaps a very large remuneration, but I dare say that in the aggregate it comes to a great deal. They get about 4d. in the £ for the work which is generally attached to this kind of transaction. I dare say that will not quite adequately remunerate them for the trouble they will have to take, probably in the course of the next few weeks.
§ Mr. LLOYD GEORGE
The Inland Revenue. The amount is collected on behalf of the Inland Revenue. It is a great convenience to the Inland Revenue, and this allowance is made in respect of it. It may not be quite enough for the 579 next few months, but, taking year in and year out, it is a very fair remuneration. I only point this out because an enormous fuss has been made about the enormous inconvenience that has been created.
§ Mr. BUTCHER
Before the right hon. Gentleman leaves the subject of coupons, will he kindly say what will happen in the very numerous cases where no certificates for the deduction of Income Tax are given?
§ Mr. LLOYD GEORGE
I believe they are the cases of coupons. In regard to dividend warrants and deposits in banks, certificates are attached in both cases, and the only cases referred to by the hon. and learned Gentleman are those of coupons. In those cases certificates are always granted now on application, so that if application is made to an agent or banker a certificate will be granted. I cannot conceive of a banker refusing to grant it. I put the question to one, and he said, "Why should he refuse?" If they do refuse, it will be the very first time they have ever refused a document of that character. Supposing they do, in that case the Inland Revenue will make arrangements to take such evidence as they think fair of a payment of that kind. I cannot conceive of any banker or agent refusing to do that for his clients.
§ Sir FREDERICK CAWLEY
Do we understand that a private individual can send all his dividend counterfoils and the coupon certificate he has received from his banker to the Inland Revenue, and that they will take all the trouble to refund the amount?
§ Mr. LLOYD GEORGE
That is so. My hon. Friend has put it very clearly. That is exactly the arrangement we are making. We are making that arrangement in order to take all the trouble off the shoulders of bankers and agents, and to do the work ourselves. That has been done by Sir Matthew Nathan, the head of the Inland Revenue, and I find from personal inquiries that it is considered satisfactory by the agents and bankers. We felt that we have done all we can, but if there is any other suggestion we are ready to do all we can to take all the trouble off the shoulders of the bankers and agents. There is no better indication of grievances of this kind than the number of letters which come to the Inland Revenue and the Chancellor of the Exchequer. For instance, 580 when the extra 2d. was put on, I received hundreds of letters from people whose incomes range from £200 to £500. They poured in, and I am entitled to say that I read most of them. Those letters indicated that there was a real sense of grievance. The Government did their very best to meet it, and I received exceedingly few letters about it afterwards. I made inquiry of the Inland Revenue, and they told me that before the Instruction was issued making it clear that the deduction was to continue at 1s. 4d., they received hundreds of letters, but from the moment it was made clear and there was no perplexity in the minds of agents and bankers as to whether they should deduct at the rate of 1s. 4d. until there was a vote of this House, the correspondence dropped, and they received very few letters of complaint. I am not quite sure whether I am not entitled to say that we received no complaints from the City after the arrangements were made. If there are any complaints, I am sure the very able and distinguished head of the Inland Revenue will at once do his best to deal with the case made and to facilitate matters. In conclusion, I would say that there have been cases of alterations in taxes before this in the course of a Budget passing through the House of Commons. There have, I know, been alterations in indirect taxes. When you propose no indirect taxes, then the alteration, if there is to be an alteration made at all, is one which is bound to fall upon direct taxation. That is the present position. In these cases there is always inconvenience when you alter taxation. I do not doubt that for a moment, and, of course, it is an argument which ought to weigh with any Chancellor of the Exchequer before he assents to any alteration. We have done our very best to minimise the inconvenience, and I am assured by those most intimately conceited in this class of business that they do not regard it as serious. Whatever it is, the Inland Revenue will be quite able to cope with it and take this burden off the shoulders of bankers and agents.
§ Mr. BUTCHER
I understand that in order to get a return of overpaid taxes the subject will have to apply to the Inland Revenue and not to his bankers. Except in the case where the subject who has been overtaxed is a very expert person, he will either have to employ his solicitor or his banker. Is it to be supposed that people living in remote parts 581 of the country will be able to make out for themselves a list of small amounts deducted from their dividends and their coupons and make it up accurately and be able to send in their accounts and vouchers and the rest of it to the Inland Revenue? Of course they will have to get some expert advice. Without going into business matters very closely, it is obvious that that will happen. They will have to get solicitors to do the work. One of two things will happen. Either these bankers and solicitors will have to work for nothing—and I would ask the Chancellor of the Exchequer whether he expects them to do that—or the subject will have to pay. In either case someone will be put to considerable expense, and therefore I would ask the Chancellor of the Exchequer whether under these circumstances it would not be fair to make some provision for reimbursing the amount of the expense which will be incurred. Why will these expenses be incurred? Because the Chancellor of the Exchequer altered his mind because some Gentlemen behind who formed a "cave," into which they temporarily vanished, brought pressure to bear upon him. Whether it is the fault of the Gentlemen in the "cave" or of the Chancellor of the Exchequer I do not know, but, as a matter of fact, the alterations has occurred, and these unfortunate people will be put to the expense of recovering their overpaid taxes. Take it which way you like, whether it is the fault of the Government or of the cave dwellers, these people have been put to expense, and I would ask the Chancellor of the Exchequer whether he could not in some way make provision for meeting that expense. I do not remember any similar situation which has ever occurred in our generation. The Chancellor of the Exchequer might meet that very unusual situation by unusual action which, at any rate, will be fair to the public, and which will prevent them from having, through no fault of their own, to pay this very considerable expense.
§ Sir J. D. REES
The Chancellor of the Exchequer, in dealing with this question, as it appears to me, practically left out the case in which the chief inconvenience is experienced. He pointed out, and I do not dispute it, that arrangements can be made with a banker. That is so. The Chancellor of the Exchequer dealt both with bankers and with agents, but when he came to the case of the payment of dividends there was evidently some con- 582 fusion in his mind. Even in referring to the payment of dividends and the confusion which arises, he allowed himself, whether by inadvertance or not I do not know, to refer to the case of agents. Who does the Chancellor of the Exchequer think is the agent in the case?
§ Sir J. D. REES
If that is so, the Chancellor of the Exchequer left the worst case out of account altogether—that is the case of the payment of dividends. In that case it is the duty of the secretary of the company, under instructions from the board, to make out the dividends. That is the case where all the extreme trouble and inconvenience is felt, and it is of the extremest, incalculable character. The Chancellor of the Exchequer has a genius for passing by and lightly touching the very subject with which he should be dealing. He came back again and again to the bankers and the agents. The case where the real difficulty is felt in the City is in the case of the payment of dividends.
§ Mr. LLOYD GEORGE indicated dissent.
§ Sir J. D. REES
The right hon. Gentleman shakes his head, and I presume there is something in it. I do not mean his head, but his objection. But the fact is that the opportunity which occurs for the subsequent taking of an account and adjustment in the case of the banker and the agent does not occur in the case of the ordinary recipient of a dividend. He is a man probably having a very small holding in the company, and his dividends may be a very small amount. He is not accustomed to receiving rebates and writing to the Chancellor of the Exchequer or the head of the Inland Revenue Office. He has not got an agent. He probably has not got a banker. Yet men of this sort hold in the aggregate enormous stakes in all the great limited liability companies which carry on business in this country. I will point out how this works in one individual case. If dividends are due you cannot put them off and say you will pay them later, whenever the 1s. 3d. rate which the Chancellor of the Exchequer has verbally announced becomes the law. The company has to pay the dividends with the deduction which the law authorises at the moment, and they cannot wait because the recipients of dividends do not like waiting. They like to get 583 their little bit at once. Therefore the company has to deduct the dividends at 1s. 4d. It has to make a most abstruse calculation. For instance, take the dividends payable early in July and already declared. The shareholder wants that dividend. He is not going to wait till a Resolution of the House of Commons and all these things which he regards as so much surplusage and unnecessary formalities are settled. Take the case of the company whose dividend, already declared, is payable in July. The rate is altered from 1s. 4d. to 1s. 3d. Even in that case, think of the calculations which have to be made! Up to 5th April you have a 1s. 2d. rate, and from 5th April on you have a 1s. 4d. rate, which will subsequently become a 1s. 3d. rate if certain things happen of a hypothetical and contingent character; and if the Chancellor of the Exchequer and his Government survive, and ii everything goes according to scale, a certain method of calculation will come in force. What use is that to the secretary of a company or to the recipients of dividends? They want something clear-cut, certain and immediate in its operation.
Does the Chancellor of the Exchequer seriously maintain that a position such as I have described, in which hundreds of thousands of dividend warrants have to be made out, is a slight inconvenience? Why does he ride away from that on to the case of bankers? He knows that bankers have wealthy clients to whom these small amounts probably do not matter. Between the man who has an account at a bank and a man who receives a small dividend from his company there is a world of difference, which I dare say he does not appreciate, but which nevertheless does exist. His statement has been thoroughly unsatisfactory for that reason, whether founded upon unappreciation of the case or want of familiarity of business. He may have no familiarity with these details, at any rate of company procedure, but that is no satisfaction to the City, which has been thrown into a state of the utmost confusion. The Chancellor of the Exchequer has heard from certain persons whom he consulted that the inconvenience has been greatly exaggerated. The persons he consulted must be people like the poor men whose feet are washed by the Emperor of Austria. They are carefully selected before their feet are washed. The right hon. Gentleman must have been 584 acquainted with these people's views. If he goes into the City and asks the first few men of business he meets in the street whether the inconvenience has been great or small, he will receive an answer in the sense of the few remarks I have addressed to the Committee, and not at all in the sense of the remarks which he has made. This is a matter affecting the business of the City of London. The gap beween the City and the House of Commons is enormous, and five minutes cannot be wasted in stating what is a notorious fact. There is another expression of the right hon. Gentleman's to which I take strong exception. He said this was taking a penny off the Income Tax. It is not. It is simply abstaining from further depredations upon the particular taxpayer whom the Chancellor of the Exchequer delights to plunder. The 1s. 4d. has not become law yet. It was only authorised by the Resolution of the House. These alterations, showing that the Government officials and the Chancellor of the Exchequer in particular cannot make up their minds, are more fatal to business and more disturbing to trade than the higher rate of the two, even if the higher rate had been maintained. I am quite unwilling to let this opportunity pass without expressing a feeling which is strongly held and expressing my regret that the Chancellor of the Exchequer should have attempted to minimise inconvenience which it is hardly possible to exaggerate.
§ Mr. HOLT
This talk about inconvenience is most ridiculous. As a practical business person who has to do with companies, all I can say is that if my staff could not manage all the business they have to do in connection with the alteration of the tax, they would not be worth their salaries. But where does the argument really carry you? I will ask the Committee to see what is the conclusion of this argument about inconvenience. It comes to this, that under no circumstances ought the House of Commons to pass an Income Tax at a lower rate than that originally proposed by the Government. That is a splendid doctrine to be put before the representatives of the people. When we are asked to vote these Resolutions we are always distinctly told that they are maximum rates. That is perfectly understood, and the House has full power and authority to finally fix the tax at a reduced rate. The argument of inconvenience is an argument that we are not entitled to put the tax at a lower rate than 585 that originally proposed by the Government. Therefore, I submit that even if it were true, which I do not believe, that substantial inconvenience has been caused, that in itself would not be the slightest reason for coming to a different decision from that now proposed. The only other point I want to make is this, and I think it ought to be said publicly, that neither I myself nor any hon. Member who has at any time acted with me in the matter of the Finance Bill of this year ever at any time, directly or indirectly, asked that the Income Tax should be reduced. The whole point that we made was that the sum total levied by taxation ought not to be greater than the sum total of the expenditure authorised. We never attempted to earmark any particular tax for reduction, and I have no reason to suppose that there is any sort of unanimity amongst my Friends as to what particular tax they would have liked to see reduced. It is not necessary to make that statement except that some people do not know as much as they ought to do. But it would have been a most improper thing for any Government to consult individual Members of the House of Commons as to which of several taxes they wished reduced. That is a responsibility that the Government must take on their own shoulders and come forward with their own proposal. Therefore, I have only to say that I certainly have great satisfaction in supporting the Amendment.
§ Mr. BONAR LAW
I am sure I listened with surprise to the remark of the hon. Gentleman (Mr. Holt), to whose views I generally pay some respect, when he said that there is no grievance in regard to the inconvenience caused by this change. It is really not, as he said, a question whether or not a reduction of the rate should be made. Of course, every one admits that there are occasions on which such reductions should be made. The whole point we make is that this alteration was made as the result of proposals put forward by the Government without proper consideration, and that if they had given them proper consideration the change would not have been necessary. The change has caused immense inconvenience to a vast number of people throughout the country.
§ Mr. BONAR LAW
Certainly not. I tried to make my meaning clear. Undoubtedly such changes may sometimes be necessary, but in this case the necessity arose simply through want of proper thought beforehand—through the Government not giving proper consideration to their proposals before making them. I really cannot see how anyone who considers this important subject can say that there will be no great inconvenience, and I venture further to say that the statements made by the Chancellor of the Exchequer himself have proved to Members of the House who are not familiar with the subject that they do not understand how great the inconvenience is. It is perfectly true that you can arrange that bankers, will not be put to great inconvenience by the arrangements he described. They can hand over the surplus to the Inland Revenue, and they have done it. But what about the individual who has to get it back? How are they to get it back? Take, for instance, the case referred to in the newspapers a few days ago in a letter from a chairman or secretary. He says that he has 10,000 shareholders, and that he has issued to everyone of these dividend warrants, deducting what has proved to be the wrong amount of tax. There are 10,000 shareholders to get it back. Is everyone to make a claim to the Inland Revenue to get back what has been overpaid? If that is to take place in the case of these deductions from dividends, it means that a large number of the taxpayers will never get the relief at all. It is certain that a great part of it will never be returned, and this penny rate will be imposed on a great number of His Majesty's taxpayers. I presume that the secretary or the accountant of every company in this country will have all this to go through, and the trouble of readjusting this tax, and paying back to the individual shareholder the amount recovered from the Inland Revenue by this arrangement. There is no other way of doing it that I can see.
§ Mr. BONAR LAW
Very well, if they do it in the second half-year, that means that the secretary or the accountant of a company has to deal with each individual shareholder, and go through all the trouble of giving back the deduction which has been made. I say that is the way it will be done. But what happens if the 587 shares are sold in the interval—as one man is a shareholder to-day, and is not a shareholder afterwards? What becomes of the refunding in that case? Is it not perfectly obvious that the amount of inconvenience is excessively great. I do not say that that in itself is a reason for not making the change, but, I say that it is a reason for thinking out beforehand what you are doing; for considering the objections made by my hon. Friend, and taking them into account before making the proposals, so as not to have a revolt against them. As to the defence of the hon. Gentleman, I do not think his heart was much in it. He is going through the usual experience of people who get into his position. He has got into a cave and he does not find it a comfortable place to live in. He wants to get out, and he is very glad to get up and support the defence of the Chancellor of the Exchequer, but I am sure, if he considers it, he must know the change is causing the people of the country a vast amount of absolutely unnecessary inconvenience.
§ Sir F. CAWLEY
I do not think anybody will say that there will be no inconvenience in consequence of the proposed change. There is bound to be inconvenience, but the question the Committee have to consider is whether the Chancellor of the Exchequer is taking the best means to minimise the inconvenience and remedy it as far as possible. The hon. Member opposite (Sir J. D. Rees) has referred to the calculations which will have to be made when the rate of the tax has been altered, and he has spoken of the difficulties in apportioning different parts of dividends for two or three months. He stated that special calculations will have to be made.
§ Sir F. CAWLEY
The hon. Gentleman referred to the calculations which will have to be made with respect to two or three months' dividends in order that, whenever the tax is altered, the proper amount may be refunded. I would point out that such calculations have to be made whenever an alteration in the tax is made. There are two months at, say, 1s. 2d. in the £, and three months at 1s. 3d. That always happens when there is an alteration in the Income Tax, and it is not at all peculiar to this particular case. It seems to me that no course which the Chancellor of the 588 Exchequer could possibly have taken would minimise the inconvenience so much as the course he has taken, because, when a man receives a dividend, he, of course, receives a warrant for it, and all that he will have to do is to claim a refund of the amount which represents the deduction which has been made in respect of the extra penny. He need not go into the calculation. All he will have to do is to send the counterfoils to the Inland Revenue and ask the Department to count these and to send back what is due to him. Some of the taxpayers may possibly send their claims to the secretary of the company, and I do not think it is too much to ask him to get back for the shareholders the money which ought not to have been paid. I am sure any company would gladly do that. The secretary of the company would get the money from the Inland Revenue, and he would then pay it back to the individual shareholders. There is no more convenient way of doing it, and I think we must thank the Chancellor of the Exchequer for the way he is trying to minimise the inconvenience caused to shareholders.
§ Mr. JAMES HOPE
I only want to put one point to the Chancellor of the Exchequer, and that is, for how long a period will the deduction continue to be made at 1s. 4d.? Circulars have been issued stating that it would be made until a vote of this House alters it. What I wish to know is—will a vote of this Committee alter it, or will it be a vote of the House on the Report stage, or will it be a vote of the House on the Third Reading of the Bill when Mr. Speaker will come forward certifying that it is a Money Bill? I hope the right hon. Gentleman will make that clear.
§ Mr. WORTHINGTON EVANS
We have had a charming prospect put before us by the hon. Baronet (Sir F. Cawley) who has been put up to defend the Government. Let me draw attention to what companies are likely to do. The hon. Baronet thinks that a company when it receives a claim from a shareholder for a very small fraction of a penny will then write to the Inland Revenue and ascertain from that Department how much is due to the individual shareholder, and that, having received a reply, he will draw a cheque or send a postal order, or remit by means of the coin of the realm, to repay the fraction of a penny. There are companies with 10,000 shareholders.
§ Mr. WORTHINGTON EVANS
The hon. Gentleman says that is reducing it to an absurd proposition. Take the case of a company issuing dividend warrants for six months, and from which the fraction of a penny has been deducted as Income Tax. I read in the "Times" the other day of a company, with respect to which an illustration was given. I have not the letter before me, but I think I can from memory state the exact figure. For part of the year the tax was calculated at one rate, and for part of the year at another rate. The average was 1s. 3.24d., or, roughly, 1s. 3¼d.
§ Mr. WORTHINGTON EVANS
It always happens when there is an alteration in the Income Tax, but what does not happen is the throwing upon the shareholder the duty of recovering the amount of the fraction he is entitled to. As I understand the statement of the hon. Baronet, the shareholder has two alternatives. He can either send the top half of the dividend warrant to the Inland Revenue and claim from that Department, the Inland Revenue making the calculation for him, or he can communicate with the secretary of the company, the secretary of the company can communicate with the Inland Revenue, the Inland Revenue can refund the amount to the secretary, and the secretary can repay to the shareholder some curious little sum like 2s. 1 2–5d.
§ Mr. WORTHINGTON EVANS
That is to go on in a vast number of cases. I did not understand that that was the proposition of the Chancellor of the Exchequer. I think the right hon. Gentleman's proposition was very much easier than that, and the hon. Baronet got up to defend it. The right hon. Gentleman proposed, not that secretaries of companies should repay the shareholder—if he has not proposed that, I hope he will—but that the individual shareholder should send the top half of the dividend warrant to the Inland Revenue in all cases, and that the Inland Revenue should refund the amount to the taxpayer.
§ Mr. WORTHINGTON EVANS
I am going to take the individual case. Supposing a man receives dividends from ten different companies, it is relatively simple for him if he takes the whole of the ten top halves of the warrants, sends them to the Inland Revenue, and gets the amount back from that Department. But if he is put at the mercy of the companies, he has to ascertain first whether a company in which he is a shareholder is making a claim on his behalf. He will have to write all round to these ten companies to find out whether they are making claims, or whether he himself will have to make the claims, and there will be endless confusion. It is no use for the Chancellor of the Exchequer to shake his head. This is really a practical difficulty which he is bound to face. I hope that he will see his way to lay down one course for the taxpayer to take, and that is to claim from the Inland Revenue, and there will be far less confusion if that is done. If you are going to have each company at its own option either dealing direct with the taxpayer or else saying, "We will have nothing to do with the taxpayer. We have simply paid what we were asked to pay. You must go to the Inland Revenue," then there will be enormous confusion, and no one will know from whom he is going to get his money. I would like to ask the Chancellor of the Exchequer also what he is going to do with another class of case. Take the common case of holding an American ordinary railroad stock. It is the practice for American railroad common stock to be registered in what are known as big names. They are registered in any fairly well-known name in the City, perhaps a banker's name, and the actual possessor of that stock has the piece of paper with the endorsement on it of the registered owner's name. If that registered owner is, as frequently he will be, a member of a banking house, the coupons find their way to that banking house and are paid. But there is no record as to who is the owner of the American common stock at all except the registered owner.
When the registered owner pays over the dividend or interest warrant upon that stock, he will deduct—he has been doing it recently—a tax at the rate of 1s. 4d. for the period during which that tax is in force, and at the rate of 1s. 2d. for the earlier period. What is to happen to the taxpayer who has had that deducted? Is he to go back to the registered owner of the stock and say, "Please give me the 591 fraction of a penny due to me," or is the claim to be made on the Inland Revenue? And how on earth will it be possible to identify either the owner or the person entitled to receive the dividend on the stock? The complication does not end there, because it is the constant practice in those classes of coupons—I am now rather referring to financial bonds—to be the subject themselves of sales. They change hands over and over again, and I do not believe that with any machinery whatever you could possibly be sure that the tax gets into the hands of the person who has really paid it. It gets perhaps into the hands of the last purchaser, but he is in effect obtaining a present because he is obtaining more than he actually bought, seeing that a greater taxation has been met from the gross sum, which has now to be repaid, so that he would be actually receiving more than he paid for, while the person who ought to get the benefit, the person who pays the tax, will never get it. I cannot suggest myself any means of putting that back into the hands of the person who is entitled to it, but I am quite sure of this, that as regards the company divdends the Chancellor of the Exchequer ought to make up his mind which of the two courses he is going to take, and that he ought not to allow both those courses. The bankers have been accustomed to receive 4d. in the £ from the Treasury for the Income Tax which they pay from the subject. Is that 4d. in the £ to be increased this year to compensate them for the additional trouble to which they are going to be put? And another question is: Has the Chancellor of the Exchequer made any estimate of the cost of the enormous amount of extra work which is going to be thrown upon the Inland Revenue, and especially upon the claims repayment office?
§ Mr. DAVID MASON
I desire to endorse what has been said by the previous speaker with regard to the common stock, and I do hope that the Chancellor of the Exchequer will have one rule, and one rule only. The usual custom when a shareholder holds ordinary stock is to claim from the preceding seller. Therefore if the company, as suggested by the Chancellor of the Exchequer, is to have the option either of getting the amount from the Inland Revenue and repaying it or referring the shareholder to the Inland Revenue, then the obvious course followed by the holder of the common stock would 592 be to claim from the preceding seller, and he in turn would have to claim from his preceding seller, and, as the hon. Member pointed out, you can imagine that the probability is that only one or two possibly would get this rebate, and that injustice would be done to others in addition to adding to the confusion already referred to. I hope therefore that the Chancellor of the Exchequer will make it perfectly clear that the Inland Revenue and the Inland Revenue alone will have the distribution to all holders of stocks of this kind of moneys which have to be repaid. But I rise to oppose this deduction for another reason. I hope to be able to give more weighty reasons than those of inconvenience, to which reference has been made. I listened with astonishment to the remarks of the Chancellor of the Exchequer when, as he thought, he lightly disposed of this point of inconvenience. I would ask the Chancellor of the Exchequer to use his own common sense. As a lawyer he has had some experience of office work, and I would ask any hon. Member who has any experience of office work to take just the concrete case put by the hon. Member for East Nottingham, which is very similar to the case which I put myself on the Second Reading, the experience which was given to me of a managing director of a company who had just made out the dividend warrants. I would ask the Chancellor of the Exchequer, what would he say if he were connected with a great concern and were asked again to go into these calculations and to make out fresh warrants? That it would necessarily involve inconvenience is so self-evident that it is not necessary to appeal to a banker or to any other human being to show that it means additional labour. The question before the House is: Was there or was there not inconvenience in this proposal? I think that it has been amply demonstrated on both sides of the House that there is inconvenience, and it is better for us to admit it.
I pass from that to the actual proposal. I would ask the Chancellor of the Exchequer whether he would not reconsider this proposal of reducing the Income Tax from 1s. 4d. to 1s. 3d. The reason which I ventured to give on the Second Reading, and which I understand received some consideration from the Treasury, though the right hon. Gentleman did not make any reference to it—I hope perhaps he may be able yet to give his views on the subject—was this: As I understand the position, 593 from the Debate which we had on the Persian oil proposition, it is proposed to utilise certain balances which now exist for the redemption of debt to take shares in this Persian Oil Company. The amount is something like £2,000,000. The right hon. Gentleman the Member for Fulham drew attention to that procedure, and the point he made obtained a considerable amount of support on this side. He protested against this continual raiding of the Sinking Fund. The amounts paid into the Old Sinking Fund ought to go automatically for the redemption of debt, and, as the right hon. Gentleman pointed out, when that sum was voted by this House there was no idea of any oil concession in Persia or anywhere else. What I would suggest to the right hon. Gentleman is this, that those balances should be allowed to go for redemption of debt. That of course would still necessitate the raising of some £2,000,000 this year for this oil concession. And that I submit might be done by leaving the Income Tax at 1s. 4d. It would just produce the £2,000,000 necessary for the purchase of the oil concession in Persia. That, I think, would be a sound financial proposal. It would be paying for it out of our revenue. I hope that this proposal will commend itself to Members of the House on all sides. It would be keeping up our traditions and maintaining our Sinking Fund operations, and would also get rid of this inconvenience. I hope that the Chancellor of the Exchequer will yet give some consideration to this proposal. I submit that it is in accordance with our best traditions, and that it will get rid of a considerable amount of unpopularity attaching to him in the City and throughout the country on account of this inconvenience. But apart from that, because that is not the real reason as pointed out by the Leader of the Opposition, I would suggest that this alteration should not be made, because of inconvenience, but for the much more weighty reason which I venture to submit to the Committee, and I hope, therefore that, if it is not too late, the hon. Gentleman will in the interests of sound finance give his consideration to this proposal.
§ 5.0 P.M.
§ Mr. PRETYMAN
I think that the Committee will realise that this is a matter of importance, quite apart from the question of inconvenience on which I think enough has been said to show the Chancellor of the Exchequer that he passed very much too lightly over it. He seemed to think that 594 a few smooth words could get over the whole thing. I think that he understands now that the difficulties are great. There is some force in what he said, that whenever this House does alter taxation there has of necessity to be a certain amount of inconvenience. I would say that if the inconvenience results from the reduction of taxation for ordinary reasons, that inconvenience would be borne with a better heart. But what the taxpayers look at is, whether this inconvenience is necessary at all. Beyond that the speech of the hon. Member for Coventry reminded us that we come to greater questions still. The right hon. Gentleman the Leader of the Opposition dealt just now with the question whether the inconvenience need have occurred at all, and he pointed out that the objection which we take to this, and all the trouble which it has caused, are due not to the fact that the change has been made, but the fact that there was any necessity for making it, which obviously arose from the total disregard by the Government of the ordinary constitutional practice of the House. The Chancellor of the Exchequer obviously thought that he could ride rough-shod over all canons of finance which bound his predecessors. He has departed from those canons. We on this side of the House were powerless to prevent him. Fortunately, by the action of the hon. Members on his own side of the House, he has been forced to make a change, a change which ought never have been necessary, because it was the right hon. Gentleman's duty to prepare a Budget which would be a constitutional Budget and from which he would not find it necessary to run away as soon as attention was called to it. I think that the really serious problem which arises on this Amendment is not the inconvenience to which the taxpayer is being subjected, but that it really means a new Budget. That is the real position, and we cannot consider this proposal of the Chancellor of the Exchequer as though it were merely an isolated question of whether the Income Tax should be 1s. 4d. or 1s. 3d. We have to look at it from this point of view, that there is a reduction of two and a half millions in the demand made on the taxpayers, and under those altered circumstances, we have to consider the question on wider grounds than were taken by the hon. Member for Coventry. Under those altered circumstances, are we raising the necessary increased taxation in the best 595 possible manner for the country and the taxpayers? That is the real issue. If the Chancellor of the Exchequer had originally budgeted for this reduced sum, would he have levied the taxation in the form now proposed? I do not think for a moment that he would. He passed over the thing in his explanation to the Committee very lightly by saying that he merely had to consider the question as between reducing the new taxes or reducing the old taxes—two alternatives. This is no question of two alternatives at all. There is no question as between old taxation and new taxation. If the right hon. Gentleman had considered the matter and reviewed the whole finance of the country, he would have been able to introduce a Budget to cover the whole of its needs.
Does the Chancellor of the Exchequer suggest that had he known about this two and a half millions, for instance, he would have made the change in the Death Duties now proposed? It is not conceivable that any Chancellor of the Exchequer would have proposed this increased scale, particularly that part of it which breaks contracts for possibly small sums of money. I cannot believe that the increase could possibly have been proposed, if the Chancellor of the Exchequer had been able to think out his proposals as a whole. Why do we have it in this form? We have it in this form because, in the unconstitutional action of the Chancellor of the Exchequer and the Government, they found themselves in the position, instead of being able to consider the whole finance of the country before the Budget is introduced, of having to act in a hurry, of having to act under pressure, and all they are able to do is not to bring in considered proposals to the House to make a change, but simply to consider in haste, under pressure and on the spur of the moment, what alteration in the Budget will cause—I give them all credit for that—the taxpayer and the country the least inconvenience. Is that a position in which the Government ought to find itself, or the Committee ought to find itself? I submit that it is the business of the Committee to consider the finance of the year, and I say that we have no right, if we believe that this reduction to 1s. 3d. is not the best form that the taxation can take, to provide the sum required, to vote in favour of this Amendment simply as a matter of convenience. I, for one, am strongly of opinion, when we are considering and reviewing taxation as a whole, and when 596 money is to be raised, that a graduated Income Tax is the fairest tax that can be imposed; and I am also strongly of opinion that no Chancellor of the Exchequer, having really the time and opportunity to consider the finance of the country as a whole, as it ought to be considered, would have proposed this reduction.
We should have had a reduction in some other form, and I, for one, feel that I certainly cannot support this reduction, because I believe that the money could have been better applied in many ways which require to be reviewed as a whole and taken into consideration. There is the question whether the Sinking Fund is to be raided preferably to this reduction of the Income Tax.
§ Mr. LLOYD GEORGE
I agree that it is a matter for consideration, but there is the question of raising taxation for a capital purpose—the question of the Persian oil purchase.
§ Mr. PRETYMAN
There the right hon. Gentleman is confusing the issue, for which he has great ability. The point is perfectly plain. Is taking the money from the Income Tax the only alternative? The suggestion which I have made was that this was a matter which, if a capital matter, ought to be dealt with by borrowing money in the ordinary manner, by raising the money for a capital purpose, and hot by raiding the Sinking Fund. I certainly do not consent to using the Income Tax in order to raise money which is to be applied for the purpose of oil or any other purpose. I believe it far preferable to keep the Income Tax at 1s. 4d. than to raise the Death Duties to the figure now proposed in this Budget. Further than that, and even more strongly, I consider that the claim of the ratepayers comes before the claim of the Income Tax payers. I and a great many of my hon. Friends are of that opinion.
The Chancellor of the Exchequer said that he had only two courses, but he omitted the obvious course—as he very often does—by raising minor points on which he thinks he has a better case, and he carefully passed over the really important point as to whether this reduction of the Income Tax ought to be made, in view of the claims of the ratepayers. He passed that over absolutely, but many 597 of us on this side of the House feel strongly that the claims of the local ratepayers are insistent, and that they should be met even at the extra cost of such a high Income Tax as 1s. 4d. We are of opinion that no case whatever has been made out by the Government for refusing this relief. We shall come to the details when we discuss the proposals of the Government. I do not know whether it would be in order to discuss them, but I do not think it would be desirable to discuss the details of many of those Grants, though I do most strongly submit that the money which is due to the ratepayers is money which is overdue, and that the Chancellor has failed to make good his case. The reasons which he has given for refusing the money are reasons which I do not think the Committee can possibly accept as valid. Therefore, I, for one, believe that this reduction in the Income Tax is, on the widest grounds, a mistake, and that the whole Budget is stultified by the action of the Chancellor of the Exchequer and of the Government. Therefore, I, for one, shall certainly not support the reduction.
§ Sir H. ELVERSTON
I only want to ask the Chancellor of the Exchequer one question, and it is this: As hon. Members know, bankers have a disagreeable habit of charging interest on any overdrafts which they may have allowed their customers to make. At the present time, I believe I am right in saying that there is no provision for those customers to secure the rebate of Income Tax in respect of that interest which is charged. It is allowed at times, but only as a favour and not as a right, and I should like to ask the Chancellor of the Exchequer whether, whilst he is making his arrangements, he would also make an arrangement to provide that these persons shall be able to secure a rebate of Income Tax in respect of interest which has been paid to banks on overdrafts.
§ Mr. T. M. HEALY
The question of inconvenience is one which is well worthy of consideration, but I think that there is another important question which has to be considered by the House. I listened with great attention to the hon. Member for Hexham (Mr. Holt) when he made his statement, and what I am anxious to know is how the hon. Member for Hexham succeeded. I want him to tell us something about the facts of the case. Let me put the point in this way. When you are dealing with ordinary legislation in the House 598 —that is to say, ordinary enactments for the good of the country—you are undoubtedly upon fair ground when you approach the Minister from behind, and not from the front, and say that various inconveniences may arise in respect of particular legislation, or particular Clauses to which objection is taken. I think that is fair. But the hon. Member for Hexham has laid down a proposition to which I cannot give my assent. He seems to think that when you have succeeded with the Minister—by what means I do not know, perhaps by what I might call millionaire power—it is not legitimate to suggest to the Chancellor of the Exchequer that a particular one of your pockets should not be displenished, if I may use that word. Surely, if it is right for millionaires to approach the Chancellor from behind, it is equally right that they should have laid before him some further proposition, say, as to sugar, salt, or Persian oil, but the business that they influenced him upon was the business of getting some more money in their pockets. I respectfully maintain and say that it is of importance to this House to know what has been the procedure of the millionaires, for this reason: The Chancellor of the Exchequer budgets for the community, having regard to the needs of the community. We know very well, in the discussions about fiscal reform questions, that in regard to taxes of that kind there was great anxiety that additional burdens should not be laid upon the poor. We know the way in which the Chancellor of the Exchequer looks up and down the country for new subjects of taxation or remission, and the Chancellor of the Exchequer in all cases proceeds upon principle, and the House is to have the exposition of that principle. In this case the Chancellor of the Exchequer, having ridden the high horse, is suddenly confronted by a millionaire, and immediately, without any knowledge on our part of the processes which induced him to shrink from the encounter, finds that the taxpayers are not to be charged a sum of money two and a half millions in extent, which on an earlier day of the Session we were told it was absolutely necessary should be squeezed out of them.
All this has been done in secret. All this has been done in the dark. There has been no Debate about it in this House, and the Member for Hexham (Mr. Holt) is so modest and retiring that he does not even 599 tell us how he has won. Hitherto we have had our metaphors in this House, drawn in one case from the guillotine, and another the kangaroo, and I would suggest "Hexameter" as one of the newest of the new Parliamentary processes, and one apparently as to which that hon. Member alone preserves the secret. I would like to know the secret, and especially those of us who come from Ireland, because we might elect a few millionaires very gladly in order to get two and a half millions off our taxation. I cannot conceive an Irish constituency doing better service than in securing the remission of two and a half millions of taxation simply by electing a millionaire. That this matter is not a light one, I would suggest. The Income Tax proposed by the Chancellor of the Exchequer was 1s. 4d., now to be reduced to 1s. 3d. Let the Committee remember what the Income Tax was when Mr. Gladstone offered to the country to abolish the Income Tax. At that time it was the contemptible sum of 3d. When Mr. Disraeli came in he reduced it to 2d., and the yield of a penny at that date was only a million of money. A penny now yields two and a half millions of money, and the Chancellor of the Exchequer tosses his pennies about like pancakes. It is only forty years since those days, and now we have got a Budget of over two hundred millions of money, and therefore I would respectfully ask under those circumstances, when a penny produces this enormous sum, that we should treat even a bawbee with respect, and that we should be told by the Government upon what principle it is, having put, so to speak, their pistol to the throat or the head of the taxpayers of this country, they suddenly see, under the inspiration of the millionaire, that there is no longer any necessity for this imposition. Upon this point the House has not been taken into the confidence of the Government. The successful brigadiers—I mean millionaires—have not taken us into their confidence, and I respectfully and humbly say we are not unworthy of their confidence, because from our point of view we are as much affected in our small degree by their taxation as they are themselves.
What, now, is to be thought when you are considering this question of finance of the wisdom of the Treasury last year? It is, of course, a subject of joke whenever anybody in the House gets up and says a word against the Treasury. When you attack the War Office or the Navy you are 600 supposed to be discharging a sacred duty to your country, but I have never known the War Office or the Navy or the Admiralty, or whatever they may be called, to behave in the way in which the Treasury behaves. We do not know who they are. Their names are secret. I should like to see them, especially after the blunders they have recently made, treated in the way that the Chinese treat their officials and put in a bamboo cage in the Lobby, so that we might see who the creatures are, because, of course, it is on their advice the Chancellor of the Exchequer acted. You who vote these moneys at their instance and obey their behests year by year, what are you to think of the Statute which they insisted on passing last year, and which has been the means of bringing about all this inconvenience to Income Tax payers? Last year they said that in order to meet the case brought by Mr. Thomas Gibson Bowles they must have the Provisional Collection of Taxation Bill. They came down and for days and days they kept us here, and when the simple suggestion was made to pass the Resolution and authorise the Chancellor of the Exchequer to give a certificate founded on the Resolution they would not have that. They thought that would be too simple, and that they must provide something else in their wisdom. That wisdom is not a year old, and they are turned into fools within the twelve months. Because what happened? They insisted on doing what never had been done before, namely, giving legislative effect to a Resolution of the House of Commons and making that Resolution practically statutory. So that instead of the good old, convenient, elastic custom which this House recognised, and which the country and the judges had recognised for centuries, they provided and said that the only way was to give the Resolution statutory effect, and in the very next Budget they are made fools of while this House has to confess its own blunder, and we are now making apologies to the constituencies outside and to the Income Tax payers, and we are devising new plans.
What are the new plans? You are to get your Income Tax and get certificates for this, that, and the other, and some three or four thousands of people, it is like licking stamps under the Insurance Act, are to be troubled, and the regular revenue collecting departments of the country are to be troubled, and for what—because of some genius of the Treasury who insisted 601 that this Resolution should have statutory effect, and anybody who gets up to criticise is a blunderer and is an idiot, and is incorrect, and knows nothing whatever about it, and he is the greatest ass that ever lived. Then in one short revolving year we know who really are the great asses. I, therefore, say that the first thing to be done to put our House in order is to repeal the Bowles Act and substitute new provisions for it, and substitute definite provisions which will not land us in the mess in which, admittedly, we are now floundering. Lastly, I would like to say on this question of taxation, which is so vital, so far as Ireland is concerned, that I think the Government might remember that it is we who have to pay, and it is they who are getting the salaries. I quite agree we are getting £400. I did not vote for it, and I never will vote for it. I take it because others are taking it. I do think that the Government in the management of taxation have a right to come down to this House, having made the blunders that they have made, and to confess that the criticisms that have been directed against them have been just criticisms, while instead of that I have not the smallest doubt that we shall hear the old melodies sung, perhaps a somewhat little broken as to the great wisdom of the genius who presides over this great office of the Treasury, and as to the great fault of anybody who ventures humbly to criticise them.
§ Mr. CHARLES BATHURST
It seems to me there is a greater danger of the merits of this proposal being overlooked in the criticism, well-founded criticism, of the mechanical difficulties of the proposed deduction. I say quite unhesitatingly, in my opinion, the interests of the ratepayers, and particularly of the rural ratepayers, have been sacrificed by considerations of sympathy with the Radical plutocrats. I protest so far as those for whom I may be interested are concerned against the particular procedure by which those alleged difficulties have been overcome. I myself do not like high taxation, but I dislike it all the more because, I am sure, whatever form it takes at least two-thirds of it falls upon those who are least able to bear it, namely, the working classes of this country. We are assured on no less an authority than the representative of the Treasury that the ratepayers, although they have been repeatedly promised this relief contained in the original edition of 602 this Bill, cannot be relieved and that promise carried out unless the Income Tax is fixed at a sum of 1s. 4d. in the £. If that is so, what are the difficulties that are standing in the way of the Chancellor of the Exchequer's repeated promises to the local authorities being carried out? The hon. Member for Hexham (Mr. Holt), in future to be known as the "Hexameter," told us that his difficulty and that of his colleagues was that Parliament was not providing as to how the money was to be expended. That is all very well, but when you come to look at the Bill itself you find that the sole reason why Parliament is not providing in the Finance Bill for the expenditure of this money is because a certain Preamble has been put in front of Clause 13 which professes to provide for the relief of local ratepayers. The right hon. Gentleman suggests that he is faced with two alternatives. One of them, he says, is to reduce the amount of indirect taxation, and the other is to reduce the amount of direct taxation as represented by the Income Tax and the Super-tax. He has not apparently thought of the most natural alternative, namely, to tear up the condition precedent to this relief contained in Clause 13 of the Finance Bill.
This condition precedent, as we all know, involves the setting up of vast new machinery of valuation on an entirely new basis, and against which, by the way, a majority of his own Committee has reported. The setting up of that machinery will also, we know, involve various additional Bills which have not yet been presented to the House. Surely, the natural course which ought to have been taken in fairness to the local authorities and in pursuance of his own promises was to give the relief this year, so repeatedly promised and to be found in the Finance Bill for the year, without insisting on any condition precedent, and bearing in mind his own promises were wholly unconditional, and were made with the object of relieving the local taxpayer, that was the only remedy to adopt, and he did not adopt it. Because an appeal was made to him—I do not care by what motives these Gentlemen were actuated—by the richest men in the House pitting behind the Treasury Bench. What is the result? The result is that a penny is to be taken off the Income Tax, with enormous inconvenience to bankers and various joint stock companies, and the repeatedly promised relief is to be deferred to the Greek Kalends. All I want to say about this is that the right hon. 603 Gentleman has adopted a course which will certainly not be misinterpreted in the country, and about which the local authorities have already begun to express very strong protests. The particular Gentlemen who protested against the Budget proposal represent an industry which has been thriving above all other industries during the last two years. They represent the shipowners, whose freights in the last year have been higher than at any other time in the history of British shipping. They are the Gentlemen who, above all others, could afford this extra penny in Income Tax. These Gentlemen sitting with all their wealth on that side of the House—
§ The DEPUTY-CHAIRMAN (Mr. Maclean)
The Debate has taken rather a wide turn, but I cannot say that the remarks of the hon. Member are out of order.
§ Mr. C. BATHURST
There is something unconvincing and, to my mind, insincere when you see these wealthy Gentlemen desiring an abatement in a high Income Tax—Gentlemen who, we know, can perfectly well afford to pay this additional taxation if the country requires it to be paid—when all the time their merciless hand is directed against those who happen to be interested in land, and who receive a paltry 2 per cent. or 3 per cent. out of their property, while they themselves receive normally nothing short of from 15 per cent. to 20 per cent. on their capital.
§ Mr. WHITEHOUSE
I desire to submit another point of Order. Is it in order on this Motion for the reduction of the Income Tax to discuss the investments of these Gentlemen, or the rate of interest which they receive.
§ The DEPUTY-CHAIRMAN
The line that the hon. Member seems to be taking is that a certain group of Members, representing certain industries in the country, have taken a certain line which, from his point of view, has brought about the proposal now before the Committee. I did not gather that the hon. Member was making any personal references. If he was doing so, I would ask him not to pursue that line.
§ Mr. C. BATHURST
I do not think I need put you to the trouble of interfering 604 with my further remarks, as I have no desire to be at all personal. I only state as a fact that these Gentlemen, who see no harm whatever in the serious and crushing taxation of those who happen to be interested in one form of property, namely, land, are the first to protest, although they themselves admittedly are interested in a far more remunerative industry, when the Income Tax reaches so high a level as that contemplated by this Bill. I shall take every opportunity of pointing out how extremely unfair it is to keep on cumulatively piling up the taxation on land and then, when the pinch comes in the form of a high Income Tax, to afford some relief to those who are interested in a far more remunerative form of property. I sincerely hope that the Committee will reject this Amendment, thus showing their own honest belief in the purposes that were put forward in the Budget speech of the Chancellor of the Exchequer, and their lack of sympathy with those who, without any good reason, have obtained the relief contemplated in this Amendment.
§ Mr. HAYES FISHER
The Chancellor of the Exchequer, in moving his Amendment, led the Committee to believe that there was really only one argument that need be considered when he proposes to reduce the Income Tax to 1s. 3d., and that was that the reduction had occasioned a certain amount of inconvenience to bankers and people of that kind—inconvenience which, he said, had been grossly exaggerated. I think that that is almost the last argument to which we need address ourselves. It is a good argument as far as it goes. No Chancellor of the Exchequer ought to cause unnecessary inconvenience to the great banking and commercial community. But the Chancellor gives away his own case when he says that the inconvenience has been grossly exaggerated, and at the same time shows what tremendous inconvenience has been caused by the mere fact that, for the first time in the history of the country, he is going to lend the whole staff of the Inland Revenue to the commercial community, in order that that elaborate staff, which will no doubt have to be largely increased, may see that hundreds of thousands of people obtain the repayment of money which ought never to have been taken from them if the Chancellor of the Exchequer had given proper consideration to his Budget. There is some inconvenience in the City. Like all Chancellors of 605 the Exchequer, the right hon. Gentleman evidently has a large acquaintance among bankers. If he will ask them, he will find that even the banks are adopting different processes, one bank adopting one process, another another. One banker of whom I have heard is, notwithstanding the circular of the Chancellor of the Exchequer, so confident that the right hon. Gentleman will carry his point and reduce the tax to 1s. 3d., that he is actually making a deduction of 1s. 2½d.—1s. 2d. for the first three months and 1s. 3d. for the other two. The Chancellor of the Exchequer will find an enormous amount of real concern in the banking and commercial community as to what deduction they ought to make from the thousands of dividend warrants they have to dispatch in the first week of July.
However, I admit that if the question of convenience or inconvenience was the only argument, we should not have very much to say. If there were good reasons for making the reduction from 1s. 4d. to 1s. 3d., the argument as to convenience or inconvenience might stand aside. For my own part, it is not on that ground that I find myself wholly unable to vote for this reduction. Indeed, I feel as if I ought to take the bolder course and vote against it. Certainly nothing could induce me to vote for the reduction, because it would be entirely inconsistent with the whole attitude that I have adopted for the last seven years as regards local finance. During that period, inside this House and outside, by deputations by no means always of a party character, by motions and by many speeches, I have always advocated that pensonalty should make a far larger share of contribution towards the expenditure on such matters as education, roads, police and Poor Law. If I voted to-day for this reduction, I should be voting practically to deprive the local authorities, according to the White Paper, in England and Wales of no less a sum than £1,767,000; in Scotland, of £314,000; and in Ireland, of £172,000. This money was promised in the White Paper for the period between 1st December and 1st April. All this money was to go to enable the local authorities to rescue themselves from that awful plight in which the Chancellor of the Exchequer so constantly told us they were—verging on bankruptcy and unable to discharge their ordinary duties. The President of the Local Government Board used even stronger expressions, because he said:—It is practically impossible that the nation will be able to clean itself from the impurities which still attach 606 to it, and to remove the social evils which we all agree on both sides of the House demand to be cleared, unless we increase immediately the financial resources of the local authorities.I want the nation to be able to clean itself from these impurities. I want these social evils to be removed. I want social reform, and always have wanted it. Therefore, I cannot consistently, after all the Motions I have moved, the speeches I have made, and the memoranda I have written for the London County Council, vote for the reduction of the tax, when I know that by so doing I am taking away the only means by which this money can be placed at the disposal of the local authorities, so that they can fortify themselves and go forward with the work which we all agree is necessary from the point of view of the community. On the larger question whether personalty ought not to contribute a much larger share of this expenditure, I thought the House was at last really agreed. I thought that the only objection had come from probably the richest of the millionaires who sit on the Benches opposite. The right hon. Baronet the Member for Swansea (Sir A. Mond) complained of the speech of the President of the Local Government Board. He said:—He (the President of the Local Government Board) explained to the Committee what seemed to me a most monstrous proposition. One of his propositions was that in his opinion personalty ought to contribute more to local rates. I confess"—And I agree with the right hon. Baronet—'that seems to me to be an extraordinary doctrine to come from a Liberal statesman on the Front Bench. It is contrary to the traditions of the Liberal party.We now know that the right hon. Baronet the Member for Swansea is actually leading the Chancellor of the Exchequer to-day. He has evidently brought the right hon. Gentleman round to his point of view, that personalty ought not to contribute to the relief of rates. All those Gentlemen who are going to vote for this reduction are undoubtedly going to vote that £2,000,000 shall be kept in the pockets of these wealthy millionaires, money which we think ought to go as a contribution towards the expenditure on education, and matters of that kind. We want to clear up our position. The position taken up by the hon. Member for Chelmsford (Mr. Pretyman), by the hon. Member for West St. Pancras (Mr. Cassel), and by myself is identically the same. We have no objection to an Income Tax of 1s. 4d., provided it is necessary for the purpose of finding money for the relief of local rates I and for the adequate and equitable support 607 from personalty of such matters as education, public health, and so on. Let the right hon. Gentleman opposite cease to go about the country saying that we on this side demand expenditure on the Navy, on education, on public health, and on social reform, but that no sooner does he put on an Income Tax of 1s. 4d. than we squeal, that we are the people who make a fuss and urge that the tax should be reduced from 1s. 4d. to 1s. 3d. No, Sir; if we have any millionaires on this side, if there are any left, the squeal does not come from them. The squeal comes from the millionaires behind the Chancellor of the Exchequer, and that is where the votes will come from to-day for reducing the Income Tax from 1s. 4d. to 1s. 3d. It is not we who are going to vote for it. It is they who will vote for it and carry it. It is they who will deprive the local authorities for four months of this sum which would have been most useful to them, and which indeed was expected by them. Let that not be forgotten. There have been reports by the finance officers of county and municipal borough councils, reporting to their various committees that they could go a little ahead with their expenditure in view of the Budget and the magnificent speeches of the Chancellor of the Exchequer and the President of the Local Government Board declaring that the debt was long overdue, and that at last it was going to be paid. We were told, "You can go ahead with your expenditure upon education," and all kinds of schemes were actually being framed for the expenditure of this money.
§ Mr. HAYES FISHER
The hon. Gentleman is the usual interrupter, sitting there at the back of the House. What I state is a well-known thing. Ask anybody who serves on county councils. Ask anyone who has served on the London County Council. Memoranda have been written; aye! and memoranda have been adopted by the whole of that council without any exception, and from no party point of view, welcoming the Budget of the Chancellor of the Exchequer and looking forward to some relief, and the hope that they would be able to indulge in some further expenditure on education, public health, and matters of that kind. Then we come down to the House one day, and without any notice of any sort or kind, we are told that fifteen gentlemen have had power enough 608 to shatter this whole Budget and to prevent these Grants being given for the next four months. Does anybody really think that if the Chancellor of the Exchequer sticks to his two conditions, that any money will be given until this new valuation scheme is set out and until this new site value arrangement is not only accepted by the House on the Statute Book, but actually adopted by the local authorities, or that any money will be forthcoming on the 1st of April for these local authorities? The hon. Member for Hexham (Mr. Holt) was wise in his day and generation when he said, "Do not let the local authorities think that they are going to get hold of this money for the relief of rates; they are not; if they think so they will be sold."
We have been sold. We are being sold to-day. We shall be sold again on the 1st of April next—a very appropriate day. Let all the local authorities note that it is on the 1st of April next that the Chancellor of the Exchequer tells them they are going to get the first little bit of what he is going to give them in connection with these Grants. For my own part I wish that the independent Labour party had as much power with the Government, and would use that power as well as the fifteen millionaires. The independent Labour party has double the number of votes. Are they sincere and earnest in their desire for all kinds of reform—social reform, and matters of that kind? Watching them there, they always seem to me to be the least independent of all the parties in this House; and if they labour at all, they labour abundantly to get the Government out of any difficulty into which they have got. If they were to exercise the power exercised by these millionaires, I am perfectly confident that even now, at this eleventh hour, the Chancellor of the Exchequer would adopt the suggestion which has been made by my hon. Friend who spoke before me: would even now adopt the alternative and keep the penny on, and give that £2,000,000 to the local authorities, not hedging it around with these new conditions of valuations and site value, and then waiting until this House can legislate at leisure as to the conditions on which he desires to impose, if anything like a permanent Grant should be made. That is the right policy to adopt.
When he made these promises to the local authorities, did he ever say that the money would not be handed over until the 609 local authorities had adopted some new system of valuation, or some new system of site value? Not once! All his promises were clean and clear cut. He said that immediately he would give this relief. "I am so sorry for you," said the Chancellor of the Exchequer to the local authorities, "and I am going to rescue you from your plight and from the bankruptcy into which you are rapidly falling." Not one word as to conditions. The promises were made without conditions. He now puts on conditions which are almost impossible of fulfilment—certainly impossible of fulfilment in the short time allowed to them by this House. What harm would come supposing the House were to give that money without conditions to the local authorities? Can anybody say that there is not inspection now? Can anybody say there is not sufficient regulation by the Departments now, or that efficiency is not promoted, and economy! No, I do not think Government Departments do make for economy, though I admit they ought to make for efficiency. It is not as if these Grants would be made without proper regulations. The Prime Minister said, "We do now make regulations for expenditure in connection with Grants. It follows that in all Grants in connection with the question of education the same course will be followed." Of course regulations would attach to all these new Grants. These regulations would attach to this £2,000,000. So I say that the proper course for this House to adopt is to keep the penny on. We on this side do not want it taken off, provided it is properly applied. Therefore, keep the penny on and fulfil the promises which have been made to the local authorities, and which are long overdue. Give this £2,000,000 without these new regulations and new restrictions, and with only such regulations and restrictions as will make for efficiency.
We will discuss an increase in the Death Duties shortly. They are now a very severe form of tax, and while I personally have always thought that under proper conditions the Income Tax, and the Super-tax was far away the fairest way of raising money, and raising it for almost any purpose, I think that our Death Duties are already high enough, and that we ought not to increase them. We may not be able to decrease them, but if we vote for this reduction of a penny, the right hon. Gentleman the 610 Chancellor of the Exchequer will turn round on us and say, "You took a penny off the Income Tax, how am I now going to find the money that you want me to find for the relief of the local rates?" I would say to Members of the Labour party, who are most anxious, and genuinely anxious, to get reduction in the Sugar Duty, that if they vote for the reduction of this penny, where is the money from which to get the reduction in the Sugar Duty? It is absolutely inconsistent that any of those who desire money to be spent on the various objects, some for one, and some for another scheme and object—inconsistent for us to vote for this reduction that the right hon. Gentleman the Chancellor of the Exchequer is proposing to us to-day. For these reasons I must again say that I will vote against this reduction, and it may be that I will find myself in the opposite Lobby, voting that this penny shall be retained in order that its original destination may be adhered to; that the product of that penny, the £2,000,000, may find itself in the pockets of the local authorities for the relief of some of their expenditure; perhaps to help them with expenditure which may be forced upon them in the interests of public health, education, and various other schemes which sometimes they are urged to make.
§ Mr. CHIOZZA MONEY
I suppose it is inevitable that this Debate on the first Clause of the Income Tax Section should take on the character of a Second Reading Debate on the Finance Bill. I do not rise to complain that the subject has been widened as it has been by the right hon. Gentleman who has just sat down; on the contrary, I should like to congratulate him—
§ The DEPUTY-CHAIRMAN
I think on that point I should just safeguard the Chair. I trust that a Second Reading Debate will not take place.
§ Mr. CHIOZZA MONEY
I do not myself propose to travel over so wide a ground as that travelled by the right hon. Gentleman the Member for Fulham, but I think he may congratulate himself on his defence of a 1s. 4d. Income Tax. I hope that view will be taken by all his hon. Friends; yet I notice, with some consternation, that the next Amendment on the Paper is one standing in the name of an hon. Friend of his to reduce the tax not by a penny, but by twopence.
§ Mr. CHIOZZA MONEY
I would renew my congratulations to the right hon. Gentleman that he has tackled the defence of the 1s. 4d. Income Tax. I myself should take the very strongest objection to the reduction of the 1s. 4d. to 1s. 3d. but that I accept the assurance, which I am afraid the right hon. Gentleman does not believe, of my right hon. Friend that the Government next year will propose an Income Tax of 1s. 4d. I hope then that the proposal will receive the enthusiastic support of the right hon. Gentleman. However, Mr. Maclean, I want, if I may, to ask the Committee to bear with me for a little while if I direct attention to the character of the impost itself. After all this is one of the few opportunities we have to do so. It is not my purpose really to discuss the rate, or to discuss whether the Income Tax should be at 1s. 4d. or at 1s. 2d., or any other rate. I am only concerned now to argue that whatever the amount may be that we desire to collect by means of the Income Tax, that it should be collected in a fair and equitable manner. While the tax is small the anomalies which attach to it amount to very little, but as the tax rises in the scale, as our Income Tax has risen in recent years, the question of anomalies and imperfections becomes of very great importance. That I think will be generally recognised. I think that everybody in the House who heard his speech the other day would welcome the announcement of the Prime Minister of the appointment of a Committee or Commission to inquire into the whole question of the Income Tax. What are we asked to enact by this Clause? We are asked to enact that Income Tax for the year beginning on 6th April, 1914, shall be levied at the rate of 1s. 3d. in the £. Of course that statement, that enactment, is utterly misleading. Probably not a quarter of the Income Tax payers in this present financial year will pay 1s. 3d. in the £, and of the remaining three-quarters, something like 800,000 persons, the most of them will pay at less than 1s. 3d. The real rate of tax, even taking over the whole body of income, is very much less than that—not only if we take into account the Income Tax, but the Super-tax also. If we take the Income Tax and the Super-tax, and add the body of income, the two taxes together do not amount at the present time to 1s. in the £. There cannot be 612 much less income enjoyed by Income Tax payers than £1,100,000,000. Therefore a level shilling will obviously produce £55,000,000. By the Income Tax plus the Super-tax this year we propose to raise about £54,000,000 in round figures.
§ The DEPUTY-CHAIRMAN
I do not think I can allow the hon. Member to proceed on that particular line. No doubt it would be quite appropriate to the Question that the Clause stand part, but I am afraid I have not yet been able to follow the relevance of his observations to the Amendment before the Committee—that is, that the Income Tax be reduced by one penny.
§ Mr. CHIOZZA MONEY
I raised this point at the opening of our proceedings to-day with Mr. Whitley, and Mr. Whitley indicated that I could deal with this question as I am now dealing. I feel, therefore, in a very great difficulty because I rose in pursuance of the ruling that I had from the Chair on that point, and I certainly thought that if the right hon. Gentleman opposite could discuss the local Grants in so far as they come under this Income Tax Resolution, I should discuss the point I am now discussing.
§ The DEPUTY-CHAIRMAN
I do not desire to be unduly severe on the hon. Member, but the comparison which he makes between the observations of the right hon. Gentleman on my left in relation to the local Grants differ from what he is dealing with in that they distinctly come under the Amendment. The point the hon. Member is dealing with is no doubt a very interesting point. Income Tax qua Income Tax as it falls upon the community is quite appropriate, of course, on the Second Reading of the Bill, but I must ask the hon. Gentleman, as no doubt he is quite able and has quite enough ingenuity to do, to bring his remarks into more relation to the point at issue, the Amendment before the Committee.
§ Mr. CHIOZZA MONEY
I am very much obliged to you, Sir, for what you have said. I only repeat that I raised that point very clearly when Mr. Whitley was in the Chair, and he gave me the permission, as I understood.
§ The DEPUTY-CHAIRMAN
I was present when the ruling was given by the Chairman, and I did not understand it to be what the hon. Gentleman says.
§ 6.0 P.M.
§ Mr. CHIOZZA MONEY
I shall endeavour to keep within the limits which you have so kindly sketched out. This Amendment is to reduce the Income Tax from 1s. 4d. to 1s. 3d., and I say, in that connection, that neither of these rates really obtain, except in a very limited number of cases, and that we are really being asked to re-enact a form of words which have very little relation to the real facts of the case. Indeed, to understand the real rates of tax we have to turn not to the words which we are asked to re-enact—not, indeed, even to the Finance Bill of the present year—but to past Finance Bills, in order to understand the series of enactments which set up the rates that actually obtain at the present time. I should be only wearying the Committee if I were to endeavour to recite the particulars of the true rates that do obtain. I was fortunate in obtaining from the Chancellor of the Exchequer, immediately after his Budget Speech this year, the particulars which are published in the White Paper, and which are now in the possession of every Member of the Committee, showing what the real rates of taxation amount to, both in regard to earned and unearned income. It is true that in regard to unearned income the rates worked out at 1s. 4d. level, the normal rate which we are now asked to amend. But, of course, it makes very little difference, except usually the fraction of a penny, and by glancing at the White Paper one can tell what sort of Income Tax we are asked to amend at the present moment.
I placed an Amendment on the Paper giving the details of a graduated scale. I should like to explain at once that I had no idea of submitting that to the Committee—if it were possible to do under the Rules of Order, as unfortunately it is not—as an ideal scale of my own. If hon. Members will compare it with the White Paper, which was so kindly furnished by the Chancellor of the Exchequer they will see that the rates I put upon the Paper were really the actual virtual rates of the Government's own proposals slightly modified. I do not therefore argue that they are defensible as an ideal progression in the Income Tax. I merely wanted to place before the eyes of the Committee in the clearest possible manner what the Income Tax really means at the present moment. I need hardly apologise for that, I am quite sure. I may say that no matter how much study any hon. Member has given 614 to the Income Tax he cannot trust his memory to say what it means for any particular taxpayer at any particular moment. He would have to refresh his memory before doing so. Of course no one would graduate an Income Tax like this if starting de novo. The thing has arisen out of a long series of enactments which have simply meant that successive Chancellors of the Exchequer as they have raised the Income Tax have endeavoured to arrest some of its anomalies by chopping off pieces at one end of the Income Tax by means of abatements, while in raising the Super-tax they have weighted it at the other end. The tax we are asked to amend, if we understand it, shows many glaring injustices. But to the average taxpayer at present it is a thing not easily understood. So in addition to the real grievances which anyone can detect, there are fancied grievances which simply arise from the obscurity of the provisions. There are some real injustices now. Take the question of charging the taxpayer at the high rate of tax, unless he makes a certain claim by a certain date. Can anybody defend that system? If a small taxpayer will not make a declaration of his income by 30th September, although the virtual rate of taxation upon him may be only 4d. in the £, he will have to pay 1s. 3d. under the Amendment now before the House. He will be fined many pounds which he cannot afford, because he has omitted to make his declaration. Surely that is a method of taxation which cannot be defended in any assembly. Take a man with £300 unearned income: he is entitled to the 1s. 2d. scale. That is, if he had made his return within the proper time.
§ Mr. JOYNSON-HICKS
On a point of Order. Though I am very loath to interrupt the hon. Member, and though he is raising a very interesting point, I submit that this has really nothing to do with the Amendment before the Chair. There are many other hon. Members who wish to speak, and I submit that the point the hon. Member is raising is really outside the scope of the Amendment.
§ Mr. CHIOZZA MONEY
It is very unfortunate that I should have misunderstood the ruling I obtained earlier in the Debate, because I mentioned to Mr. Whitley the very question of the inequalities of the Income Tax. In view, however, of what has 615 been said, I will not pursue the subject further now, and will sit down, hoping that the Commitee will allow me to go into this, [matter later on the question that Clause 1 stand part.
§ Mr. HOARE
I rise to support what was said by my right hon. Friend the Member for Fulham. I do not wish to go back to what the Chancellor of the Exchequer said at the beginning of the Debate with reference to the inconvenience or the absence of inconvenience in which offices in the City have been placed, except to say this: I have in my Constituency many men who are engaged at work in the City, and I have already had representations both from officials in Government offices and from clerks in the City as to the great additional work which has been imposed upon them by the haphazard action of the Chancellor of the Exchequer in proposing this change. Now, in reference to the change itself, I have this objection, first of all, to it. It seems to me that if a penny is to be taken off the Income Tax some remission should have been made for that benefit to men with moderate incomes. When the Chancellor of the Exchequer in his remarks said that we were making a remission to the lower grades of incomes it surprised me. It is not the case. The only taxpayers who will gain anything from the proposed change are the men who are fortunate enough to possess incomes of over £2,500 a year. Whether they earn that income or whether they do not, they are to receive 1d. of remission, whereas those with incomes of less than £2,500 a year will receive no remission at all. The main object for which I rose was to protest against the way in which the local authorities are being treated under the proposed change. When I saw the influence fifteen hon. Members opposite had on the Government with reference to the change they are now proposing I could not help regretting that fifteen Radical Members for London did not attempt to exercise similar influence with the Chancellor of the Exchequer, for I feel certain that if they had done so the London County Council would have been receiving this year some further relief larger than that which it is going to receive.
Why is it that the local authorities are not to receive the £2,000,000 which they were told they would receive only a few weeks ago? I know it has been said that as there has been no time to pass the large amount of local government legislation, 616 they must wait until next year. But why is that the case? Even now certain temporary Grants are being made to local authorities. A Grant is being made for necessitous schools; a Grant is being made for the provision of meals. Why then cannot the Government retain this 1d. on the Income Tax and extend these temporary Grants in other ways? I have been looking through the Report of the Departmental Committee on Local and Imperial Taxation, and I find that in every one of the branches of local government with which they deal it is perfectly possible for the Government, by retaining the 1s. 4d. Income Tax, to make temporary Grants under Departmental Regulations. If it was in order, I could go through the list. I could show how in public health, in Poor Law, the administration of the rates, and in other branches of local government, it would be perfectly possible for the Government to do what they are doing for necessitous school areas, and to do what they are doing for the provision of meals, and to give immediate relief. A moment or two ago the President of the Board of Education was sitting upon the Government Bench opposite. I only wish he had remained two or three minutes longer, for I desired to make to him in particular an especial appeal. There are large fields in the administration of education in which immediate assistance is of the utmost importance, and I desired to appeal to him to retain the 1s. 4d. Income Tax, and to give some of this assistance at once.
Over some of the Grant there would be no controversy at all. Let me give a single illustration. The heaviest charge at the present moment upon the administration of public education is the charge for teachers' salaries. No less than £15,000,000 a year is being spent in teachers' salaries in our elementary schools alone. Why could not the Government have kept the Income Tax at 1s. 4d. and have devoted £200,000 or £300,000 of that sum to Grants to local authorities in aid of this very heavy charge for teachers' salaries? If such a proposal had been made I am certain there would not have been any controversy over the allocation of the money. Every one realises that many teachers in the country are grossly underpaid, and one of the first needs is that further assistance should be given to local authorities to enable the teachers to be better paid. Simply because the Government desire to introduce a complicated rating system, and because they are almost afraid that some individual landlord some- 617 where may receive some benefit from the Exchequer Grants they intend to postpone all these urgent reforms, and the provision of the money for the local authorities for this purpose is to be pushed off for another year, and all we have got is another promise such as in the past has been given year after year, and which, as far as I can judge, has no chance of being fulfilled before the 1st of April next. I intend not to abstain from this Division, but to vote against the reduction of the 1s. 4d. Income Tax to 1s. 3d.
§ Mr. ROBERT PEARCE
It is no use crying over spilled milk, and the trouble that will be caused by a reduction of the Income Tax from 1s. 4d. to 1s. 3d. The Chancellor of the Exchequer has pointed out how he can help people in that matter, but I think he had far better let it alone, and allow it to be adjusted next year. I want to point out to the Treasury that they have neglected an opportunity of reducing this tax, not only to 1s. 3d., but almost by another halfpenny in the £. There is a large mass of property in this country which by Statute is exempted from Income Tax. There is about £11,000,000 a year of income which is administered under the jurisdiction of the Charity Commissioners and which is exempted from Income Tax altogether. If that were brought into the regular account of the Income Tax officials, it would reduce the tax another halfpenny in the £ or thereabouts. Without elaborating this matter I will only say that this subject was brought before the House fifty years ago by Mr. Gladstone, and he spoke for two hours and a half trying to persuade the House of Commons to repeal those exemptions, but he did not succeed. Of course I do not expect to succeed in this matter, but I want the point to be taken into account when the Income Tax is being considered. The subject of the exemption of charitable property has not been discussed since Mr. Gladstone introduced it, and I think it is a subject which requires the consideration of the Treasury in any proposal for the equalisation of burdens.
With regard to this reduction of the Income Tax by 1d., the question of inconvenience is a very important one, and I should like to recall to the House how that point was met by hon. Gentlemen opposite when it was originally raised by the hon. Member for York. The Debate on that point was raised by my hon. Friend asking the 618 Chancellor of the Exchequer if he was going to do anything towards relieving the great expense which a number of gentlemen had been put to by the alteration of the Income Tax, and the only answer he received from the Chancellor of the Exchequer and hon. Members opposite, was loud laughter and a statement that there would be no inconvenience at all. Anybody who has spoken to any bankers or any business men on this subject knows perfectly well that this alteration is going to cause the very greatest amount of inconvenience and expense to hundreds of thousands of Income Tax payers in this country, and merely to try and laugh it out as if there was no inconvenience is a point which I hope will be remembered against the Chancellor of the Exchequer. Not only will inconvenience be caused to taxpayers, but the same thing is going on at the present moment. Can anybody speaking for the Treasury say what the Income Tax is at the present moment and what is being charged?
In the last two days I have noticed two different sums have been charged. I have received dividends for £100, and £5 has been taken off for Income Tax—that is at the rate of 1s. in the £. Why charge 1s. in the £ on one dividend and 1s. 4d. or 1s. 3d. on the other? This only proves what a hopeless state of muddle we are in, and it is only part of the general muddle whch the Chancellor of the Exchequer has got his Budget into. I notice that on another small dividend 1s. 3d. is charged. Supposing, on a Division to-night, the House refuses to endorse the Chancellor of the Exchequer's Amendment and the Income Tax is left at 1s. 4d. 1s the Chancellor of the Exchequer going to sue everybody for that extra 1d., just as he expects every Income Tax payer to sue him if he has been overcharged? To say that there has been no inconvenience is treating the whole matter with levity. I should like a reply from some hon. Member opposite before the Debate concludes upon the original point on which this Debate arose. I want to know is the Chancellor of the Exchequer prepared to do anything in the direction of granting some relief for the expense which will be caused to a large number of taxpayers by the change which is now proposed? I hope we shall get an answer to this question, because it is one of substance, and it is going to cost tens of thousands of pounds to Income Tax 619 payers all over the country. Perhaps the Chancellor of the Exchequer will give me a reply to this point before the Debate closes.
§ Mr. LANE-FOX
I am not a banker or a Liberal millionaire, but there are some other points which affect me in this matter, and I think it is a matter of very great regret that when an opportunity has at last come for those of us who have been pressing for years that relief should be given to the local authorities, it is ruthlessly taken away from us by the action of the Chancellor of the Exchequer. I do not myself relish paying an extra penny on the Income Tax any more than hon. Members opposite. Ever since I have been a Member of this House, the one thing which I have been definitely pledged to more than another is that at the earliest possible opportunity, I would vote for any proposal to relieve the ratepayers, and more particularly for relieving the burden of the rates upon real property and placing it more upon personal property. This is the first opportunity I have had of carrying out that pledge, and now in order to satisfy the conditions which the Chancellor of the Exchequer has laid down, this reform is to be put off for another year. I am not going to discuss those conditions, but we have a right to complain that just because it suits the Chancellor of the Exchequer from another point of view, and for another purpose to take this course he has put off this relief which many of us have been pledged to for so long.
We have heard a great deal in speeches by the Chancellor of the Exchequer about his desire to relieve real property, and put more of the burden of taxation upon personal property. Although many of us consider that the Income Tax is high enough already and higher than it need have been, we were prepared to vote for this high Income Tax, and support the right hon. Gentleman if we were certain that the relief was going to go to the local authorities. I think a certain number of us will have the courage of our convictions and go into the Lobby against this proposal. I think that this will be an opportunity for us to justify and fulfil the pledge we have so often given, because this was an opportunity of doing something towards removing the gross unfairness of the burden of the rates upon rural property in which our rural districts are especially interested. That opportunity has been taken from us, and we have 620 now very grave doubts as to whether any relief whatever will come to the rural districts. In voting for this extra penny we are not concerned with the conditions the right hon. Gentleman has made, or the considerations he has created by the mismanagement of the business of this House. It would have been perfectly possible, if this money had been voted, to have devoted it to relieving some of the many pressing burdens upon local authorities. That opportunity has been taken away from us, and I hope this will be noted more particularly by the rural districts, more especially after what has been said about the desire of the Government to improve those conditions, because when an opportunity has occurred it has been taken away from us by the Government.
§ Sir ALFRED MOND
The hon. Gentleman who has just sat down has explained to us with the utmost candour why he is sad that the Chancellor of the Exchequer has taken the course he has adopted of reducing the Income Tax in a manner to which many of us object, and which I should have thought would have found a great deal of support from hon. Members opposite. The point with many of us is whether it is right to raise the taxation first, and make up your mind what you are going to do with it afterwards. The hon. Gentleman opposite admitted that he did not like a high Income Tax. We fail to see why the Income Tax payers should pay a higher tax for the benefit of the owner of real property. We hear a great deal about a desire to relieve the burdens on real estate and the local rates, and transferring it on to personalty. I do not know that we have any information which would enable us to form any idea as to how the burdens of the local rates at the present time fall on real estate and personal estate. I should like to point out that the whole of our leasehold property in this country is personalty, whereas the rates are paid by the leaseholders. Unless we have such a return as that which I have suggested, we cannot form the slightest idea as to the amount which personal property and real property is paying to-day. Some of us have been blamed for the action which the Chancellor of the Exchequer has taken. I have a recollection that at the beginning of this Debate learned and ingenious hon. Gentlemen opposite proceeded by putting quite legitimate and certainly ingenious questions of procedure in order to throw every 621 difficulty in the way of the Chancellor of the Exchequer proceeding with the Finance Bill in a manner which would enable him to give the local authorities the relief they desired. That was certainly one of the points which was raised, and I cannot see the logic of a party which begins by raising difficulties to the local authorities getting the Grant on a point of procedure, and then comes down and blames the Chancellor of the Exchequer for having given in to the supposed protest of some of his supporters. I might go further and say that the question of time does undoubtedly enter into this matter, and it might have been arranged if the Opposition had given any undertaking enabling the Chancellor of the Exchequer to pass his Finance Bill and Revenue Bill in time to fulfil the statutory obligations. It is, therefore, too bad to put all the blame on the Chancellor of the Exchequer when the Opposition have made no efforts to facilitate his task.
The position taken up by some of us was a very simple one, though it seems to have been generally misunderstood. We have never pressed, and we have never had any interest in asking, for any reduction in taxation. We considered that it was contrary to the financial control and principles of this House that we should levy taxation before it had been determined how that taxation was to be spent. We considered that it was contrary to the whole of the financial principles of this House to levy taxation on a hypothetical basis. I am astonished to hear that doctrine questioned from the opposite side of the House. I have had the unusual and very rare honour paid to me—I do not imagine it will occur again—of seeing myself held up in Conservative papers as one who was upholding the traditions of Gladstonian finance. Various complimentary remarks were launched at our heads much to our surprise. We were held up as the upholders of the only true traditions of finance. Now hon. Members come and say that the Chancellor of the Exchequer was quite wrong for having imagined that he bad given way to these remarks, and that he ought to have proceeded on the lines advocated by the hon. Member for Chelsea. That is exactly the way to fritter away the resources of the taxpayers of this country. It is the most vicious principle which has ever been advocated. We can all fritter away money in that way, and nobody better than the local authority, but, after all, we are here to represent the 622 taxpayer, and surely it is entirely right that the right hon. Gentleman should not allow himself to be lured into a position of that kind. I should be very pleased to see a penny retained on the Income Tax and the Sugar Tax done away with, and two-pence additional put on the Income Tax next year if it is required, but that does not come within the purview of the Amendment. The right hon. Gentleman was quite right in not raising taxation and then listening to the hon. Member for Chelsea who, when he has raised the revenue, will find for him, as he thinks, some useful, and, as others think, some wasteful method of spending it.
§ Mr. PETO
The right hon. Baronet has said two things, to which I want to allude. In trying to make his case that the owners of personal property are contributing quite as much towards the rate as those interested in real estate, he does what is usually done; he begs the whole question, "who pays the rate," and merely states that, because a large number of owners of personalty happen to be leaseholders and hand over the actual sum of the rates, therefore they pay the rates. I must enter my protest against any such summary method of dealing with such a complicated question as attempting to make out one general rule in the same way as the advocates of Free Trade try to make out that the consumer invariably pays the tax. It is just about as true in the one case as in the other. He gave us an explanation of the action he and others took. He told us that they had not any interest in asking for the reduction of the Income Tax, and that they put forward no such claim, but the Committee is bound to bear in mind that is the precise result, and that is the exact question we are here to Debate this afternoon. It may be only an accident that this reduction from 1s. 4d. to 1s. 3d. is proposed; but after all there in such a thing as cause and effect, and I think we are entitled to suppose that they may have had some glimmering idea of what would be the result of the action they took.
I want to deal with one or two points which were raised by the Chancellor of the Exchequer. He told the Committee that this was purely a temporary relief. I quite agree, and that is the reason why I am wholly opposed to the proposal to reduce the Income Tax in the present year from 1s. 4d. to 1s. 3d. The effect of the precedent he is setting up of juggling 623 with Income Tax rates will last longer than the purely temporary relief he is supposed to be giving. We have heard a great deal about the inconvenience, and the Chancellor of the Exchequer has said that it is grossly exaggerated. I do not minimise the inconvenience, but much more important even than the inconvenience is the monstrous injustice of the proposal. We have heard a good deal from the Chancellor of the Exchequer about his leading banker, who told him as soon as the circular was issued the position became perfectly simple. It may have been simple to the leading banker, but I am not interested in him. I am dealing with the person in receipt of a very small income from invested capital, and I am perfectly certain, even under the proposals put forward by the Chancellor of the Exchequer for minimising the effect of his blunder, that the people who will really suffer will be those in receipt of small incomes. It may be worth the while of somebody with £10,000 invested in a single stock to go through all the troublesome process of recovering these fractions of a penny in dispute, but I ask the Chancellor of the Exchequer to consider the position of a person who owns £100 of Four per Cent. Stock, and who has been paid a dividend of £2 for the half-year. The difference in that case will be about five-eights of a penny on every £1 dividend, and he must know perfectly well that there are many thousands of people in this country to whom the mere postage would cost infinitely more than the sum which they are trying to recover. Those are the very people who would find these abstruse calculations of fractions of a penny most troublesome and inconvenient.
I ask the Committee what they think of the honesty of the Chancellor's proposal for the solution of this difficulty. He says that he has made it all right with the leading bankers, because he has told them that they can hand in all the counterfoils of the dividend warrants to the Treasury, and, provided they hand over the cash, the Treasury will be good enough to take charge of the business. What percentage of that cash will be ever recovered or claimed? Are we having a genuine reduction of the Income Tax at all, or are we only having a reduction, a purely temporary relief, in the case of those who happen to be in receipt of a large annual income, sufficient to make it worth their while to claim the refund? That is the 624 real position, and I think it is the most brazen and dishonest proposal ever put before the House. If the bankers will hand over the money they have deducted at the wrong rate, the Treasury will take charge of it. It means that the Treasury will only refund in the case of those in a position to claim. Therefore the rich will be the only people who will get any benefit whatever from the Chancellor's proposal. He is going to charge the full rate in the case of those less able to afford it. The hon. and learned Member for North-East Cork (Mr. T. M. Healy), as he usually does, gave the House an admirable illustration of the real effect of this proposal. Speaking of the enormous amount of trouble, inconvenience, waste of money, and of people making these countless claims, he said that it was like licking stamps under the Insurance Act. Another parallel might be used. We have had the example of the Chancellor's Land Duties. We know what they cost to collect and what the country benefit by the collection. This proposal now to change again the rate of Income Tax for a purely temporary period without any permanent relief to the taxpayer at all is creating the absolute maximum of inconvenience and waste of public money.
The Chancellor of the Exchequer said that he had had two or three hundred letters addressed to him by people in receipt of comparatively small incomes, and he had not heard any objection to any of these fractions of a penny. Is it very remarkable? Under the original proposals of the Budget these people with very small incomes stood to lose a very substantial part of their whole income, and therefore it would only be worth their while putting their views before the Treasury in the hope that they would have some consideration. I am glad to think that they have had some consideration. Does he suppose that people who do not yet know whether this proposal will have the ultimate sanction of the House are going to write at the present moment and protest against the inconvenience? In the one case it was a sum worth writing about and claiming, and the whole of his argument with regard to the counterfoils of dividend warrants being the vouchers necessary for the claim to a refund of the Income Tax will not bear investigation. Hitherto, if people have had a claim at all in respect of unearned income or because their income is below a definite sum, it has been a definite and fixed sum that they 625 have had to claim once a year, and it has been sufficient to make it worth their while to claim it. The counterfoils of dividend warrants have been very useful for that purpose, but under this proposal in some cases the refund of the Income Tax will have to be made through the company itself, and in other cases it will have to be made through the Treasury. People in receipt of small incomes only receive very few dividends in the course of the year, and the whole sum which they will be entitled to receive will be so trivial that it will be utterly hopeless to expect them either to keep the counterfoils or to be able to get them back from their bankers, and they will not know what fraction to claim. They will have the most abstruse calculations to make, and the Chancellor of the Exchequer knows perfectly well that from the point of view of the Treasury he is giving away very little. What I want to emphasise is that really he is giving it away to people who can best afford to do without it.
I should like to call the attention of the Committee to the singular fact that while we are debating this question of the reduction of the Income Tax, no Member of the Labour party has thought it of sufficient importance to be present. Yesterday, when I was proposing a reduction in the Tea Duty, those hon. Members were here in considerable force, and some of their leaders were prompt to explain the exact reason why they were going to vote for a higher Tea Duty than was proposed on this side. The hon. Member for Blackburn (Mr. Snowden), in the course of that Debate, practically threw a challenge across the floor of the House to me. He said he would be very much better able to decide how he and his party should vote on my proposal if he knew how I was going to vote on this Motion for a reduction of the Income Tax. I did not answer him at the moment, because I hoped to have the opportunity of catching Mr. Speaker's eye, and to give my reply at the proper time. I may tell the hon. Member now that I am wholly opposed to this proposal, not only on account of the terrible inconvenience to which bankers and even the smallest recipients of incomes from dividends throughout the country are going to be subjected, but also because of the injustice of levying an inequitable and unequal tax on different people in an inverse ratio to that in which the tax should be levied. Therefore, if I have 626 any opportunity to do so, I shall vote against the proposal of the Chancellor of the Exchequer to-night. I am sorry the hon. Member for Blackburn did not take a similar course in supporting me. But I wish to call attention to the fact that not a single Member of the Labour party has attended this Debate, and we are, therefore, unable to ascertain what they think of the proposal of the right hon. Gentleman to relieve the incomes if his hon. Friends behind him, who, I should imagine, are well able to put up with the Budget as originally framed.
I am glad, however, to have this opportunity of stating my views on the question. I quite agree with hon. Members who have spoken from this side of the House, that the relief of the rates is overdue, and that no adequate reason has been given for withholding it in the present year. The only reason, in fact, is the ridiculous Preamble to those Clauses which deal with the matter and which insist on an imaginary division between land and the buildings placed upon it. But when I recall the speeches made on that subject by the hon. Member for Hanley (Mr. Outhwaite) and the hon. Member for Newcastle-under-Lyme (Mr. Wedgwood), I quite understand the reasons why the proposals are put forward in the form they are, and I fully appreciate how unlikely it is we shall ever get any practical relief of the rates as long as the Government in power have to depend on squaring the views of such opposite sections as the recent cave and the hon. Member for Hanley. When I hear it suggested that the reason for this subdivision in the taxation of land is that it is going to make land cheaper, I am reminded of a certain unfortunate gentleman who lived in a house by himself. He suffered under the delusion that he was a tea-cup, and he spent all his life in looking for a saucer large enough for him to sit down upon. He never found one. These Gentlemen to whom I have referred also live in a world by themselves, and I contend we shall never have relief of the rates while they pursue the policy which they are advocating.
§ Sir F. BANBURY
We have had a proposal from this side of the House that the Income Tax shall not be reduced from 1s. 4d. to 1s. 3d. in order that the money which would then accrue in the hands of the Chancellor of the Exchequer may be spent in the way of relieving local authorities. But that relief has never yet 627 been sanctioned by the House of Commons If my hon. Friend had said that possibly by making a reduction in the Death Duties instead of the Income Tax trouble might have been saved to various people, and a better reduction of the taxation of the country secured, I should have agreed; but to ask us to support an increase in taxation—an increase on the Income Tax—in order to give something which the House has not yet decided upon to local authorities, is to my mind one of the worst methods of finance it is possible to imagine. Who can believe for a moment he is going to gain any benefit from any further money that may be given to the local authorities? The ratepayers certainly will not get any benefit, because the local authorities will only be encouraged to greater extravagance. Having obtained money from sources, the contributors to which have no control over the spending authority, they will say they will have a new town hall, possibly like that on the other side of the Thames, and instead of wasting the ratepayers' money only, they will also waste the taxpayers' money. Under these circumstances I hope the Chancellor of the Exchequer will not yield to the requests which have been made to him from this side of the House. As a matter of fact, considerable trouble will no doubt be given to bankers, clerks, and other persons. But that is not our fault. It is the fault of the right hon. Gentleman for not having sufficiently considered his Budget before he brought it in. Why should we relieve him of the difficulty in which he has placed himself? It has been said that the sum involved is only a trivial amount. If so, it cannot matter much; and if it is not a trivial amount, then my hon. Friend may be quite certain that those who have paid it will take the trouble to reclaim it. The difficulties of reclamation are not so great as my hon. Friend suggests. Where a person holds registered stock the company is aware of the fact and can repay the money. If a person is holder of bearer stock, the coupons have been collected from bankers who, when the coupons are presented for payment, make a list showing the number of the coupon; that list is kept, and consequently the bankers will be able to repay the amount over-deducted in those cases. Unless I am very much in error, my hon. Friend is wrong in thinking that the bankers are keeping the money. They have no right to retain it, and as 628 soon as it is deducted they have to hand it over.
§ Sir F. BANBURY
Yes. I did not rise to go into a general discussion on the difficulty into which the right hon. Gentleman has put the country, but merely to enter a protest, because I think, when the right hon. Gentleman proposes to reduce taxation, there is no reason why we on this side should object to it.
§ Mr. CASSEL
The right hon. Member for Swansea (Sir A. Mond) is the only Member of this House who on this occasion has repeated the grossly unfair and unfounded charge that my appealing to Mr. Speaker for a ruling has been the cause of the ratepayers not gaining the promised relief. The right hon. Gentleman has his own reasons why he objects to these Grants. He told us that he objects to personalty contributing more than land. Very well. He is quite entitled to his views. I do not agree with them. But what he is not entitled to do is this: Having taken objection—effectively—with the Government, he is not entitled to shuffle the responsibility for his action on to my shoulders. The change in procedure which resulted in my having to appeal to Mr. Speaker, so far from having made it more difficult for the Chancellor of the Exchequer to give these Grants, will make it easier. The right hon. Gentleman knows it, and so, too, does the Chancellor of the Exchequer. He knows it perfectly well. And therefore I protest against this unfair and unfounded charge. It is good enough for the "Star," but it is not good enough for the House of Commons. So long as these Clauses dealing with the local Grants were in the same Bill as the Income Tax Clauses the time limits of the Provisional Collection of Taxes Act applied, and they would have had to be dealt with either by the 5th August or, as other legal authorities say, by the 5th September. I hold the view it should be the 5th August, but, whatever the date may be, the result of separating these Clauses and of putting them into a Revenue Bill, or, as I think would be better, into a Bill by themselves, so far from giving less time to deal with these Grants, would offer more time, because there would be absolutely no time limit whatever.
Whatever view the hon. Member may hold on the merits of the question, it is 629 grossly unfair to attack me for something which every Member of this House knows to be untrue. If the right hon. Gentleman had time to deal with the elaborate provisions for the permanent Grant, if he had time for dealing with the six months' temporary Grant, he cannot get the House of Commons to believe he has not time to give to the ten months' temporary Grant. It is absurd on the face of it, and I repeat that it is a wholly unfair and unfounded charge. I propose to show my sincerity in this matter in the Division Lobby to-night. I am sorry to differ from my hon. Friend the Member for the City of London on any occasion, and I regret being obliged to do so on this occasion, but I feel I should be acting quite improperly if I did not go into the Division Lobby in order to show that the money for these, purposes can be raised.
§ 7.0 P.M.
§ Mr. EDWARD WOOD
I should like to say why I also shall find myself in the same Division Lobby as my hon. and learned Friend. Those who heard the speech of the hon. Baronet the Member for the City of London (Sir F. Banbury), must have thought there was something ominous in the fact that he and the Chancellor of the Exchequer for once were of the same opinion, and it would seem as though the hon. Baronet on this occasion, at any rate, should have resumed the seat to which he is entitled on the opening of the Session on the Front Bench by the side of the right hon. Gentleman. His argument was that because the Chancellor of the Exchequer had made a mistake, that was no reason why we should help him out of it. I have no wish to help the right hon. Gentleman out of his difficulty, but I am concerned in seeing that the local authorities do not suffer from it if it can be helped, and that is the first reason why I shall join with other hon. Members on this side in opposing the Amendment of the Chancellor of the Exchequer. I was pleased to notice that the right hon. Baronet the Member for Swansea (Sir A. Mond) was able to give some hope that we should have his support on this matter in the Division Lobby. He said he himself was perfectly willing to keep the tax on in order to take the Sugar Tax off. We have our opinion about the Sugar Tax, but obviously, the first way to get it taken off is to keep the Income Tax on, so that the money may be forthcoming for getting rid of that particular duty. Therefore, I presume, unless he contra- 630 dicts me, that it is his firm intention to support us, who wish to keep the Income Tax at the rate of 1s. 4d. I wish to advance one further argument that has not been mentioned in regard to the Grants to local authorities. Apart altogether from the reasons and motives which led the group of millionaires to protest—for which there is, on constitutional grounds, a great deal to be said—I am quite sure that from the point of view of the local authorities it is not a mere matter of withholding the temporary Grants for four months. Everybody knows that if the temporary Grants had been given, we should at once have mortgaged the obligations and the time of Parliament to make them in some form permanent at the earliest possible moment. The fact that you are withdrawing the temporary Grants relieves you of a sort of mortgage to make some permanent arrangement. Therefore it is more than a mere suspension of the matter for four months. We may take it that the Government had this money to spare and so they decided to do that. It was the duty of the Chancellor of the Exchequer to make up his mind in what form he would apply that surplus. He must have asked himself this question: "Is the Income Tax the best item to relieve?" He had three alternatives. He could have relieved direct taxation or indirect taxation. He decided not to relieve indirect taxation for the simple reason, as we saw last night, that he knows as well as we on this side know that the Labour party may speak and agitate but they will never vote against the Government, and he knows as well as or a great deal better than we do, that the millionaires would have voted against the Government. Therefore, quite obviously, he chose to relieve direct taxation. When he made that decision he had two further alternatives. He could have relieved the Income Tax or left it as it was, and could have avoided placing a further increase on the Death Duties.
I would ask the Committee to consider the question, granting that you were going to relieve direct taxation, which would be the sounder to relieve? Everybody who has considered the question will agree that it would have been far wiser to have avoided increasing the Death Duties and to maintain the Income Tax, even at a higher level than it is at present. Just contrast the two! Death Duties seem to have almost every vice that can be found 631 in an instrument of taxation. They are capricious, uncertain, they depend for the moment of their collection upon the most uncertain of all human attributes—namely, human life—and they have to be paid in one lump sum, which falls onerously, and often intolerably, on the estates which have to bear them. They have to be paid in a form which dislocates, temporarily, and, perhaps, permanently, the whole system of taxation upon which your permanent revenue depends. It has always seemed to me undesirable that you should encourage what might possibly be a spendthrift owner of an estaté or property to spend his income and leave to posterity the duty of paying the debt out of capital.
That is, in effect, what your Death Duties at this high rate do. It will be said that Income Tax at the high level which offends the hon. Baronet the Member for the City of London—and, indeed, all of us who have to pay it—is exceedingly irksome, but the great difference between Income Tax and the Death Duties is that one is a steady, regular payment, while the other is a lump payment which falls with crushing severity often at moments when it is hardest to bear. It would have been perfectly possible for the right hon. Gentleman to have called in the assistance of any actuary and to have discovered from him what would have been
§ the equivalent amount, worked out in capital terms, of the Death Duties. If that had been done he would have been able to raise the same amount of money, but to raise it in a less onerous and less burdensome form. My last point is this: Is not the first and main effect of the great increase in the Death Duties to directly encourage, what may be good socially but is undoubtedly bad from the financial point of view of the Treasury, namely, gifts inter vivos? Everybody knows that if these Death Duties are screwed up higher and higher they will be an inducement to a prudent father to make everything over to a prudent son in order to avoid the duties. That may be good socially, but it is not good financially. You are financially cutting off your nose, not to save your own face, but somebody else's face.
§ The CHAIRMAN (Mr. Whitley)
I think we must defer that subject until we come to the Clause dealing with it.
§ Question put, "That the words 'four pence' stand part of the Clause."
§ The Committee divided: Ayes, 156; Noes, 251.635
|Division No. 147.]||AYES.||[7.8 p.m.|
|Agg-Gardner, James Tynte||Crichton-Stuart, Lord Ninian||Hoare, Samuel John Gurney|
|Anstruther-Gray, Major William||Croft, Henry Page||Hohler, G. F.|
|Baird, John Lawrence||Dalziel, Davison (Brixton)||Hope, James Fitzalan (Sheffield)|
|Baker, Sir Randolf L. (Dorset, N.)||Denniss, E. R. B.||Hope, Major J. A. (Midlothian)|
|Banner, Sir John S. Harmood-||Dickson, Rt. Hon. C. Scott||Horner, Andrew Long|
|Barnston, Harry||Dixon, C. H.||Houston, Robert Paterson|
|Barrie, H. T.||Du Cros, Arthur Philip||Hunter, Sir Charles Rodk.|
|Bathurst, Hon. A. B. (Glouc, E.)||Duncannon, Viscount||Ingleby, Holcombe|
|Beach, Hon. Michael Hugh Hicks||Du Pre, W. Baring||Joynson-Hicks, William|
|Benn, Ion Hamilton (Greenwich)||Eyres-Monsell, Bolton M.||Kerry, Earl of|
|Bentinck, Lord H. Cavendish-||Faber, Captain W. V. (Hants, W.)||Keswick, Henry|
|Bird, Alfred||Falle, Bertram Godfray||Kinloch-Cooke, Sir Clement|
|Blair, Reginald||Finlay, Rt. Hon. Sir Robert||Lane-Fox, G. R.|
|Boles, Lieut.-Colonel Dennis Fortescue||Fisher, Rt. Hon. W. Hayes||Larmor, Sir J.|
|Boscawen, Sir Arthur S. T. Griffith-||Flannery, Sir J. Fortescue||Lawson, Hon. H. (T. H'mts, Mile End)|
|Bowden, G. R. Harland||Foster, Philip Staveley||Lewisham, Viscount|
|Boyle, William (Norfolk, Mid)||Gardner, Ernest||Lloyd, George Ambrose (Stafford, W.)|
|Burdett-Coutts, W.||Gilmour, Captain John||Locker-Lampson, G. (Salisbury)|
|Burgoyne, A. H.||Glazebrook, Captain Philip K.||Locker-Lampson, O. (Ramsey)|
|Burn, Colonel C. R.||Goulding, Edward Alfred||Lockwood, Rt. Hon. Lt.-Col. A. R.|
|Campbell, Captain Duncan F. (Ayr, N.)||Grant, James Augustus||MacCaw, William J. MacGeagh|
|Campbell, Rt. Hon. J. (Dublin Univ.)||Greene, W. R.||Mackinder, Halford J.|
|Campion, W. R.||Gretton, John||Macmaster, Donald|
|Carlile, Sir Edward Hildred||Guinness, Hon. Rupert (Essex, S.E.)||M'Neill, Ronald (Kent, St. Augustine's)|
|Carson, Rt. Hon. Sir Edward H.||Gwynne, R. S. (Sussex, Eastbourne)||Martin, J.|
|Cator, John||Haddock, George Bahr||Mason, David M. (Coventry)|
|Cautley, Henry Strother||Hall, D. B. (Isle of Wight)||Mason, James F. (Windsor)|
|Cecil, Lord Hugh (Oxford University)||Hall, Frederick (Dulwich)||Meysey-Thompson, E. C.|
|Cecil, Lord R. (Herts, Hitchin)||Hall, Marshall (L'pool, E. Toxteth)||Middlemore, John Throgmorton|
|Clay, Captain H. H. Spender||Hamilton, Lord C. J. (Kensington, S.)||Moore, William|
|Clive, Captain Percy Archer||Harrison-Broadley, H. B.||Morrison-Bell, Major A. C. (Honiton)|
|Craig, Charles Curtis (Antrim, S.)||Henderson, Major H. (Berks, Abingdon)||Mount, William Arthur|
|Craig, Ernest (Cheshire, Crewe)||Hill-Wood, Samuel||Neville, Reginald J. N.|
|Newdegate, F. A.||Rutherlord, Watson (L'pool, W. Derby)||Walker, Colonel William Hall|
|Nicholson, William G. (Petersfield)||Samuel, Sir Harry (Norwood)||Walrond, Hon. Lionel|
|Orde-Powlett, Hon. W. G. A.||Sanders, Robert Arthur||Ward, A. S. (Herts, Watford)|
|Ormsby-Gore, Hon. William||Sandys, G. J.||Warde, Colonel C. E. (Kent, Mid)|
|Paget, Almeric Hugh||Scott, Sir S. (Marylebone, W.)||Weston, Colonel J. W.|
|Parker, Sir Gilbert (Gravesend)||Smith, Rt. Hon. F. E. (L'pool, Walton)||Wheler, Granville C. H.|
|Pease, Herbert Pike (Darlington)||Smith, Harold (Warrington)||White, Major G. D. (Lancs., Southport)|
|Perkins, Walter F.||Spear, Sir John Ward||Willoughby, Major Hon. Claud|
|Peto, Basil Edward||Stanley, Hon. G. F. (Preston)||Wilson, A. Stanley (Yorks, E.R.)|
|Pirie, Duncan Vernon||Starkey, John R.||Wilson, Captain Leslie O. (Reading)|
|Pretyman, Ernest George||Steel-Maitland, A. D.||Wilson, Maj. Sir M. (Bethnal Green, S.W.)|
|Prothero, Rowland Edmund||Stewart, Gershom||Wolmer, Viscount|
|Pryce-Jones, Colonel E.||Strauss, Arthur (Paddington, North)||Wood, Hon. E. F. L. (Yorks, Ripon)|
|Randles, Sir John S.||Swift, Rigby||Wood, John (Stalybridge)|
|Ratcliff, R. F.||Talbot, Lord Edmund||Worthington Evans, L.|
|Remnant, James Farquharson||Thomas-Stanford, Charles||Wright, Henry Fitzherbert|
|Rolleston, Sir John||Thomson, W. Mitchell- (Down, N.)||TELLERS FOR THE AYES.—|
|Rothschild, Lionel de||Thynne, Lord Alexander||Mr. Cassel and Mr. C. Bathurst.|
|Royds, Edmund||Tickler, T. G.|
|Rutherford, John (Lancs., Darwen)||Tryon, Captain George Clement|
|Abraham, William (Dublin, Harbour)||Duffy, William J.||Lambert, Rt. Hon. G. (Devon, S. Molton)|
|Acland, Francis Dyke||Duncan, Sir J. Hastings (Yorks, Otley)||Lardner, James C. R.|
|Addison, Dr. Christopher||Elverston, Sir Harold||Law, Hugh A. (Donegal, West)|
|Agar-Robartes, Hon. T. C. R.||Esmonde, Dr. John (Tipperary, N.)||Lawson, Sir W. (Cumb'rld, Cockerm'th)|
|Agnew, Sir George William||Esmonde, Sir Thomas (Wexford, N.)||Levy, Sir Maurice|
|Ainsworth, John Stirling||Essex, Sir Richard Walter||Lough, Rt. Hon. Thomas|
|Allen, Arthur A. (Dumbartonshire)||Esslemont, George Birnie||Low, Sir Frederick (Norwich)|
|Allen, Rt. Hon. Charles P. (Stroud)||Falconer, James||Lundon, Thomas|
|Armitage, R.||Farrell, James Patrick||Lyell, Charles Henry|
|Arnold, Sydney||Fenwick, Rt. Hon. Charles||Lynch, Arthur Alfred|
|Asquith, Rt. Hon. Herbert Henry||Ffrench, Peter||Macdonald, J. M. (Falkirk Burghs)|
|Baker, Harold T. (Accrington)||Field, William||Maclean, Donald|
|Baker, Joseph Allen (Finsbury, E.)||Fiennes, Hon. Eustace Edward||MacNeill, J. G. Swift (Donegal, South)|
|Balfour, Sir Robert (Lanark)||Fitzgibbon, John||MacVeagh, Jeremiah|
|Baring, Sir Godfrey (Barnstaple)||Flavin, Michael Joseph||M'Callum, Sir John M.|
|Barlow, Sir John Emmott (Somerset)||Furness, Sir Stephen Wilson||M'Kean, John|
|Beale, Sir William Phipson||Gelder, Sir William Alfred||McKenna, Rt. Hon. Reginald|
|Beauchamp, Sir Edward||George, Rt. Hon. D. Lloyd||M'Laren, Hon. F.W.S. (Lincs., Spalding)|
|Beck, Arthur Cecil||Gladstone, W. G. C.||M'Micking, Major Gilbert|
|Benn, W. W. (T. Hamlets, St. George)||Glanville, H. J.||Manfield, Harry|
|Bentham, G. J.||Goddard, Sir Daniel Ford||Markham, Sir Arthur Basil|
|Birrell, Rt. Hon. Augustine||Greenwood, Hamar (Sunderland)||Marks, Sir George Croydon|
|Black, Arthur W.||Grey, Rt. Hon. Sir Edward||Marshall, Arthur Harold|
|Boland, John Pius||Griffith, Rt. Hon. Ellis Jones||Meagher, Michael|
|Booth, Frederick Handel||Guest, Hon Frederick E. (Dorset, E.)||Meehan, Francis E. (Leitrim, N.)|
|Boyle, Daniel (Mayo, North)||Gwynn, Stephen Lucius (Galway)||Meehan, Patrick J. (Queen's Co., Leix)|
|Brady, Patrick Joseph||Hackett, John||Millar, James Duncan|
|Brocklehurst, William B.||Hancock, John George||Molloy, Michael|
|Brunner, J. F. L.||Harcourt, Robert V. (Montrose)||Molteno, Percy Alport|
|Bryce, J. Annan||Harvey, A. G. C. (Rochdale)||Mond, Rt. Hon. Sir Alfred|
|Buckmaster, Sir Stanley O.||Harvey, T. E. (Leeds, West)||Money, L. G. Chiozza|
|Burns, Rt. Hon. John||Haslam, Lewis (Monmouth)||Montagu, Hon. E. S.|
|Burt, Rt. Hon. Thomas||Hayden, John Patrick||Mooney, John J.|
|Byles, Sir William Pollard||Hayward, Evan||Morison, Hector|
|Carr-Gomm, H. W.||Helme, Sir Norval Watson||Morton, Alpheus Cleophas|
|Cawley, Sir Frederick (Prestwich)||Hemmerde, Edward George||Muldoon, John|
|Cawley, Harold T. (Lancs., Heywood)||Henry, Sir Charles||Munro, Rt. Hon. Robert|
|Chancellor, Henry George||Hewart, Gordon||Murphy, Martin J.|
|Chapple, Dr. William Allen||Higham, John Sharp||Nannetti, Joseph P.|
|Clancy, John Joseph||Hinds, John||Needham, Christopher Thomas|
|Clough, William||Hobhouse, Rt. Hon. Charles E. H.||Nicholson, Sir Charles N. (Doncaster)|
|Collins, Godfrey P. (Greenock)||Hogge, James Myles||Nolan, Joseph|
|Collins, Sir Stephen (Lambeth)||Holmes, Daniel Turner||Norman, Sir Henry|
|Compton-Rickett, Rt. Hon. Sir J.||Holt, Richard Durning||Norton, Captain Cecil W.|
|Cotton, William Francis||Howard, Hon. Geoffrey||Nugent, Sir Walter Richard|
|Crumley, Patrick||Jardine, Sir J. (Roxburgh)||Nuttall, Harry|
|Cullinan, John||Jones, Edgar (Merthyr Tydvil)||O'Brien, Patrick (Kilkenny)|
|Dalziel, Rt. Hon. Sir J. H. (Kirkcaldy)||Jones, H. Hayden (Merioneth)||O'Connor, John (Kildare, N.)|
|Davies, David (Montgomery Co.)||Jones, J. Towyn (Carmarthen, East)||O'Connor, T. P. (Liverpool)|
|Davies, Ellis William (Eifion)||Jones, Leif (Notts, Rushcliffe)||O'Doherty, Philip|
|Davies, Timothy (Lincs., Louth)||Jones, William (Carnarvonshire)||O'Dowd, John|
|Davies, Sir W. Howell (Bristol, S.)||Jones, William S. Glyn- (Stepney)||O'Kelly, Edward P. (Wicklow, W.)|
|Dawes, James Arthur||Joyce, Michael||O'Kelly, James (Roscommon, N.)|
|Delany, William||Keating, Matthew||O'Malley, William|
|Denman, Hon. Richard Douglas||Kellaway, Frederick George||O'Neill, Dr. Charles (Armagh, S.)|
|Devlin, Joseph||Kelly, Edward||O'Shaughnessy, P. J.|
|Dickinson, Rt. Hon. Willoughby H.||Kennedy, Vincent Paul||O'Shee, James John|
|Dillon, John||Kenyon, Barnet||O'Sullivan, Timothy|
|Donelan, Captain A.||Kilbride, Denis||Outhwaite, R. L.|
|Doris, William||King, Joseph||Palmer, Godfrey Mark|
|Parry, Thomas H.||Robinson, Sidney||Walton, Sir Joseph|
|Pearce, Robert (Staffs, Leek)||Roch, Walter F. (Pembroke)||Ward, W. Dudley (Southampton)|
|Pearce, William (Limehouse)||Roche, Augustine (Louth)||Waring, Walter|
|Pease, Rt. Hon. Joseph A. (Rotherham)||Roe, Sir Thomas||Warner, Sir Thomas Courtenay T.|
|Philipps, Col. Ivor (Southampton)||Rowlands, James||Wason, John Cathcart (Orkney)|
|Phillips, John (Longford, S.)||Rowntree, Arnold||Webb, H.|
|Pollard, Sir George H.||Samuel, Rt. Hon. H. L. (Cleveland)||White, J. Dundas (Glasgow, Tradeston)|
|Ponsonby, Arthur A. W. H.||Samuel, J. (Stockton-on-Tees)||White, Sir Luke (Yorks, E.R.)|
|Pratt, J. W.||Scan Ian, Thomas||White, Patrick (Meath, North)|
|Price, C. E. (Edinburgh, Central)||Scott, A. MacCallum (Glas., Bridgeton)||Whitehouse, John Howard|
|Price, Sir Robert J. (Norfolk. E.)||Sheehy, David||Whittaker, Rt. Hon. Sir Thomas P.|
|Priestley, Sir Arthur (Grantham)||Sherwell, Arthur James||Whyte, A. F. (Perth)|
|Priestley, Sir W. E. B. (Bradford, E.)||Simon, Rt. Hon. Sir John Allsebrook||Williams, Aneurin (Durham, N.W.)|
|Pringle, William M. R.||Smith, H. B. L. (Northampton)||Williams, Llewelyn (Carmarthen)|
|Radford, G. H.||Smyth, Thomas F. (Leitrim, S.)||Williams, Penry (Middlesbrough)|
|Raffan, Peter Wilson||Soames, Arthur Wellesley||Wilson, Hon. G. G. (Hull, W.)|
|Rea, Rt. Hon. Russell (South Shields)||Strauss, Edward A. (Southwark, West)||Wing, Thomas Edward|
|Rea, Walter Russell (Scarborough)||Sutherland, John E.||Wood, Rt Hon. T. McKinnon (Glasgow)|
|Reddy, Michael||Taylor, John W. (Durham)||Yeo, Alfred William|
|Redmond, John E. (Waterford)||Taylor, Theodore C. (Radcliffe)||Young, William (Perthshire, East)|
|Redmond, William (Clare, E.)||Thorne, G. R. (Wolverhampton)||Yoxall, Sir James Henry|
|Redmond, William Archer (Tyrone, E.)||Touche, George Alexander||TELLERS FOR THE NOES.—|
|Roberts, Charles H. (Lincoln)||Toulmin, Sir George||Mr. Illingworth and Mr. Gulland.|
|Robertson, Sir G. Scott (Bradford)||Trevelyan, Charles Philips|
|Robertson, John M. (Tyneside)||Walters, Sir John Tudor|
Question, "That the Clause stand part of the Bill," put, and agreed to.
§ The CHAIRMAN
The Amendments in the names of the hon. Members for St. Pancras and Leamington are not necessary, because their provisos or Clauses can be moved later without the insertion of these words.
§ Mr. CASSEL asked a question which was not heard in the Reporters' Gallery.
§ The CHAIRMAN
The hon. and learned Gentleman will see that in the Bill itself there are three or four Clauses granting relief which was not granted last year. Further proposals of the kind can be made in new Clauses.
§ Mr. CASSEL asked a further question which was not heard in the Reporters' Gallery.
§ The CHAIRMAN
It is clear that the hon. Member can propose new Clauses without the insertion of these words.
§ Mr. WORTHINGTON EVANS
Do you by your ruling say that Amendments, for example, to make Income Tax and Super-tax payable on net income, must be new Clauses; or, if this Amendment is not moved, will it be necessary to have these as new Clauses or can they be moved as they are on the Paper?
§ The CHAIRMAN
I was not dealing with that point at all, as to whether they come in as provisos. Some come in as provisos, and some as new Clauses. I was saying that in both cases it is unnecessary to interpolate these words here in order to open the way for these proposals.
§ The CHAIRMAN
That is so. Any proposal which will be in order with these words would be equally in order without these words being inserted. The Amendments in the name of the hon. Member (Mr. G. Locker-Lampson) on this Clause are a proper subject for new Clauses. It is customary in the Finance Bill in the Clause which imposes Income Tax to deal with the imposition alone, and to deal with relief in later Clauses of the Bill.
§ Mr. G. LOCKER-LAMPSON
Would it be possible if these new Clauses are moved for the Chancellor of the Exchequer to give some indication as to what line he promises to adopt in regard to them?
§ The CHAIRMAN
I think the hon. Member would be entitled to put that question on the Question that the Clause stand part of the Bill.
§ Mr. CHARLES BATHURST
I beg to move to leave out the words—
I move this in order to ask for an explanation of the meaning of the Sub-section. It appears to be framed with the object of securing that the assessment of all real property, whether in the hands of an owner under Schedule A, or in the hands of an occupier under Schedule B, shall be assessed at the same value for the current year as it was assessed for the purpose of the last financial year. I want to ask why real property should necessarily be assessed for the current financial year at exactly the same valuation whether, in the first place, that value is maintained or not, or whether, in the second place, the local Income Tax Commissioners desire to alter the assessment or to leave it as it was previously. It is quite conceivable that half a house might be burnt down, or that the property might be seriously depreciated in value through no fault of the owner, and yet if I read this Sub-section aright he would necessarily be assessed at exactly the same value as in the previous financial year, and have to pay Income Tax upon it. It is in order to obtain an explanation from the right hon. Gentleman that I move the omission of this Sub-section.
- "(3) The annual value of any property which has been adopted for the purpose either of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of Inhabited House Duty, for the year ending on the fifth day of April, nineteen hundred and fourteen, shall be taken as the annual value of such property for the same purpose for the next subsequent year; provided that this Sub-section—
- (a) so far as respects the duty on inhabited houses in Scotland, shall be construed with the substitution of
637 the twenty-fourth day of May for the fifth day of April; and
- (b) shall not apply to the Metropolis as denned by the Valuation (Metropolis) Act, 1869."
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Montagu)
It will be in accordance with the usual practice to keep the existing valuation and prevent the necessity of making new assessments this year. The existing valuation for this purpose was only carried out in 1910–11, and would, in the normal course, run for about five years. I suggest that by not renewing the Clause this year you are throwing upon the Inland Revenue Department the burden of administration of a much altered Income Tax, and giving them also the burden of carrying out for the first time a premature assessment; this would add to the inconvenience of owners of property, which is not what the hon. Member wants. If the hon. Member wants a revaluation of this property for this purpose his best course is to wait till he normal period has elapsed from the last assessment, and move an Amendment in two or three years' time.
§ Mr. PRETYMAN
I do not think the right hon. Gentleman has met my hon. Friend's point, which is not that there should be a new assessment, but whether 638 this assessment, being taken as the basis, there is anything in this Sub-section which would prevent those whose property had been seriously depreciated by some special cause from obtaining a consequent reduction. For instance, in the case of agricultural land, it is a most common thing, at present at any rate, that where there is a very bad season, and where the tenants have suffered, the owner of that property would be assessed under Schedule A, and it has hitherto been the practice under special circumstances of that kind to give a reduction. Is there anything in this Sub-section which precludes that owner from asking for a reduction of his Income Tax under Schedule A on that special ground? There are many reasons why there would be an obvious difference between the value of the property this year and last year, and where that obvious difference exists what my hon. Friend desires, as I understand, is a distinct assurance that nothing in this Sub-section will prevent the relief being claimed and obtained in such cases as that.
§ Sir J. SIMON
The hon. Member will find that there is nothing in this Subsection which is in any degree unusual or which alters the general provisions of the Income Tax law. There is, as the hon. Gentleman has said, a Clause—indeed, I think there are two Clauses—in the general Income Tax code, which allow in special circumstances special application to be made. All this does is to repeat for another year what, for instance, was done last year, and I dare say the year before. The Finance Act of 1913 is word for word the same, the object being simply that outside London you should not have what you would otherwise have, an annual valuation. I can assure the hon. Gentleman that these special reliefs which he has in mind which arise under special Sections of the Income Tax law would be available in just the same way, and this does not affect it in the least.
In connection with this particular Clause, why is it that we find the Clause dealing with valuation for Income Tax purposes in Section 2 for next year, and we find a Clause dealing also with valuation for Income Tax in the year 1916–17 in the Revenue Bill? It seems to me most extraordinary and highly inconvenient that you should deal with valuation for one year in one Bill and for another year in another Bill. That only 639 shows one of the inconveniences of separating the two Bills. It would be a much greater convenience if we could consider these two questions, which are closely connected, in the same Bill, more particularly after the Instruction.
§ Mr. C. BATHURST
I cannot say that the speech either of the Secretary to the Treasury or of the Attorney-General has carried the smallest conviction to my mind. I may be more stupid than most people, but what I do not understand is what appears to be the plain meaning of words which have not received their ordinary interpretation in this case. We are told, and I am prepared to accept it from the Attorney-General in answer to my hon. Friend, that in fact those whose property has depreciated during the year will not suffer in consequence of the continuance of their former assessment.
§ Sir J. SIMON
I am anxious that the hon. Member should not misunderstand me. What I said was not quite that. What I said was that the provisions of the general Income Tax law which allow in special cases—a fire is one of them; the giving up of businesses is another—these things are not affected by this Clause at all. That is all. Do not let anything more be put upon me than that, because that is what I said, and I believe it to be quite accurate.
§ Mr. C. BATHURST
The commonsense answer to that is that it is time to scrap this superfluous and unnecessary Clause. It has apparently been in existence since 1910, and has been re-enacted since then. The fact that the irregularity has occurred for four years does not in the least convince me that it is desirable to continue it. What this Clause actually says is that all property which has been assessed for the purpose of Schedule A or B during last year shall be assessed at the same value during the current year. If that is so, surely what the Attorney-General has just said only shows that the ordinary interpretation of these words is not to be the interpretation of the Treasury. I do not want to press the Amendment, but I suggest that it might be worth while consulting the legal experts at the Treasury as to whether it is desirable to re-enact this quite unnecessary provision in the next Finance Bill.
§ Mr. LEES SMITH
I wish to point out to the hon. Member what is the nature of this 640 Clause. He appears to suppose that it was enacted for the first time in 1910, and that it was subsequently re-enacted every year ever since. As a matter of fact, this Clause has been enacted in regard to Income Tax for thirty, forty, or fifty years. The fact is, that the assessment for Schedule A of the Income Tax is practically a quinquennial assessment, and at the beginning of each quinquennial period it is renewed for a similar period in the Finance Act. The general Income Tax law at the same time makes provision that any such injustice as the hon. Member had in his mind can be remedied by a surveyor of taxes making allowance for depreciation of property, fires, and so on.
§ Mr. WATSON RUTHERFORD
I think we might ask somebody on the Treasury Bench whether, for the last fifty years, this has been repeated year after year without the authorities having to get a new valuation, and whether they have taken the valuation of the last preceding year without altering it. I venture to think that the statement made by the hon. Member is utterly unfounded, and if there has been any such enactment as he suggests, all I can say is that it has been regularly broken by the authorities ever since.
§ Mr. LEES SMITH
The hon. Member has not stated the facts as I put them. It is not the case that the law has been re-enacted every year. There is a new valuation every five years, and that new valuation is re-enacted by some such Act as this for the remaining four years.
§ Mr. MOUNT
I beg to move in Subsection (3) to leave out the word "either" ["adopted for the purpose either of"]. This is an Amendment on the same subject as I raised on a point of Order at the beginning of the discussion to-day. I was then told by you, Mr. Chairman, quite correctly, that my point ought to have been raised earlier in the progress of the Bill. I did not understand you to rule whether I was right in my contention that those words dealing with Inhabited House Duty were outside the scope of the Bill, because there is no mention in the title of any part dealing with Inhabited House Duty.
§ The CHAIRMAN
On that point, I do not know whether the hon. Member has looked at the Resolution on which the Bill was brought in. The Resolution meets 641 that point. The Committee is authorised by the Resolution to deal with this matter, and that is the only thing that comes within my cognisance.
§ Mr. MOUNT
Even if it is not in your power to rule it outside the scope of the Bill, I think the Committee ought to consider very carefully before they allow the words to stand part of the Bill, because there is no doubt that they are outside the title of the Bill. The title of the Bill says:
"A Bill to continue the Duty of Customs on Tea, to reimpose Income Tax and Super-tax, with amendments and modifications, and to amend the Law relating to Death Duties, the National Debt, and Grants for Local purposes, and for purposes incidental thereto."
There is nothing at all in the title which would cover the words dealing with Inhabited House Duty. It seems to me that this is all the result of the attempt of the Government to limit in any way they can discussion upon this Bill. Last year, when for the first time the Government took that line, they were careful in the title of the Bill to put in words which would cover the proposals dealing with Inhabited House Duty, but this year they are not in, and I move my Amendment with the object of getting these words out of the Clause, in order that the Clause may strictly conform with the established practice of the House, namely, that a Clause should not go outside the title of the Bill. I frankly admit, after the explanation given with regard to the meaning of this Clause to my hon. Friend the Member for the Wilton Division (Mr. Bathurst), that this Clause in the Bill is a usual one. But if these words are cut out, that will not make any difference in the valuation for Inhabited House Duty, because this Clause can, if necessary, be put into the Revenue Bill. I think the House should be jealous that no steps should be taken which would infringe the usual line of procedure by leaving in the Bill words which are outside the scope of the title.
§ Sir J. SIMON
The hon. Gentleman very fairly says that, so far as regards the last Amendment which was proposed by the hon. Member for the Wilton Division (Mr. Bathurst), he feels that, in view of the explanation given, nothing irregular or improper is proposed. I hope to be able to satisfy him in regard to this matter, also that the procedure is regular. The fact is, that exactly the same con- 642 siderations and the same practice apply to Inhabited House Duty as apply to the other case. If anybody looks at the Act of last year, they will find a Clause which is word for word the same as this Clause. Or take as an example a Statute passed in a year when the right hon. Gentleman the Member for East Worcestershire (Mr. Chamberlain) was Chancellor of the Exchequer. The Finance Act of 1904 has exactly the same Clause in it in both particulars. The reason is this: If you do not make that provision, then you would have to have an annual revaluation of the value of every inhabited house and an annual revaluation for the purpose of Income Tax, Schedule A, in connection with any inhabited house all through the country, except London, to which a special provision applies. The fact is, whatever Government is in power, and whatever may be the particular prejudices of the time, it has always been considered that that would impose an unreasonable amount of labour on the machine of valuation, and that it was quite unnecessary. Therefore, it has always been the practice in this House for generations, when dealing with Schedule A or valuation for Inhabited House Duty purposes, that you should not require a valuation every year, but that you should have a valuation periodically. What has always been done is that Governments have had a Clause like this for four or five years, and at the end of the period it is carried on for another five years, or it might be seven years. I hope the hon. Gentleman will take it from me that precisely the same practice has been followed with regard to Inhabited House Duty as Income Tax. We are not overstepping the usual limit of time before making a new valuation; we are not extending the period at all. I think the hon. Gentleman will see that if it was right to carry on the valuation last year for Schedule A, it must surely be right to carry on the valuation for Inhabited House Duty purposes. There are some purposes for which these valuations are almost interchangeable, and there are other cases, for instance, those in connection with licensing, where it is necessary to look at one or the other. It would get us into hopeless confusion if we did not follow the established practice.
§ Mr. WORTHINGTON EVANS
I do not wish to speak on the merits at all. I think the Attorney-General made out a case for the Clause as it stands. He quoted as 643 precedents the Acts of 1904 and 1913, and stated that precisely the same words were in those Acts. Were the titles the same? It seems to me of extreme importance that that question should be answered, because my recollection is that the title of the 1913 Act did include provision for the law on Inhabited House Duty. I am not sure about the 1904 Act, but the point which my hon. Friend (Mr. Mount) took was that this Clause which we are now considering goes beyond the title of the Bill. If I am right in saying that there is no precedent for including such a Clause, unless the title also includes it, then the Clause is outside the scope of the Bill. The Attorney-General has the Act before him, and he can say if I am right.
§ Sir J. SIMON
I did not deal with that when I spoke, because it seems to me that it is a point of Order, and therefore a question for the Chair. It did not seem to me to be necessary to deal with it, for I understand that you, Sir, had already ruled that there was no point of Order.
§ Mr. WORTHINGTON EVANS
I asked the Attorney-General whether the two precedents which he quoted are on all fours or not.
§ Sir J. SIMON
I have not said a word about the point of Order, because it is for the Chairman to look at the Clause from that point of view. I have addressed myself to the Amendment.
§ The CHAIRMAN
I ruled, so far as my duty as Chairman is concerned, that the words are in order. They were authorised by the Resolution passed in Committee of Ways and Means. We cannot put all the Bill into the title.
§ Mr. CASSEL
I have the title of the 1913 Act here, and it includes the words:
"and to apply with respect to Income Tax (including Super-tax) and the annual value of property the like provisions as were applied in the last preceding year."
§ Mr. CASSEL
I think it does. It is a general and wide title. Last year I took exception to this narrow form of title in this new-fangled procedure which is being substituted for the ancient custom. This new form of title, trying to separate 644 the Revenue Bill and the Finance Bill, is really the cause of all the trouble of the Government.
§ Mr. LLOYD GEORGE
The hon. Member is quite wrong. That is the old dustbin. I am reverting to the good old tradition.
§ Mr. CASSEL
I think that the right hon. Gentleman is straying from the procedure of Sir William Harcourt in 1894, which has been followed ever since. It is inconvenient to have these titles so closely drawn. The object of this Amendment is that either these headings ought to come out, or the title ought to be altered. My hon. Friend did not say that the substance of the Clause was unnecessary I only take this opportunity of intervening again in order to raise my protest against the separation of the Revenue Bill and the Finance Bill
§ Motion made and Question proposed, "That the Clause, as amended, stand part of the Bill."
§ Mr. FELL
The Prime Minister a week ago told us that the Income Tax of this country was collected in such a confused manner that it reflected credit on no one concerned, and he promised—as he had promised three years ago, also as Prime Minister, and as he promised six or seven years ago, when he was Chancellor of the Exchequer—that the whole question of the Income Tax Acts would be looked into by him, and that he would have the whole question thoroughly sifted, and the whole of those Acts put into one Consolidating Act, under which we could settle Income Tax questions, which are most complicated and difficult, by reference to one Act of Parliament. Of course, when the tax is low, these anomalies are matters of comparatively little importance; but when the tax—although it is only a penny more this year—is very high, and is, in fact, at a war rate, then all these anomalies become very serious, and I think that we should have some absolutely definite promise by the Chancellor of the Exchequer that he would next year at latest, if still Chancellor of the Exchequer, bring in a Consolidating Bill, so that the law as to Income Tax might be put in a more reasonable and more easily understood form than it is in at present, so that we should be able in the one Bill to ascertain what the 645 Income Tax is, and not have to refer to several Income Tax Acts, some of which were passed over fifty years ago. The main Act itself, to which we are continually being referred, was passed over fifty years ago. In that Act our Colonies are called the "Plantations," and in the Income Tax forms which used to be sent out up to two or three years ago, profits derived from the Colonies were described as "profits derived from the plantations." That shows the extraordinary age of the Acts under which we are working. It recalls the days of the old Virginian planters considerably more than 100 years ago. The whole matter requires to be brought up to date, and perhaps before we close the Chancellor will confirm the promise made by the Prime Minister—that the whole question of these Income Tax Acts will be gone into, so that they may all be consolidated in one new Bill.
There is another point on which I think the Chancellor will agree that something should be done. We have no means of knowing at present the number of people who are paying Income Tax in the United Kingdom. We do not know within hundreds of thousands. They bring out 500,000 assessments, but many people appear two and three and up to even nine times in these assessments. I know cases myself in which three or four assessments are made on the same person. That is quite wrong. When we see half a million assessments in the Blue Books we have no idea whether that represents 500,000 or 300,000 or 100,000 people. When you come to the Super-tax you get the accurate number of persons who make the returns and are paying the tax. But as the Income Tax is taxed at the source, there is no possible means by the present machinery of ascertaining with the remotest approximation to accuracy the number of people in England who are at present paying Income Tax. I know cases, personally, of ladies who are paying small amounts of Income Tax on their dividends which the Government have no possible means of knowing. They do not get any return or rebate or reduction. They do not appear in any book as Income Tax payers. The Government never hear of them. I think that the number of people paying Income Tax is greatly underestimated. Instead of 500,000 I should think that it would be considerably over 1,000,000. But we have no means of knowing while the Income Tax is collected under the present system.
646 The amount of Income Tax collected is now £10,000,000 more than it was years ago, and the amount from which it is collected has grown up, roughly speaking, by £100,000,000. But when we turn, as we shall do in a few days to the Estate Duties, we shall find that the capital value of the investments of the country has remained stationary during the last ten years. The result is an extraordinary anomaly which it is hardly possible to understand. I believe that it has arisen from the fact that the return which capital is paying has increased considerably during the last four or five years, so that the capital which formerly returned 3 per cent. is now returning 4 per cent., and that which yielded 4 per cent. is now producing 5 per cent. The result is that the Chancellor, from the same amount of income, is now able to draw £10,000,000 a year more Income Tax than he would have been able to draw, but for the fact that the rate of interest in this country is very much higher than it used to be eight or ten years ago. It is a matter for the very gravest thought whether, by putting these heavy taxes on that stationary capital we are not incurring considerable responsibility, and whether there may not be a pitfall before us owing to the fact that our capital may not always produce the increased income, but may, owing to bad trade or other causes, produce a lower rate of interest. If the capital is remaining stationary, and these heavy taxes continue to be imposed future Chancellors may find it very difficult to cope with the situation which may arise. Income Tax is now one of the mainstays of the revenue of the country, and if the capital remain stationary and at any time produces a lower rate of interest than it does at the present time, then the very large sum produced by the Income Tax would be reduced, and it would tax the ingenuity of future Chancellors to deal with the situation which would then arise. A period of bad trade would in this way produce very grave results.
I am sure that something can be done to simplify the practice in reference to Income Tax in England. Nothing can be more complicated than the existing system. I would suggest that it might be possible to send out at a certain time of the year to everybody in the country, a form which he will be required to return filled up, stating what his income has been during the past year. I believe that this would be the only way by which you 647 could find out the number of people in this country who have incomes assessable to Income Tax. All we know from collection at the source is that a certain amount is collected. We do not know that that is the income of the people of England. The Chancellor should devote his attention next year to this subject. There are large sources of income from which he will find Income Tax. There are others which he is at present collecting unfairly, because many people who should not do so pay Income Tax at 1s. 3d. in the £, and they do not take the trouble to make claims. I have often met ladies who say that they did it once or twice, but that the trouble is so great that they would not do it again. I think that that can be avoided. I think that we are drawing too much Income Tax from some people, while there are many others who should pay but are not paying Income Tax. There is nothing which would repay the Chancellor of the Exchequer more than to go thoroughly into te question of Income Tax to the bottom, and to pass a Consolidating Bill which would simplify very much the practice existing at the present time.
§ 8.0 P.M.
§ Mr. CHIOZZA MONEY
I have some diffidence in endeavouring to pick up the threads of the speech which was interrupted at an earlier stage of the proceedings this afternoon, when I was endeavouring to show some of the injustice attaching to the present system, and to urge upon the Committee that the time has arrived for an entire revision of our Income Tax system. I am very glad that the hon. Gentleman who has just sat down is a supporter of this particular view. In referring to what he said with regard to the relations between income and capital in this country, I rather think that when he referred to the evidence shown in the Inland Revenue book of the capital of the country, he was referring to the Death Duties figures, because they are the only figures. That particular inference is vitiated by this fact. There is no doubt whatever that in recent years there has been an increase in the passing of property inter vivos, due of course to the increase in the Death Duties. We are increasing the desire of the people to give away that property during their lifetime. Surely that is one of the most remarkable results ever achieved by taxation in this or any other country. The £300,000, or thereabouts, which is now returned on the 648 capital passing at death in this country is very much less than would be recorded if you had a very low rate of Death Duties. I think, therefore, that the hon. Gentleman's observations in regard to the stationary character of the capital of this country is not entirely justified. The question of the advisability of raising the Death Duties over a certain period is a subject to which I may make reference at another time. To go back to the Income Tax, I endeavoured to point out earlier this afternoon that while we are enacting a 1s. 3d. rate, that rate is only paid by a small proportion of the taxpayers. The 1s. 3d. line may be drawn roughly as a graduated Income Tax circle, which is formed by Income Tax and Super-tax taken together. The graduated Income Tax is now set out very clearly in a White Paper circulated by the Chancellor of the Exchequer. It shows the rate of taxes ranging from zero (£160) up to about 2s. 7d. at the highest point, and the 1s. 3d. that we are enacting, or we may soon enact in this country, cuts right through the graduated scale, almost half-way. If it were 1s. 3½d. it would be a sort of equator of the roughly graduated taxes, but it would only be an equator with regard to the rate of the taxes, and not with regard to the persons. With regard to the great majority of the Income Tax payers, they lie below that line. The hon. Gentleman who has just sat down said that we have no idea of the number of taxpayers, but I can assure him that he is mistaken. It would be true to say that we only know approximately, but I think we know approximately that, roughly speaking, there are something like 1,100,000 or 1,200,000 Income Tax payers in the country—probably nearer 1,200,000 than 1,100,000.
The abatement system and the Super-tax system, with all these various provisions made by different Chancellors of the Exchequer, represent a series of attempts made to introduce justice into an inherently unjust system. The abatement system works unfairly in a very large number of cases. In regard to the question of declarations, what we do is this: We set up a 1s. 3d. rate of taxation, and to the small men we put it in this way, you have either got to pay 1s. 3d. or declare your income, and we give them a certain limited period within which to do it; and, if a man does not declare his income, if he forget it, or does not know it, he is fined in an amount of taxation which we acknowledge ourselves to be unjust. Let 649 me point out what it means in regard to an unearned income of £300 a year. When you declare it you pay £8 3s. 4d. on it. If you do not declare it you pay £17 10s. I say that is a most unjust form of taxation. You admit that the £300 man ought to pay only a low rate of taxation, and yet, under certain circumstances which do occur in some cases, you fine him a very much larger sum. With regard to abatements, I do not think the point has been raised in recent years. Very likely it is only when the tax rises to a considerable height that you notice it. Take what is the effect of abatements on mixed incomes. They are only allowed upon the earned portion of the income. The whole of the unearned portion pays a higher rate. It therefore may fall out that a small income, if half earned, pays as high a rate of tax as the income which is wholly unearned. Take an unearned income of £400 a year. Suppose that the taxpayer gets an abatement in respect of two children and an abatement in respect of £50 for insurance. Those abatements affect the 1s. 2d. rate, and therefore he gets deductions from the amount of the tax, and pays £8 15s., as compared with the income which is more than half earned. Let us suppose that the £400 consists of £250 earned and £150 unearned, and that the taxpayer is allowed for two children and the same amount of life insurance. If you work that out you find that he pays £8 15s., exactly as in the case of the £400 a year wholly unearned. This, of course, is a conspicuous injustice. That is only one of the injustices which attaches to the abatement system.
The hon. Gentleman said, and said with great truth, that if we had universal declarations of income we would get a return of a much larger amount of income. I believe that to be true. We have had it proved again and again. I am one of those who believe that when you ask the average taxpayer to declare his income he does it honestly. That is the experience of two officials of great authority, Mr. Braithwaite and Mr. Minnis, who have investigated the matter, and they made a report which is to be found in the Appendix to the Report of the Royal Commission on -Local Taxation. They state what they found with regard to personal declarations both in Prussia and in Hamburg and other places. With regard to Prussia and Hamburg they say that it is universally agreed that in those places the declarations are satisfactory, 650 and that, on the whole, they are honest and true declarations. In Hamburg I find that out of 348,000 taxpayers in the year which is referred to by these officials, only 28,000 were called upon to explain their declarations. I believe it to be true that when you ask the taxpayers to declare their incomes, although there may be cases where they do not occurring here and there, yet on the whole you get the truth, or something near it. How far have personal declarations gone? Probably nine out of eleven taxpayers now declare. Why is that? They declare for the following reasons: They do it either to get the special earned rate of 9d. or 10½d. or to get the advantage of the abatements; or, being rich, and suspected, they are compelled to declare in respect of the Super-tax. You therefore get two classes of declarations. The one class is a declaration to obtain something, because if a man does not declare he is fined; the other class of declaration is the declaration imposed upon the rich man in respect of Super-tax. It may be said that you could only successfully get declarations where they had to declare in order to get something, but the experience of the Super-tax, so far, shows that the personal declaration system may lead quite another way. I may add, in that connection, that it does not seem that any very great pressure is brought to bear in respect of personal declarations. At any rate, I notice in the new organ of the Civil Service, called "The Civilian," a letter evidently written by an Income Tax official, a portion of which I should like to read to the Committee, as showing what officials themselves think of our system as it is:—Taxpayers are divided into two classes—those with large incomes and those with small. Persons possessing large incomes are very sensitive, very honourable, and entitled to the most sacred privacy. Persons with small incomes are dishonest, and what they feel does not matter.That is the view of the Civil Service with regard to how the personal declaration system is now working—that the small man is hunted, and that the rich man is not hunted enough. I do not know what the Super-tax Commissioners do in endeavouring to find Super-tax payers. They do centrally, and, incredible as it may appear, local surveyors of taxes not only do not make inquiries on their own account, but they are instructed from headquarters that they are not to make inquiries on their own account. We have the central body, the Super-tax Commissioners, sitting in London, and endeavouring to levy Super-tax in a big 651 country like this without any proper local inquiry being made. I want to know how, under those circumstances, they can hope to get a proper return for Super-tax? It certainly seems to me that the officials of the Civil Service are justified in what they say, when the local surveyors are actually instructed to make no inquiry of their own, and the official central body vainly endeavour to discover Super-tax payers in the provinces. No doubt you will find that in the provinces there are those who are liable to Super-tax who live in small houses, and make no show of their wealth at all. It is all very well to have a system of suspicion by which you fish for probable Super-tax payers, but is that enough? Should we not rather do what the hon. Member opposite suggested, ask everybody living in a house of from £25 to £30 a year to personally declare his income? If you did that I think undoubtedly you would get the revelation of a very much larger amount of income, and therefore you would reduce the rate of taxation upon those taxpayers who now honestly declare their incomes.
Is there not some penalty attached to taxpayers if they do not declare their income?
§ Mr. CHIOZZA MONEY
No; there is no call upon the Income Tax payer to declare his income unless, on the one hand, he desire an abatement on the earned rate of Income Tax or, on the other hand, if he is a rich man, suspected of possessing a large income, when he is called upon to declare his income for Super-tax, between these two classes there is a large gap filled with people who are never called upon to declare their income and who do not do it.
Is there not a penalty upon the rich man if he does not make a declaration, and then makes a return in fear of being caught one day, and having to pay more?
§ Mr. PRETYMAN
Surely the hon. Gentlemen must be aware that anybody who is liable to pay Super-tax, owing to the size of his income, is subject to a penalty if he does not voluntarily tell, and he has not got to wait for notice!
§ Mr. CHIOZZA MONEY
Still there is a great gap between those people and the people who declare in order to get some- 652 thing which numbers probably 200,000 or 250,000, and these people are not Super-tax payers. No doubt they are a minority of the taxpayers, but that body does not include a large part of the taxable income, and I think there is not much doubt that there is evasion amongst them. The right hon. Gentleman this year is increasing the rate of the Super-tax, and because of that we shall again get an addition to the number of taxpayers who are called upon to pay Income Tax, but there will still be a considerable number of persons left. You cannot, of course, have a graduated Income Tax unless you have personal and universal declarations of income. That is the essence of the matter, and that is why I was so glad to hear agreement on that point from the hon. Gentleman who has just spoken. What is the main objection that is raised in the matter? Nobody objects, and nobody can object, to the equity of the thing. The objections are always put forward on grounds of practicability. The main objection is this: It is said that if we have a graduated Income Tax we have got to give up collection at the source. But we have already got a graduated Income Tax, very roughly and unjustly graduated, but we have got it, rough as it is, and the fact that it exists side by side with collection at the source is proof that if we had a properly graduated Income Tax we have not got to give up collection at the source. Let me return to the figure I began with. Here is a scale ranging from zero to 2s. 7d., and we have got the figure of 1s. 3d. cutting through the middle of it. To complete the picture what happens? Below a certain amount you can prove that your income is not more than a certain amount, or if you show that it is earned you get the advantage of a rate lower than 1s. 3d. Above the 1s. 3d., if you are suspected of possessing a certain income, it is your duty to declare, in order that you may be taxed more. What is the effect of it. The effect is that the normal rate of 1s. 3d. is below 1s. 3d. graduated by abatements and reductions in respect of earned income, while above 1s. 3d. there is something loaded on by the Super-tax.
If that can be done under our present rough system I suggest to the Committee, and I respectfully suggest to the Chancellor of the Exchequer that that can be done with a properly graduated scale. Suppose instead of 1s. 3d. there was some such scale as I have put down on the Paper, and let me say it is not put there 653 as an ideal scale, but for the purpose of reminding the Committee of what Income Tax really amounts to. Suppose the Income Tax for 1914–15 were charged on a varying scale it would still be possible just as it is now possible to tax at the source at any rate we cared to tax, either at the highest point or at an intermediate point. It would still be possible, as it now is, to make returns to those drawers of unearned income who are accidently taxed to-day. If we decided to tax 1s. 3d. from the source we could do so just as we do now. And on a personal declaration any addition to the 1s. 3d., the equivalent of the existing Super-tax. It would not be called a Super-tax, and you would not have any necessity for separate divisions. And the absurdity of two assessments on the one income would be swept away. At present a rich man is assessed in one way under ordinary Income Tax law, and then specially assessed on Super-tax and in a different way. If he has an earned income of £5,000 he is taxed on the average of three years' profits, but for Super-tax he is taxed on last year's profits, so that the same man is taxed in two different ways. The whole of that would be swept away with all its clumsy machinery. Instead you would have a personal declaration which would be sufficient for the whole purposes of your Income Tax law. With regard to the return of Income Tax overpaid at the lower end of the scale, that would be exactly as it is now. In the case of a person with £400 unearned dividend, the company before paying the dividend subtract 1s. 3d., and pays the balance. Therefore, the State has overtaxed that individual, and if he wants the over-taxation returned a claim has got to be made. If, therefore, we have a properly graduated scale, and if you desire to retain the collection at the source, then, although that obviously would be a fault in the system, it would be no greater fault than now obtains under your present system, and that cannot be alleged against setting up a plain graduated scale. Opinions might vary as to what amount you should levy. I am not now discussing the question of rates, and the question of whether the Income Tax should be high or low is not involved in my argument. If we only had an Income Tax equivalent to 9d. in the £ I would still urge that it ought to be graduated. The question of rates need not trouble us, but I do urge that we can collect at the source an appreciable proportion of the total taxation.
654 Alternatively there is another plan which is well worthy of the consideration of the Committee, and that is the plan which is adopted in Prussia. In Prussia it is a plain graduated scale. Collection at the source is effected in Prussia by taxing not only the individual taxpayer but also by levying an Income Tax on the company that pays the dividend, and because of that double taxation they allow a subtraction of 3½ per cent. for the profits of the company before its profits are taxed. Supposing the company is paying 10 per cent., then 3½ per cent. of that is allowed and is not taxable, while the remainder of the dividend is taxed. That is in the hands of the company which distributes its dividend to the shareholders. The shareholders are then taxed as if the taxation of the company had not taken place. That is really a double taxation, but, at any rate, it secures effectively taxation at the source. That method is certainly worthy of consideration in view of any general reform of our Income Tax law. In the past it has been said that every suggested reform in connection with Income Tax was impossible. Differentiation was declared to be impossible, and we have now got it in working order. A Super-tax was said to be impossible, and we have now got it in working order, and if not in the best working order, it is certainly effective in that it produces a revenue to the State of six millions per year. I am quite confident, if any Government would take its courage in its hands and make a thorough reform of the Income Tax, setting out a plain schedule of Income Tax easily to be understood by every Income Tax payer, it will not only find the thing practical, as I think I have demonstrated, but it will gain a very much larger revenue from the tax. There will be created in the mind of the taxpayer a sense of justice which does not now obtain. You have now both real and fancied injustices. It is easy to pick out anomalies in the scale set out in the White Paper. One has only to glance through the scale to see how unjust it is and what big jumps there are, especially at the lower end of the scale. In addition to these real injustices, there are the fancied injustices which arise from the clumsiness of the system itself, apart from the question of machinery, into which I should like to go on another occasion. One point is that the greater number of the people who administer the Income Tax are not Civil servants at all, and work 655 under conditions which, to my mind, are intolerable, not only to the officials, but also the private taxpayer.
Surely the Government ought not to hesitate in this matter because of minor difficulties. After all, it is not difficult to collect money in a rich country. The real difficulty about Income Tax is its payment by the individual taxpayer. It ought to be the duty of a Government which desires to make the Income Tax a good and permanent instrument of revenue to make it fair and just at every point. There are many minor things that might be done to make Income Tax more convenient to pay. The right hon. Gentleman has, to my mind, done a great thing in making the allowance in respect of children. That is a very important reform indeed. There are other reforms of a similar kind that he might well consider—such, for example, as allowances when a taxpayer has suffered special misfortunes or has to support poor relatives. We talk about the Prussian bureaucracy, but at any rate the Prussian bureaucracy have heart enough and sense enough to attend to these matters. In Prussia, if you can show that you have an aged father or mother to support, they make you an allowance of one or two stages in the scale of Income Tax. If you can show in any year that you have special misfortunes cast upon you, they will again make an allowance of two or three stages in the scale. The observance of all these points helps to make the tax, I will not say popular—that is too much to hope for—but at any rate just, and it makes the taxpayer feel that he is being dealt with with justice and common sense. There is another point in this connection worthy of consideration. Why should you not, especially in the case of small people, collect the Income Tax by instalments, as they do in Prussia? The annual payment of Income Tax by a man of small means is a very difficult matter. I refer to a man who has to pay, say, £12 to £15 all at once in January. It is very difficult for him to do it. If it could be collected in two, or, as is the case in Prussia, in four instalments, it would be much easier for the man to pay. I put forward these suggestions and observations in the hope that the Chancellor of the Exchequer will add to the work he has already done in giving us a roughly graduated Income Tax by completing the edifice and making the system entirely just.
§ Mr. H. W. FORSTER
The Committee will support the hon. Gentleman opposite (Mr. Chiozza Money) in his contention that the time has come when the whole system of our Income Tax ought to be simplified and recast. Beyond saying that, I do not know that the hon. Gentleman and I will agree entirely as to the proper steps which ought to be taken. I do not desire to discuss the general question of Income Tax so much as to invite the attention of the Chancellor of the Exchequer to two comparatively small but important points. The first is the disability under which companies carrying on a part of their business by means of short-term loans suffer. The Committee will remember that the Income Tax is, as a general rule, collected at the source. In the particular case that I have in mind it is not, and it is because the Income Tax is not collected at the source that a certain amount of hardship arises. A company borrowing money for a short term—that is to say, for a period of less than six months—is not allowed to deduct the Income Tax from the interest that it pays. If it borrows by means of a long-term loan, or debentures or anything of that kind, it is entitled to deduct the Income Tax from the interest. I will give a very simple example of the way in which the system works out to the detriment of such a company. A company buys, say, £50,000 worth of railway stock, which it deposits with its bankers as security for a loan of equal amount. I know that you could not get a loan of £50,000 on such a deposit, but I take the figures for the sake of simplicity. The loan is renewed from account to account, and the interest is calculated and paid as each account comes along. As the loan is for less than six months the company is not allowed to deduct Income Tax from the interest payments. The banker, of course, has to pay his Income Tax later on. In due course the dividend is paid on the stock. That dividend comes to the company less Income Tax. Thus the Company receives its dividend at a reduced rate, but it pays its interest on the loan at the full rate. The effect of that is that the Company practically pays Income Tax twice over on the £50,000 involved.
I will give figures, again not an actual case, to illustrate the point. Suppose the rate of interest that the company pays to its bank and the rate of dividend which it receives on the stock is the same—say, 5 per cent.—and that the Income Tax is at 657 the rate of 1s. in the £. When the company pays the interest on its loan it has to pay £2,500. When it receives its dividend on the £50,000 worth of stock, it receives, not £2,500, but only £2,375. The Chancellor of the Exchequer will see that in such a case the company does practically pay twice over. It has to pay to the banker the amount which the banker will subsequently have to pay for Income Tax, and it also pays the Income Tax on the dividend which it receives. If the company had raised this money by means of debentures or a long term loan, it would have been able to deduct the Income Tax from the interest that it paid either to the debenture holders or to the long term lender. The Chancellor of the Exchequer says that the amount they have to pay by way of interest, and the amount received by way of dividend, balances. In the case of the short term loan it does not. I should like to carry the case one step further. You allow private individuals to deduct the Income Tax from the interest on short term loans, but you do not allow companies to do so. I do not think that it is fair that where companies carry on part of their business on short term loans that they should practically have to pay a double Income Tax. I suggest you should either allow one of two things: Either in these cases to allow the tax to be deducted at the source—that is to say from the interest on the short term loan, or arrange that the companies pay such interest in full, and then allow them to recover the tax that they have paid by the production of the proper vouchers. If you allow private individuals to do this, there is no reason why it should not be done in the case of a limited liability company.
That is one case I want to make. The other I can develop in a moment. It refers to a question which was brought to the attention of the Chancellor of the Exchequer quite recently, and I understand that the right hon. Gentleman intends to do something to meet the case. I refer to the complaint of the life insurance companies that they are taxed upon their annual interest income instead of upon their profits. It may happen—I think it has happened in several cases—that the annual interest largely exceeds the annual profits. I think that the life assurance offices have a legitimate grievance which they have recently laid before the Chancellor. The true profits of life interest can only be ascertained by 658 actuarial calculation, and I submit that this is really the basis upon which their Income Tax should be calculated, and not only upon the interests which they have received. I should like to remind the Committee that foreign life offices, if they are proprietary offices, are taxed only upon the profits of their business in this country. If they are mutual offices they escape taxation almost entirely. If you can allow such a thing as that in a case of foreign societies carrying on part of their business here, I feel sure that the Committee will agree with me that you ought also to allow it to British companies doing their work in this country. I understand that the Chancellor of the Exchequer is prepared to go, at any rate, some part of the way in the direction we desire, and I hope what he may have to say will give complete satisfaction to those on whose behalf I have spoken.
§ Mr. LLOYD GEORGE
With regard to the two points raised by the hon. Gentleman, the first, I understand, is a rather exceptional case. Perhaps something might be said for a rearrangement of the present system, and I will look into it. Speaking generally, however, I do not think there is very much grievance, because, after all, if the companies have to pay these high rates of interest it diminishes the profits upon which they ultimately have to pay Income Tax, so that they are not paying twice over. Had it not been for the fact that the companies pay this interest, their profits would be much more considerable, and they would have to pay Income Tax upon them. I agree there is the special case of the short loans, where there is a certain grievance which I think ought to be looked into. With regard to the life insurance companies, I have looked into that matter. It is a very old grievance, but the grievance is rather against the mixed and composite companies than against the Inland Revenue. The Life and Fire Company is not treated in the same way as the purely life office, and the result is that in competition the purely life office suffers. I think that is rather a case for raising the amount to the composite companies than taking any off the others. I think that suggestion is well worth consideration. May I point this out with regard to the insurance companies from whom I had a deputation the other day. Insurance companies have a special position in the Income Tax. The premiums can be deducted before Income 659 Tax is paid at all. There you protect these offices in the premiums upon life insurance. This provision is used now very often for the purpose of evading the Super-tax, so that the tax during the last two or three years has been a direct incitement to people to invest, and invest heavily, in life insurance. The grievance is an old one, but this is a new development in favour of the insurance companies, and is a matter very largely of the last two or three years. I therefore think that the insurance companies have been specially privileged by the taxes of the last three or four years. There are three points made which I think we are required to look into. First of all the expenses—which the hon. Gentleman has not mentioned. The question of the deduction of expenses is the second point. The point that has been made very clearly is a grievance against the composite companies. Then there is the case with regard to the foreign officers. I have thought those three matters did require to be looked into. They are old established grievances, but that is no reason why they should not be redressed. On the contrary, it is the very reason they should be. There are many anomalies in connection with the Income Tax which I should like to see redressed.
That brings me to the point of my hon. Friend behind me. With regard to his proposal for a more scientific basis for the Income Tax there is a good deal to be said for it, but it is a matter of Parliamentary time. Hon. Members who promote private Bills know the difficulties of getting Parliamentary time for them. The rearrangement of the whole of the Income Tax, including the consolidation of the Income Tax, will require a very much larger proportion of the time of Parliament than any Chancellor of the Exchequer, not merely myself, has been able to get during the whole of the time I have been in the House of Commons. All would probably admit that it ought to be done. Whoever attempted to do it would always be confronted with the same difficulties that I have indicated. I admit a great deal of the case made by my hon. Friend. He has studied the matter deeply, and is one of the greatest living authorities on the subject in this country. I am sure he is right in stating that the Inland Revenue would get much more money out of his proposal than we are getting at the present time. I agree with him. The hon. 660 Member, who has just left the House, the hon. Member for Yarmouth, raised a discussion here to the effect that the Inland Revenue were not getting at the real taxable income. I am certainly convinced, for reasons I will give, that a good deal of the income of this country manages somehow or other to escape taxation. I think that will be the conviction of every man who has given any time to the subject, but I do think that the proposal of my hon. Friend would not quite mean that position. He seems to assume that in Prussia nothing of that sort happened. I happen to have made some inquiries into the Income Tax system in Prussia and the relief of local taxation and the system of local Income Tax, and the report that they gave me was that for every evasion of Income Tax here the evasion was much more considerable in Prussia and in the German Empire. Therefore, I am not at all sure that if you got rid of the present position you would improve matters in the slightest degree. Here there is no doubt that taxation at the source has been the salvation of the Income Tax. A vast amount of income would evade taxation altogether if it had not been for that very sensible method of taxation at the source, and every Chancellor of the Exchequer must be sensible that to do anything that would let go that precious advantage would be very serious. If my hon. Friend could find a scheme that would render taxation at the source compatible with the more scientific Income Tax, I am perfectly certain any Chancellor of the Exchequer would be very glad to consider his proposal. As he pointed out, we really have a graduated scale now. In the White Paper the graduated scale is shown very clearly. Take an Income Tax of 1s. 4d. on an unearned increment of £200. As a matter of fact, that £200 pays little over 2½d. That is the present position, but I doubt very much whether it would be possible for us to so arrange the Income Tax as to give what is known as a scientific basis for each without imperilling the income which we derive at the present moment from it. I hope those who are anxious to have the Prussian Income Tax will be encouraged by my hon. Friend's reminder that there is something like a double tax there. As a matter of fact, it is very much higher. I think I have now dealt with most of the points raised.
§ Mr. GODFREY LOCKER-LAMPSON
Before the right hon. Gentleman sits down, could he possibly give some indication as 661 to whether he has any sympathy with the provisos ruled out and the new Clauses, especially as there is to be a guillotine.
§ Mr. LLOYD GEORGE
I rather think that one in the name of the hon. Member rather stands in the way of redressing the grievance put forward by the hon. Member for Sevenoaks, because if I conceded them I would have to consider the cost. A Chancellor of the Exchequer has always to consider how much justice he can deal out over a certain area, and I am afraid I could not adjust both the hon. Gentleman's grievances in the same year, the expenses would be prohibitive. If they consent amongst themselves to come to some arrangement I might consider it, but if the hon. Member for Salisbury insists this year, and the hon. Member for Sevenoaks also, I am afraid I cannot do justice to both. It would be impossible to do it, and I am perfectly certain I could not do it without redressing other injustices to the revenue to give this special position to compromise offices.
§ Sir ARCHIBALD WILLIAMSON
I do not very often trouble the House by taking up much of its time, but as a business man, having business relations abroad, I would like to point out what the effect of the present system is on international trade and to persons connected with some public companies that are radicated in London, and who conduct their business in parts of the world far away. I have some interest in a company interested in the production of oil. In the case of this company the system of assessment for Income Tax is such that shareholders are really assessed at a rate far and beyond the rate imposed as the ordinary rate per £ of Income Tax. It arises from the fact that depreciation allowed on some of those enterprises is utterly inadequate, and much of what is taxed as profit has really to be written off by this company as depreciation. Furthermore, the amount which has to be set aside for the exhaustion of ground is not allowed as deduction from income. Consequently, in the company with which I am connected we had to pay Income Tax on £126,000, whereas only £60,000 was available for dividends. Consequently that company and the shareholders, instead of an Income Tax of 1s. 4d., are paying at the rate of 2s. 8d. in the £. I may be told by some Members of the House that it is very fortunate to be connected with companies making profits on such a scale. I do not want to give these things prominence from per- 662 sonal motives, but merely as an example of what is going on and how it will affect people connected with such companies in this country.
At the present moment a very large oil company is being formed amalgamating certain existing concerns. Owing to the system by which we levy Income Tax in this country, those who are promoting this large company with the capital of £2,000,000, though they are willing to pay Income Tax to Great Britain on the profits available to their shareholders, are not willing to pay on an amount which is more than double what is available for dividend, and consequently the company to which I refer is going to be radicated abroad, not because it wants to avoid paying Income Tax, but because it wants to avoid payments which are not Income Tax at all. There is another instance which I think hon. Members ought to hear. I know a nitrate company that, since 1898 up to 1913, has paid Income Tax upon £572,000, but the money available for the shareholders was £375,000. The Committee will see that great injustice is not only done to these shareholders, but that the tendency is that companies will be radicated abroad where such injustice does not exist. Do not let the House run away with the idea that it does not matter where companies are radicated if we wish to get the orders for materials. If the board of directors is in London, of course the result is, they give, as a rule, preference to British manufacturers and place orders here and give employment to people in Great Britain. If these companies are radicated in Canada or South America, then, of course, the tendency is to buy in the country where the company is placed, or from any "drummer" when he comes round from Germany or the United States. Therefore, the tendency to give trade to our people is taken away if these companies are radicated elsewhere. British companies trading abroad have frequently to use borrowed money for the purpose of developing their trade. If they borrow that money from a British bank, when they come to make up their profit and loss accounts, and their figures for Income Tax, they are allowed to deduct from the profits the cost of interest as a charge upon the business, and it is deducted from the profits. Now, if that money is borrowed from a foreign banker, or from some financier abroad, then the 663 British merchant who is borrowing this money has not only to pay interest to that foreign concern, but he has also to pay to the British Government a tax on interest which he is not receiving but is actually paying. That is a serious drawback to the development of trade, and I do not think the House of Commons realises, that owing to our Income Tax laws if we borrow from a foreign concern we are taxed because the British Government cannot reach it.
If a British firm conducts business in the United States it is assessed there on its profit for Income Tax, and if the control of that firm is in London then the British Revenue authorities say, "We are going to tax you for the profits on your business conducted in the United States of America, because the control of your business is in London." Thus the investor who has invested abroad, not because he wants to encourage British trade, but because he wants to avoid taxation, is in a more favoured position, because the United States say to him, "If you are a British subject and the holder of American shares or bonds, you can escape the American Income Tax," when merchants in America do not so escape. But the British Government wants the merchant to pay again on those same profits. Consequently the merchant who is doing some good to British trade, in this way is doubly taxed, but the investor who has invested abroad is to be taxed only once. Therefore I think it is clear that this is a drawback to British trade. What is the result and the effect of this system? It is that a British firm trading abroad no longer wishes to have the control here. They say, "If we are to pay double Income Tax, we will not have the control here, and the firm abroad shall be an independent house." When there is trade to be done do you suppose the trade will continue to come through the British house? No, it will be done locally or with "drummers," or in some other way. There is not the same patriotic reason for giving trade to our own people. If the control is in London it is beneficial to British trade, and anything that removes it abroad is a drawback in the long run. In the case of the Egyptian Hotel Company, it has been held by the Courts that if control is abroad it can escape Income Tax, but if it is a firm doing a similar business, the conditions are different under the law. That is an entire anomaly. These are points 664 which have struck me as a practical business man and which have come under my observation. I do not bring them forward from any personal motives, but because I think they are injurious to British trade as a whole. There is another point which I think might be dealt with. In the old days there was a great deal of apprehension and people did not want to go to the Courts to discuss questions of Income Tax, and it was said that they would rather go to the Income Tax Commissioners, which is a private body. Unfortunately, it so happens if you go before the Income Tax Commissioners, and afterwards wish to appeal to the Courts of Law, you have to ask the Commissioners to state a case. The Income Tax Commissioners are frequently served by a clerk who is a solicitor, and when he is drawing up the case for the Courts, as a lawyer, he does not want his Commissioners' decision to be upset by the Courts, and what is stated very often is that the Commissioners inquired into the matter and into the facts, and found so-and-so. What happened? When you go to the Courts the Court at once says that "the Commissioners have decided this matter upon the facts; we are only here to decide matters of law."
Consequently the appeal is ineffective.
I suggest that we should get rid of all the nonsense about being unwilling to go to the Courts direct. I would give everyone who has a grievance the option of direct access to the Courts, without having to go to the Commissioners. I understand that the Prime Minister has indicated that there should be an inquiry into these matters of anomalies and injustices in connection with the Income Tax. What I press for is that the Government should promise this inquiry definitely, and not hold it out as a vague thing. I press the Government to give us a definite promise that an inquiry will be held. My second point is that they should promise that on that inquiry there should be a number of bankers and business men, and that it should not be held solely by Revenue officials. I know the officials do their best, but they are not cognisant as to how these matters touch British industry and British foreign trade, and English merchants and bankers could give them many points showing where our present system is injurious to our trade, and illustrating how it works great injustice between concerns doing the trade in one 665 way and doing it in another. The clever man may use his ability to escape certain taxes, whereas another man is not so well informed as to how to escape. You ought to have on this Committee business men who would let the Government understand how the regulations and practice touch our trade and how by going on, as we are doing, in a haphazard sort of way we are driving a lot of trade and the formation of companies to other countries where they are treated more fairly and reasonably.
§ Sir JOHN SPEAR
The hon. Member who has just sat down has made out a very strong case in favour of an inquiry into the application of the Income Tax. We have heard from the Prime Minister and others that there is a possibility of such an inquiry being held, and therefore I would like to point out one or two other directions in which I think it is essential for the just application of the Income Tax that an inquiry should be held. The Chancellor of the Exchequer in his speech a few minutes ago said that he thought there was a great deal of property in the country escaped the payment of Income Tax which ought to pay, but I venture to say that there is a good deal of Income Tax paid on property in the country which ought not to be paid. The system of assessment is so faulty that very often the trader pays Income Tax on an income which he does not receive. I hope that in the inquiry something will be done to deal with that matter. Unfortunately, many traders do not keep accounts sufficiently clear to enable them to go before the Commissioners and prove their case. That truly is their own fault, but the result is that the surveyor of taxes places au assessment on the individual, no doubt according to the best of his outside knowledge, but altogether greater than the circumstances warrant. The trader, in some instances, not having properly kept accounts, has difficulty in showing that the proposed assessment is unjust. I know it is a difficult matter to deal with, but I hope, when the inquiry is held, that something will be done to facilitate the presentation of his case by a trader who is aggrieved before the Commissioners on different lines than at present.
The hon. Gentleman who has just sat down recommended that a person who is aggrieved should appeal direct to the Courts rather than to the Commissioners. 666 I cannot help thinking that is unwise advice. He would have a very considerable bill to pay for his trouble, and I would suggest that when the inquiry is held it should be considered whether the appellant against the surveyor's assessment of the Income Tax should not have the right to appear before the Commissioners with the surveyor, and should not have to withdraw when the Commissioners come to a decision. I cannot help thinking that the aggrieved person ought to be in the room with the surveyor and state his case and discuss his case. My hon. Friend (Mr. Duke) says that neither of them ought to be in the room. That, at any rate, would be impartial treatment, but I cannot help thinking that both could offer evidence that would be invaluable to the Commissioners in deciding what was a just assessment to put upon the property. The hon. Member who has just sat down, I think, proved his case that certain traders who are conducting business in this country and abroad pay Income Tax twice over. That occurs in the case of a trader on his overdraft at the bank. The banker pays Income Tax on his profits, and the trader pays on the profits of his trade without any deduction for what he has paid in interest on his current account at the bank. He has a grievance in that direction, too, because really Income Tax is paid twice on that particular sum of money. I hope this question will be gone into carefully. I have been an Income Tax Commissioner for a great number of years, and it is one of the most unpleasant public duties one has to fulfil, because you can never be sure that you are fixing an assessment that is equitable and just to the State, and yet deals fairly with the person affected. We ought to have a system whereby we could be more confident that all who ought to pay do pay, and that none pay who ought not to pay.
I look forward with a great deal of interest to the result of an inquiry such as has been suggested. It is an inquisitorial tax, but it has to be paid, and I do think the Government would be well advised to appoint practical men, as has been suggested, and not merely Departmental men, though an element of that character, no doubt, would be valuable. It would be still more valuable to have on that Committee of Inquiry business men who have known the difficulties connected with the conduct of trade. We might thus probably have a system established which 667 would do away with some of the irritation that now prevails, and which would also help the Government to receive the full amount of Income Tax to which they are entitled. I support the suggestion of the hon. Member for Northamptonshire (Mr. Chiozza Money) that the Income Tax should be paid by instalments. We often get the demand for the payment of the Income Tax before Christmas, and it is not always convenient for men, especially if the amount is pretty heavy, to pay. It seems to me that payment by instalments would be very convenient to many men in business. We know that pressure is brought to bear soon after Christmas if the money is not paid, although legally action is not taken if it is paid by 31st March. If the tax we're payable by instalments there would be less irritation and less difficulty in collecting the amount. I hope that an impartial Committee of Inquiry will be appointed and that they will be able to do away with some of the sources of irritation. It is very unpleasant to the surveyor to have to guess and to put an amount on the trader because he cannot quite prove what he ought to pay, and it is very annoying and irritating to the trader. If we could have a system more likely to be just and equitable all round, I am sure that it would remove some of the irritation felt by the Income Tax payer.
§ Mr. DUKE
I should like to thank the hon. Baronet (Sir A. Williamson) for the most businesslike contribution which, if I may respectfully say so, he made to this discussion. The system of assessing and collecting Income Tax in this country is worthy of the Middle Ages. It is not worthy of a civilised, up-to-date democratic country. The hon. Baronet referred to two aspects of it which anybody who has had experience in these matters must have come in contact with. First, there was that administration of the Income Tax by means of which the government of important commercial corporations is directly driven away from the City of London and other important business centres in this country. I dare say the hon. Baronet is familiar with the case in which a trading corporation of the United States had an administration in London and was taxed doubly upon the whole of its income—income made outside this country as well as within this country—with the result it changed its constitution and removed its 668 seat of administration across the Atlantic. Nothing can be more disastrous, because where the seat of administration is, there is naturally a tendency to spend all the money that can be spent to aggrandise the importance of the business, and to give full play to all those influences, sympathies, and associations which make for profit in trade. In that case I do not doubt that tens of thousands of pounds yearly were driven out of this country by what I can only call an imbecile maladministration of the Income Tax. Why that corporation should have been taxed here on the profits it made in all parts of the civilised world, no intelligent human being could say. It was a grasping policy on the part of those who administer the Income Tax, which showed an utter want of appreciation of the elements of business life.
It was quite according to law, because when the thing came to be discussed it was found that the Income Tax Acts in this country permitted such action. But when Nelson was at Copenhagen he put his telescope to his blind eye and achieved a great public benefit. Perhaps one cannot expect people who are responsible for the collection of these taxes to adopt such heroic methods. But this House, at any rate, should try to infuse common sense into the administration. I heard with gratitude the businesslike observations of the hon. Baronet. Damage has been done to this country, and is being done, year by year, by grasping methods in the administration of the Income Tax, and I am afraid that the more intelligent the man at Somerset House—or wherever you instal him—is the more bound he is to see that our present system permits him, and, if he is a zealous official, almost requires him to drive trade out of the country by the administrative methods to which the hon. Member referred. This is a subject which ought to be dealt with, because, although you may bring to this country tens or hundreds of pounds in the form of Income Tax for a year or two, the result, if you drive out of the country in perpetuity the business of administration of international undertakings which are capable of contributing very great sums to the business resources of this country, is that you inflict misfortune upon a community such as ours which exists upon such an artificial system as prevails in this country at the present time—an artificial system which, if you do not apply to it business methods and instincts, is bound to produce more 669 or less disastrous results. Therefore, I heard with great satisfaction what the hon. Baronet opposite pressed on the Government, and I confess it could have been said with much less effect from this side of the House.
There is another matter, and that is the relationship of the Income Tax payer to the administration at the present time. Nothing could be more deplorable. Immediately a man has a difficulty with the Government of this country about his Income Tax, he has to be dealt with by a hole-and-corner method, which I dare say Empson and Dudley in their day might have appreciated, but which no man with ordinary instincts of fair play and common sense would desire to perpetuate. A man has a dispute about his Income Tax. He does not mind exposing to everybody what the facts are. What happens? He is taken to a body of Commissioners of Income Tax. I do not speak disrespectfully of them, as for many years I have been an Income Tax Commissioner, but, as my hon. Friend (Sir J. Spear) said, I cannot conceive a less satisfactory duty. The man attends by himself or with his solicitor. He produces some books, and he and the surveyor of taxes have a wrangle across the table, and when all possible has been elicited the complainant is sent away, but the surveyor of taxes, for some reason I fail to understand, either as a layman or as a lawyer, stays to advise the Commissioners. I never was advised by a surveyor of taxes. One's mind revolts against the idea of being advised by a party to the litigation. My hon. Friend suggested they should both stay in the room and discuss with the Commissioners what their judgment should be. I think they ought both be sent away, but why the complainant should be sent away while the surveyor remains to discuss with the tribunal what its judgment should be, I cannot understand. It might adorn a comic opera, but as a contribution to the settlement of a delicate matter in a business community it is beneath contempt.
These two things exist in our Income Tax system. You drive away big business undertakings, while if a man has a grievance you inflict hardship and a sense of wrong upon him. When the Commissioners have given judgment to the best of their ability, the clerk to the Commissioners, as my hon. Friend said, frames a case. I should have been disposed to say, that if the surveyor could manage it, he 670 framed the case. Some Members of this House no doubt knew my late friend, Mr. Danckwertz. I am glad to say that distinguished lawyer supplied the Income Tax system with some bones to crack which broke some of its teeth, and that the system of Income Tax administration has been easier since his time. It may be suggested he was either a gamekeeper before being a poacher, or a poacher before he became a gamekeeper—I think he was a gamekeeper first. But, at any rate, he knew the system, and he was able to put the judges in a position to impose some restriction upon the ridiculous characteristics of this medieval method of administering justice to the taxpayers. My hon. Friend the Member for the Tavistock Division said that a man might find it worse if he was driven away from the Commissioners to the Courts. But let him go to both tribunals if he wants. If he has a grievance about his rates at the present time, he goes and tells the assessment committee. I understand that that is to be altered, and that in future he is to tell some gentleman from Whitehall. God forbid! He now tells the assessment committee. They are his neighbours. They discuss the thing in an intimate and familiar way, and perhaps they know a great many things that he does not intend to tell. At any rate, the matter is dealt with in a domestic form. If he is not satisfied with the assessment Commissioners he goes to Quarter Session, and the thing is fought out there in a manner which is consistent with the traditions of Englishmen. My hon. Friend the Member for Tavistock apprehends that there will be great expense. That depends entirely upon the litigant. He is not bound to employ the Law Officers or somebody of corresponding station. There are plenty of capable people, as litigants have been reminded, who would do their legal business cheaply. I do not believe in this bogey of the necessarily great expense of litigation. If people choose to go to law let them. [HON. MEMBERS: "Oh, oh!"] Hon. Members naturally enough laugh at that, but I will tell them a little story of one who was a Member of this House and who was a member of my profession. He was said to require large fees, and complaint was made of it, whereupon he said to the complainant, "It is quite true they are exorbitant, but look at those lighted windows. Behind every one of them is a man who can do your work at a cost you can afford."
671 When I said there was necessarily these deterrent expenses in respect of litigation about the Income Tax, I said it with knowledge of the facts. If people do not desire to employ fashionable counsel and fashionable solicitors, they can get their legal business done at a moderate cost, and these questions can be fought out. This is a time of intelligence, when, if a man has a real grievance, he can go before the justices or before the Quarter Sessions, and even can go before a higher Court himself and fight out a question of this kind. An intelligent business man is very capable of doing it. To suggest that you are to prevent a man having the ordinary rights of a British subject in a matter of this kind, which involves such profound feelings of oppression and injustice, is merely an insult to the intelligence of the taxpayer who has a grievance. Therefore I tell my hon. Friend that there is not that real difficulty, but there is that right of the subject to go either to the local justices or to the Quarter Sessions, or, if he so desires and feels he can afford it, he can have tried out a question of this kind in the ordinary constitutional mode in which questions of grievance are tried out. At any rate, it does not lie in the mouth of those who support an artificial system and a system which is not consistent with any of our ordinary notions of justice or common sense to say, "Oh, we do not give the poor fellow any other mode of redress, because it would be so expensive for him." That is a hypocritical pretence. The business community is entitled, as the hon. Baronet said, not to have business people driven away by a mediæval system of grasping after contributions of taxes which do not fairly belong to the community; and the taxpayer is entitled, if he thinks fit, and if he thinks he can afford it, to fight out these questions in which he is in conflict with the State, and to fight them out with whatever resources he thinks he is able to command. Therefore, I heartily support the pressure which the hon. Baronet put upon His Majesty's Government.
§ Sir J. SPEAR
May I explain to my hon. Friend that he misunderstood what I said. The hon. Member suggested it would be better for the person aggrieved to go to the Courts. That was the idea I was combating, and I said that we ought to have a simplified method of appeal before 672 the assessors before going to the Courts. If the person cannot get redress from the Commissioners, he certainly ought to have the right to go to law, but we ought to have a reformed system of appeal before the Commissioners.
§ Mr. LEES SMITH
It is rather inconvenient that we should have to discuss this question without any representative of the Treasury being present. The points that have been raised have not been points of large policy, but have been chiefly Departmental points which can be dealt with by Regulations, and it is most difficult to discuss them in the absence of those who would be responsible for the Regulations. One or two points were raised by hon. Members opposite on which it will be easy for the Government to take immediate action. The hon. Member for Tavistock (Sir J. Spear) pointed out that an appeal takes place before the General Commissioners, in which the taxpayer is on one side and the surveyor of taxes represents the other side. The taxpayer, having stated his case, leaves the room, but the surveyors stay with the sole ear of the Commissioners. I have understood, on making inquiry about this, because it has been brought to my notice, that the practice is very largely being broken down throughout the country, in many cases by the action of the Commissioners themselves, who, if the surveyor does not retire, merely retire for deliberation and give their judgment formally afterwards. In any case, this is a matter which needs no amendment of the law. It can be perfectly simply dealt with immediately by the Government if the Inland Revenue would merely issue a circular telling surveyors not to make it a practice to stay in such circumstance. I hope the Attorney-General will therefore ask the Government whether a circular dealing with this matter could not be sent out.
There is another much wider Departmental question that I wish to raise. Now that the rate of Super-tax has been lowered for the £3,000 division, the whole method of collecting it needs to be reviewed afresh As a matter of fact the Super-tax has not up to the present yielded the return which was estimated by the Select Committee of 1906, which recommended its adoption. That Select Committee, at the most moderate estimate—I believe it was the estimate of Sir Henry Primrose—expected that Super-tax would 673 be paid upon a sum of £200,000,000. That was some years ago, and it ought now to be paid on a larger sum. As a matter of fact it is only paid on a sum of about £150,000,000—that is to say, the proportion of income which escapes Super-tax is much larger than the proportion of income which escapes the general Income Tax. I believe the reason for that is that the Super-tax is centrally administered, instead of locally administered.
§ Mr. LEES SMITH
I admit that is one reason, but there is another, and one which becomes especially serious in view of the change that is to be made. The Super-tax is collected by the special Commissioners at Somerset House. It is obvious that they have not the local knowledge which the surveyors of taxes scattered throughout the country possess. When this matter was being discussed before it was said that the Commissioners at Somerset House would be able to trace incomes all over the country of Super-tax payers with large estates or large property situated in many parts of the country. But they have no local knowledge. Now that the level is being lowered, and you have come down to £3,000, and are reaching a far smaller class of taxpayers and a very fluctuating class of taxpayers—I am sure that by far the larger proportion of persons who have £3,000 income in one year will not have £3,000 the next year than in the case of the £5,000 people—I am convinced that the local knowledge of surveyors of taxes will be far more valuable than the advantages of centralisation. Of course, I know the surveyors of taxes are asked for information, but, as a matter of fact, those surveyors who are asked for information outside their own proper work for the purposes of a Department which is not properly their own, have not the time nor the spirit to give to the work of discovering Super-tax payers the amount of energy they give to the work for which they themselves are appointed. There is one other point which I wish to bring to the notice of the Government, and which has bewildered me. I believe this is the case. The Commissioners responsible for Super-tax, owing to the fact that they have a system of personal declaration, have a knowledge of income which the ordinary surveyors responsible for the general Income Tax find evades them. The 674 natural course would be for the Super-tax Commissioners to share their knowledge with the local surveyors of taxes.
§ The DEPUTY - CHAIRMAN (Mr. Maclean)
A great portion of the hon. Member's remarks seem to me relevant to Clause 3.
§ Mr. MILLS
Perhaps the Committee would do well to reflect whether the rate of Income Tax as it at present stands is not at a dangerous height for the financial and commercial interests of the country. We are told the stupendous figures of national income to-day, and there has been a very great increase during the past years. It is not my business to criticise those figures or the increase which they show, but I think it can be easily proved that those who give calculations of the national income to-day are apt to base them upon the gross returns instead of upon the net returns of Income Tax. The gross returns give a purely fallacious idea of the annual national income, because people, for instance, in the previous year who had an income which just kept them under the Income Tax limit, if they have £5 more next year, which puts them up to the Income Tax limit, for the purpose of gross calculation are given as having £160 added to the gross total instead of what is the actual increase in the national wealth, as far as concerns that man, the sum of £5. Also, of course, the few figures which we get in the returns of the Commissioners of Inland Revenue are not very reliable guides to the actual national income, because they represent not so much the actual income of the people who compose this country, but rather the turnover of trade which goes on throughout the country. The figures which appear in these Blue Books may pay Income Tax several times over. That, after all, is not exactly relevant, but it disposes of the argument which we heard so often during the earlier stages of the Finance Bill, in which hon. Members are trying to show that it was ridiculous to protest against the height of the Income Tax because of the stupendous amount of national income to-day, and the very great increase during the past few years. I should think that increase is a great deal more apparent than real, especially in years of very good trade such as we have been having of late, because, of course, the turnover is very much quicker, and the amount which appears in the return of Income Tax is very much larger.
675 We have the present Income Tax defended, especially by hon. Members below the Gangway, because we are told that these increases of Income Tax do not really reduce the amount which people spend on luxuries. I remember listening to a speech delivered by the hon. Member (Mr. Snowden) a month or two ago, which impressed me very much. He said he had never heard of a rich man buying a cheaper cigar because the Income Tax had been increased. I quite agree with him, and I think it is just the danger of the present height of Income Tax, because that unless you put the Income Tax at something like 19s. in the £, you are not going to make people give up their luxuries. The very last thing that a rich man does is to give up his luxuries. He gives up spending money in the way he ought first, and as taxation gradually increases he is forced to cut down some of his luxuries, and if the present Income Tax were simply a tax upon his motor car or cigar, I should have no criticism to make, even if it was a great deal larger than it is to-day. But the Committee, perhaps, ought to take into consideration more than it does the question whether by an Income Tax of 1s. 4d. or 1s. 3d., as it is to-day, you are, in fact, not reducing the harmful or harmless luxuries of the rich, or whether you are preventing them from spending their money in productive commercial enterprises. I should imagine that the ideal way of taxing rich people is to find out how much each man spends in luxuries, and how much each man reinvests or uses in his business, and the amount which he spends on himself and on his luxuries, you could tax a good deal higher than you do to-day, and the amount which he puts into his business should be left untaxed. I should be travelling beyond the bounds of order if I gave any idea of how that ideal can be reached—an ideal which I believe all parties agree to, but, of course, as you cannot find out how much he spends on luxuries the only way in which you could effect this is by taxing the luxuries themselves instead of the money which he spends upon them. That is one of the many reasons, to my mind, why the scheme of finance, which we on this side support, is so very much sounder, both for individuals and for the community, than the financial policy of the present Government.
676 I should like to say a word on the reduction which the Chancellor of the Exchequer has made in the Income Tax this year. I very much agree with my hon. Friend (Mr. E. F. Wood) that it would have been a better plan if this surplus, which the Chancellor of the Exchequer found he had, had been taken off the Death Duties rather than off the Income Tax. I understand that if the present increase of the Death Duties had been taken off it would not have realised as large a sum—£2,500,000—as the right hon. Gentleman wants to take off this year, but I have no doubt it would be possible to calculate actually how great a reduction of the Death Duties would correspond to the reduction of the Income Tax which the Chancellor of the Exchequer has proposed and carried this evening, because, after all we must look at it in this way, that the system which the Chancellor of the Exchequer has followed ever since he has been in office is to take money from capital and spend it as income. You may say it is right to do so. You may say that people have a great deal more capital than they can legitimately employ, and it must not be spent to help those people who are less well off. That is an argument I do not propose to go into this evening. Anyhow, it is incontestable that if you take large sums annually from the capital of the country which is used productively, and spend it as income, you are following a very unsound financial system. That is why I should have been very pleased if the Chancellor of the Exchequer had reduced the Death Duties instead of reducing the Income Tax.
Although I have often said in this House that the Income Tax is too high, I am glad to say that I regard the Income Tax as a far fairer form of tax than the Death Duties. I think it may cause more personal inconvenience, for we are all rather selfish, and we do not mind so much what happens to our heirs as to what happens to ourselves. I think a far higher Income Tax than we have to-day would have a far less bad effect on the country than the present rate of the Death Duties. But if the Government say that it would not be possible, administratively or for actuarial reasons, to reduce the Death Duties instead of the Income Tax, I do suggest that it would have been very much better, when they found that they had this money on hand, if they had given up the raid they propose to make 677 on the Sinking Fund. That is a matter on which I feel rather strongly. It seems to me that the successive raids which the Government have made on the New Sinking Fund, reducing the money from £28,000,000 to £23,500,000, are indefensible.
§ The DEPUTY-CHAIRMAN
I cannot see the relevancy of the hon. Member's remarks to the Clause now before the Committee. It is rather wide from the question of Income Tax.
§ Mr. MILLS
I do not wish to transgress your ruling. As there has been a reduction in the Income Tax since the Budget was introduced; I thought I should be in order if I suggested any other directions in which this surplus might have been given. I will not continue to dilate upon the raids which have been made on the Sinking Fund. But if you are going to tax capital, it is even worse to reduce your provision for the redemption of debt than to tax capital in the form of Death Duties. If the Government did not see their way to put this money to the reduction of the Death Duties, I think it would have been quite simple to put it to the reduction of debt, and it would have been very much better for the country as a whole, because our political system now is so intermingled with the difficulties in relation to vote catching, Parliamentary management, and finance, that it seems to me that, as a rule, finance comes off worst in the encounter. Of course, the reduction of the Income Tax is a pleasure to everybody, and those who pay it will be inclined to let off the right hon. Gentleman for reducing the tax. If you had increased the sum you propose to put to the reduction of debt by the money involved in the reduction of the Income Tax, I say it would have been far sounder finance, and it would have obviated the very real difficulties which have arisen in returning the deduction, or giving a rebate on the Income Tax already deducted.
I do not want to exaggerate in any way the difficulties and confusion caused by the reduction of the Income Tax I understand that the Chancellor of the Exchequer is going to give the taxpayers the option of either getting their refund from the bankers or agents who paid the tax, or applying direct to the Treasury. I imagine that most people would prefer to apply direct to the Inland Revenue, and that that would be the simplest way of managing it. The Chancellor of the Exchequer also said that in the case of dividend warrants he would require the top halves to be 678 sent by the taxpayers to the Inland Revenue when they claim their rebate. It is a very small point, but I hope the Attorney-General will take into consideration the method of repayment. I think that if he will ask his Friends in the City, they will tell him that the difficulty and confusion in finding these top halves will be something almost unheard of among the people you have to deal with. It appears quite simple to ask them to send the top half of the warrant to the Inland Revenue. I admit that would be a very simple way of dealing with the matter if the top half could always be found. But I think if the hon. and learned Gentleman will consult the people who have to deal with the taxpayers, he will find that the taxpayers are not always wise with regard to the top half. It seems to me much the simplest plan to employ another method, namely, that of getting bankers, companies, and agents, who deduct the Income Tax, to send up to the Inland Revenue sheets giving details of the taxes they have paid, so that those people should apply direct to the Inland Revenue for a refund. I must say that this will really give a good deal of trouble to most people, but the real difficulty seems to be, as pointed out by an hon. Member for a Wiltshire Division, upon people who have to claim a small reduction. A person who has got a dividend of, say £1, will be entitled to a rebate of five-eighths of a penny. There will be infinite trouble for the man who claims that. I think the hon. Member for the City of London said it would be a small sum to him, and that he need not bother to claim it. That may be so, but I do not think we wish the Government to be enriched by several hundred thousands of pounds because they have made a mess of the Budget, altered the rate of the Income Tax, and then made arrangements so complicated that a man will have difficulty in getting his money refunded. I have a suggestion for what it is worth which I hope the Government will consider. In the case of dividends which are below a certain sum, say £25, the amount to be refunded works at an even number of pence. In those cases the Inland Revenue should notify publicly that the rebate will be adjusted at the next dividend payment. I know that, of course, is open to the objection that the taxpayers may have sold their stock, and I do not really see how you are going to get over the difficulty in their case. It is clear that people will not write to the 679 Inland Revenue claiming five-eighths of a penny. Very few people know that they can correspond with the Inland Revenue without putting a penny stamp on a letter, and they will say that they are not going to spend 3d. or 5d. in writing to the Department to recover five-eighths of a penny.
It seems to me that it would save the Inland Revenue, and also the man who has paid the dividend, a great deal of trouble if it was stated that the rebate would be made good at the next dividend payment. Of course it is difficult if he has parted with the stock. There really is no remedy. But people who are constantly dealing in and out with stocks and shares are the larger operators, and not the small man who receives a dividend of £1. He generally puts his savings into a particular investment and is content to let it remain there. Therefore it is only fair to him, instead of being put to trouble and expense, to receive a fraction of a penny which he cam with difficulty work out, that next time he receives a dividend he should have an appreciable sum added to it. In the case of small incomes that is the only difficulty which has to be faced. There may he some difficulty in the case of dividends which are payable to people in this country and are earned on foreign securities when a banker or agent of the individual collects the coupons and sells them to a coupon-broker. As the individual gets paid net he cannot very well claim from the Inland Revenue, but his claim would lie against the banker or coupon-broker. After all, these are cases which are limited in number. They are generally cases of people with large incomes, who can all look after themselves. I hope that the Government, in issuing circulars to the Inland Revenue, will consider the man who has a small income, because unless they are very careful they will put large extra expense on the people who have got to pay the dividends, the bankers, agents, and so on, and great expense and trouble on people who have got to receive the dividend, and also on the Treasury. The suggestion which I make may, I think, save a great deal of trouble and expense to the poorer taxpayers.
§ Mr. T. M. HEALY
The hon. Baronet opposite made a speech which I regret was not made in a larger House. As I have generally been a critic of the financial administration of the Government, it is only right to say that with regard to the 680 criticism of the Income Tax Department, in my opinion the officials are not to blame in any degree. They are administering a harsh and difficult system, and the anger that we feel at the treatment sometimes received should, I think, be visited upon the framers of the Statutes, and not upon the administrators. The hon. Baronet has made a suggestion which I think well worthy of being followed out. At first I thought that his remarks would be more relevant to the fifth Clause, that is the Clause dealing with the taxation of income derived from foreign property, and having regard to the general system now being established, his suggestion is deserving of considerable weight. At the same time, I would not go the full length to which he goes in claiming that these companies should entirely escape. I would make an intermediate suggestion to the Government; which perhaps might meet the case, that has been so ably presented. We all know the important case to which the hon. and learned Member for Exeter (Mr. Duke) referred, namely, the case of the Eastman Kodak Company, which was driven out of this country by reason of the administration of the Income Tax. Why not differentiate, and instead of having as you have now a 1s. 4d. tax for all purposes, why not seek to attract these foreign companies and keep them in residence here by a differentiated tax? For instance, this Income Tax only becomes acute when it goes over a shilling. I think that everybody is willing to pay without much grumbling up to what might be called the smuggling point, which might fairly be put at that figure. But here you have a very drastic change in the public opinion of the country.
Since the democracy has been enfranchised there is a tendency to resort to the Income Tax to a greater extent than was the case before, in order to free what is called the food of the country from burdens. Accordingly, statesmen, in my judgment, have to see that while on the one hand they are freeing food from unnecessary imposts, at the same time they should not unnecessarily load up the Income Tax side of the account, so as to drive outside these shores companies which are largely British in capital. I have often taken the view with regard to large expenditures in London which might as well have been spent in Scotland, that once you establish a Government House in London, the cat's 681 meat man in London benefits, the charwoman is London benefits for all time. You establish a London interest, the effect of which you never can really estimate. It is the same way in the matter of driving capital beyond these shores with a view to collecting revenue which has been necessitated by recent changes. Therefore I think that, with regard to these companies, which are more or less foreign in their transaction, but yet which have a native enterprise and root, you ought to have instituted something which, while compelling them to pay some small moderate sum for the upkeep of this community, would yet recognise that they are incurring enormous peril in their activities abroad, the peril of revolution, the peril of changes in Government, and other things that happen abroad, and that these companies should not be put upon the same basis as those working under normal conditions of local and native institutions. At the same time the hon. Baronet seems to have forgotten, while he is advocating the case of these British companies, that he is tolerating Section 5, which has the very same disadvantage from several points of view. You want to attract to Great Britain companies having foreign connections. Surely, in the same way, you want to attract the Colonists from Australia, from the Cape, and from Canada. And those who have made their money, and perhaps have grown old making it abroad, and settle down here and spend a couple of hundred thousand pounds in that settlement, suddenly find themselves hit for all their Colonial investments abroad, while at the same time have to pay taxes here.
I would therefore suggest to the hon. Baronet, with the great influence which his commercial and mercantile knowledge gives him, that as he has spoken with such effect in the House to-day, he should bring his influence to bear not merely with regard to companies, but with regard to the whole system of treating what I may call out-land capital, which would naturally domesticate and settle in this country if it were not unduly taxed. At all events I would say this, that having relieved these outlanders, as I will call them, from tax in the famous Budget of 1909–10 and given them practically a free run of this country ever since, it is not right to come down to this House and suddenly make this proposal after attracting these Colonists to come to this country, by dispensing them from the obligations of that Budget, because nobody supposed that a harsher 682 Budget than the Budget of 1909–10 could be devised by the wit of man. After thus causing them to flock into this country, it is not right now, suddenly without notice to these people, who have settled here and who spend their money here, to tell them like the sailor "up with your anchor and go abroad once more." I must say that I think this system is calculated to kill the goose that lays the golden eggs, and I would respectfully suggest to the hon. Baronet that he should bring the weight of his great influence to bear upon the Chancellor of the Exchequer.
§ The CHAIRMAN
The hon. and learned Member has been referring to an hon. Gentleman who is not here, and I was put in some little difficulty, but it seems to me that the question on which the hon. and learned Member spoke will more properly come up on Clause 5, and it should not be further discussed now.
§ Mr. T. M. HEALY
I was so enchanted by the speech of the hon. Baronet that I could not help referring to it.
§ Mr. PRETYMAN
It is clear that the general question which has been dealt with is one the importance of which the Committee realise in regard to the whole finance of this country, namely, that the Income Tax should be dealt with on thoroughly sound lines. It is going to be in future, as it clearly is to-day, the sheet anchor of our finance. If that position is accepted, it is quite obvious that it is very important not only to raise the tax fairly and to get as large a revenue as possible out of it, but that the general impression which is created on those who pay it should be that it is as fairly levied as possible. Small inequalities will occur, but it is impossible to avoid them, and there will be some complaints, however great may be the effort to levy the tax fairly. The Debate shows that the position in regard to the tax is really serious in many directions. It is clearly felt on both sides of the House that the tax should be most carefully considered both by the Treasury responsible for it and by the Chancellor of the Exchequer, and also, if necessary, by an expert inquiry into the very many important points which have been raised in this Debate. I do not want to add to them, because I mainly rose to make one point which has not hitherto been raised in the Debate, so far as I am aware, and that is the extreme unfairness in the so-called differentiation between what is 683 called the unearned and earned income. When we come to the treatment of pension earned by long and difficult service under the Crown itself in the Army or the Navy, it is really deferred pay, and the officer, perhaps a Civil servant, or a military or naval officer, who has performed a large proportion of his service in bad climates, who has during that service received the seed of diseases and trouble which never leaves him during the whole of his life, and who, during the whole of that period, received entirely inadequate remuneration, is told that he must bear in mind that he is only receiving a part of what he earns, and that the remainder of what he is earning will be given subsequently in the form of pension or deferred pay. Then when he receives that payment, he is told that it is unearned income, and that he will have to pay the rate of tax due on unearned income.
I think that is a hardship. Surely it is obvious that this and similar hardships should be dealt with! They may be increased, and it therefore becomes the far more urgent duty of this House to deal with them, especially with the tax so high as it is now. The rate of 1s. 3d. in the £ on unearned income, so called, which is really deferred pay—for instance, four or five hundred a year, or at the utmost four hundred—is indeed a hardship. I received a most piteous letter from a lady whose husband, a colonel, had served abroad during the whole of his life, and who was receiving exactly the same income in the form of deferred pay as is now paid to every hon. Member in this House. But we here treat it as earned income, whereas the deferred pay in such cases as that to which I have referred is treated as unearned income, and has to pay 1s. 3d., while Members of this House have to pay only 9d. That is felt as a really great hardship. I may state further that those pensions have been practically stationary for many years, while the cost of living has been largely increased. Moreover, we are imposing for national purposes a constantly increasing burden, while the local rates are also increased. The whole of that is being distributed over the productions of the country, and therefore, necessarily, has to go in the bulk to increase the cost of living. Yet you leave the pensions or deferred pay of your officers, who have 684 practically given their lives to the service of their country to be treated as unearned income, and to pay the higher rate of tax, while they have to face the higher cost of living. Surely that is a subject which deserves immediate consideration, although I suppose it is not possible at this stage to obtain redress. Still, I think it does show how great is the urgency of the whole of this question, especially if you are to have an increase of the Income Tax, high as it is at present, and no one in this House can say that there may not be circumstances in which further increases will be necessary. I say, in justice to the people who have to bear these enormous burdens, we cannot go on from year to year and from time to time merely meeting the requirements of the moment by recourse to this one sheet anchor, and what I urge is that before this taxation goes any further these hardships and injustices should be fully and fairly considered and met.
§ Mr. MONTAGU
I do not propose to make a speech, but in reply to the hon. and learned Member who pointed out the hardship of pensions having to pay the rate charged on unearned incomes, I would refer him to the Finance Act of 1907, Section 19, Sub-section (7), which is as follows:—
"For the purpose of this Section the expression 'income' means income as estimated according to the several rules and directions of the Income Tax Acts; and the expression 'earned income' means—
(a) any income arising in respect of any remuneration from any office or employment of profit held by the individual, or in respect of any pension, superannuation, or other allowance, deferred pay, or compensation for loss of office given in respect of the past services of the individual, or of the husband or parent of the individual in any office or employment of profit, whether the individual or husband, or parent of the individual shall have contributed to such pension, superannuation, allowance, or deferred pay or not."
Therefore, the question of such pension being unearned income does not arise, because it is earned income as defined in the Section.
I should like to ask the representative of the Govern- 685 ment a question which was earlier put by the hon. and learned Member for York, whether the Government intend to give any help whatever to those people who have been put to enormous inconvenience and expense by the change of the Income Tax from 1s. 4d. to 1s. 3d. The right hon. Gentleman the Chancellor of the Exchequer laughed it away, but that line is no longer upheld. Hundreds and thousands of people are going to be put to great expense by this change in the Income Tax, and the question is whether the Government will in any way assist these people, who have been put to this expense. The Government have not answered that question, and before we decide the point I hope some Member of the Government will give the House their views on the point which is going to cause enormous expense
§ Sir J. SIMON
(who was indistinctly heard): In reply to what the hon. Member has just said, the Chancellor of the Exchequer subsequently gave an explanation—[HON. MEMBERS: "Speak up!"]—of what it was he proposed to instruct his Department to do. I certainly do not wish in any way to laugh at or be contemptuous about any grievance, and anybody who comes forward with a grievance does not deserve to be laughed at, but let us preserve some sense of proportion. If you were to say to the Income Tax payer which would he sooner pay, 1s. 4d. or pay 1s. 3d. and suffer this inconvenience, I do not think you would find that the Income Tax payer would thank anybody who said, "Do let us pay 1s. 4d." In the second place, it has been several times suggested in this Debate that this inconvenience creates exceptional hardship on the small Income Tax payer. In point of fact, the person with the small income always has to make a claim if he wants abatement or exemption or to be let off at a lower rate than the higher rate which is deducted at the source. I quite admit some complication is caused, but the persons who feel the complication most are those classes of the community who in the ordinary way do not have to make any claim at all. Those are not the very poorest people but the better off people. I cannot give the hon. Gentleman a further answer now, but I thought it only courteous to him to get up and show that I was listening to what he said, and if there is anything further to be raised, we shall have opportunities of considering it.
Do I understand the right hon. Gentleman to say that the Chancellor of the Exchequer had made some advance on the lines asked for by the hon. Member for York. I do not recollect any speech in which he said anything that at all made that impression.
§ Mr. BUTCHER
I do not think that the Chancellor of the Exchequer has given any answer to the question put to him earlier in the Debate, but perhaps he would be able to do so now. Before I ask him I should like to enter a very strong protest against the entirely fallacious argument put forward by the Attorney-General. He says the question is would the Income Tax payer pay 1s. 4d. rather than pay 1s. 3d. and bear the expense. That is not the question at all. The point is, that owing to the mismanagement of the Government or owing to the revolt behind them, I do not care which, the taxpayer is being put to an expense to which he ought never to have been put. It is admitted he ought not to pay 1s. 4d.
§ Mr. BUTCHER
The Attorney-General puts me a question which is totally irrelevant, but he is not going to divert my attention from his fallacious argument. I say that the taxpayer has been called on to pay 1s. 4d., and will be called on next month to pay 1s. 4d. which he ought never to be called on to pay at all. When the question is put foward that in getting back this improper charge he will be put to great expense, the Attorney-General says he ought to be thankful not to be called on to pay the whole amount, but he might as well say he ought to be thankful because he is not asked to pay 2s. 6d. The Chancellor of the Exchequer in a speech made earlier in the evening certainly minimised very much the inconvenience that is going to be caused by getting back the improper deductions. The course of the Debate has undoubtedly shown that there will be a large number of cases where, not only poor men, but men who are relatively poor, with, say, £700, of an income in which there will be a large amount of expense necessarily caused in getting back the deduction. I put it to the Chancellor' of the Exchequer that this is a case which deserves consideration, and I hope that he will give some indication whether he cannot do something to compensate those persons who, through no fault of their own, are put to this expense.
§ Mr. NIELD
I want to call the Chancellor of the Exchequer's attention to a real grievance arising under Schedule E—profits from offices. These profits are returned independently of Schedule D, and are not treated as profits arising from any profession or trade. I suppose that our own £400 a year really comes under Schedule E, but we are allowed to make £100 deduction. A director of a company who may have to travel a long distance and incur a more or less considerable railway fare in order to earn his director's fee, is not allowed by the Commissioners to make any deduction in respect of the expenses that are necessarily incurred in travelling to the place where he can render the service in respect of which his fee is paid. I think that is a great hardship which ought to be removed by an alteration being made in the deductions which are permissible. It is, perhaps, a small matter, but it is these small grievances which do so much harm from the taxpayers' point of view.
§ Mr. WORTHINGTON EVANS
I hope the Chancellor of the Exchequer will take this opportunity of officially telling the taxpayer what he is to expect. Seeing that the tax has been reduced from 1s. 4d. to 1s. 3d., the taxpayer will want to know to-morrow what steps he is to take to get back his over-payment. The Chancellor of the Exchequer made a statement earlier in the afternoon, but since then much criticism has been directed to the method which he has proposed.
§ Mr. LLOYD GEORGE
(who was very indistinctly heard): The suggestion was made that we should press for one uniform method of dealing with the position. We have no legal power to insist, but, if we could bring pressure to bear, I should think the suggestion a good one. I will bear in mind the suggestion which the hon. and learned Member made.
§ Mr. WORTHINGTON EVANS
I am glad to hear that, although it is a curious admission on the part of the right hon. Gentleman that he has no power to insist upon any method which the Inland Revenue may propose to follow. He can insist in this sense—that if he says that the Inland Revenue will pay to the taxpayer the amount that has been taken in excess, it will be open to the taxpayer to go to the Inland Revenue, and it will be his own fault if he does not get the repayment. 688 That affects dividends in respect of which there is the top half of the warrant, and which therefore can easily be vouched for. But the right hon. Gentlemen has not yet said what he is going to do with regard to foreign coupons. My hon. Friend put very clearly the case with regard to foreign coupons, or coupons payable abroad on bonds held in this country. The habit is that these coupons shall be sold. The buyers, so far as I can see, will not have the benefit of the reduction on the tax, nor the owner, nor the owner of the capital who has had too much tax deducted. What is the Chancellor of the Exchequer going to do in that case? What is he going to do in the case that I have put to him before and which I will now repeat, that of American common stock registered in a name other than that of the temporary owner?
§ Mr. LLOYD GEORGE
In the case put by the hon. and learned Member, the person who owns the bond is the one who will make the claim against the Inland Revenue.
§ Mr. WORTHINGTON EVANS
Will the Chancellor of the Exchequer say what evidence the Inland Revenue will require that the tax has been paid, seeing there is none in writing?
§ Mr. WORTHINGTON EVANS
That, of course, is putting the taxpayer to an enormous amount of trouble if he has to chase round to get certificates for relatively small amounts.
§ Mr. PETO
On one of the broader questions that have arisen out of the Debate. I would like to put a question. It will be a very large sum of money in the aggregate that is paid into the Treasury on the basis of the higher Income Tax. What is going to be done in respect of that large part of this sum which will never be claimed by the small taxpayer, who pays it on the score that it is not worth while? The Attorney-General says that the small Income Tax payer is entitled to make a claim. But he is not in the habit of making a claim, therefore what is to become of the substantial amount? In effect the argument of the Attorney- 689 General is that because an eel is accustomed to skinning, there is no reason why you should not skin him twice. I would also ask the Chancellor of the Exchequer what he estimates is the proportion of this sum that, as soon as this Debate is concluded, will be illegally collected, which will never find itself back to the pockets of the poorer Income Tax payers?
§ Mr. BAIRD
May I ask the Chancellor of the Exchequer one question on a small matter? A certain number of us in this House are in the habit of joining in the Yeomanry training. We get a small cheque at the end of it from which the Income Tax has been deducted at this higher rate. I would like to know how we possibly can get back what we have overpaid without spending a great deal more money in doing so? The matter is one not of money, but of principle. Is the Chancellor of the Exchequer entitled to get the money from the taxpayer which Parliament does not entitle him to get? It seems here to be a question of paying 9d. in order to get 4d. back. It seems very unfair, and it is not only in the Auxiliary Services; I suppose the same thing applies to those connected with the Regular Service?
§ Mr. TOUCHE
May I inquire whether a new circular will be issued by the Inland Revenue authorities to-morrow for the guidance for public companies, having regard to the fact that the only instructions they have at present are from Somerset House that the 1s. 4d. rate holds the field?
§ Mr. LLOYD GEORGE
A circular has been, I will not say agreed upon, but it has been discussed, and it will be issued immediately.
§ Mr. NEVILLE
I would like to ask the Chancellor of the Exchequer whether the real muddle with which we are now having to deal is not due to the fact that the taxes, under the practice of the Treasury and of the House, become operative before they are passed by this House? If, as it seems to me, the proper business is that no tax should become payable until it is passed by this House, we should not be wasting our time.