§ 52. Mr. E. BROWN
asked the Prime Minister whether it is the policy of the Government to demand Income Tax at the standard rate from local authorities and other bodies who are accelerating work in relief of unemployment in respect 799 of grants made for works which are technically revenue producing; and, if so, whether this decision was formally arrived at and when, or if it is the result of departmental official action?
§ The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)
Income Tax law requires that annual grants of a revenue character made to local authorities or other bodies for the purposes of their trading undertakings should be taken into account in the same way as other revenue receipts in computing the profits of those undertakings for income Tax purposes. This question in relation to unemployment grants has been before the Board of Inland Revenue on several occasions from 1923 onwards and they have always taken this view which is based on judicial decisions of long standing.
§ Mr. SNOWDEN
1923 is rather a long time ago. As the hon. Member knows, there has recently been another case in the courts which has been decided in favour of the Inland Revenue.
§ Mr. BROWN
Is the right hon. Gentleman aware that so little is this known in his own Department that some demands—I have the papers in my pocket—for 1924 were only first intimated to the local authorities on the 17th December, 1929, and is not this inimical to the whole policy of unemployment grants to make work?
§ Mr. SNOWDEN
The hon. Member is exaggerating the importance and universality of the papers which he has in his pocket. It is true that there have been a very few cases where, through a misunderstanding the law was not applied, and I believe that applications have been made for the outstanding amounts.
§ Sir HERBERT SAMUEL
Has the Chancellor of the Exchequer taken into account the fact that many local authorities have been invited by the Government to undertake work, in order not 800 merely to increase the amenities and equipment of their towns, but also to give work to the unemployed, and that large numbers have done so on the understanding that the Government would give them grants, and instead of those grants being made in lump sums they are being made in the form of annual grants in relief of the interest to be paid on these loans; that these enterprises, although referred to as revenue producing enterprises, usually involve a charge on the rates, although they bring in a certain income, and that as the outcome of all this the local authorities will be getting 20 per cent. less than they anticipated they would receive? Has the right hon. Gentleman taken these facts into account, or am I misinformed?
§ Mr. SNOWDEN
The right hon. Gentleman is wholly misinformed. The hon. Member for Leith (Mr. E. Brown) has given notice that he will raise this matter on the Adjournment tomorrow——
§ Mr. SNOWDEN
—and that will give a more appropriate opportunity for discussion than at question time. I may say, in reply to the right hon. Gentleman, that the point at issue is this, that upon the whole interest of the loan the Income Tax is deducted, but it is not the Income Tax of the local authorities but the Income Tax of the stockholders. What the right hon. Gentleman appears to have in his mind is this, that the local authority, having deducted the whole of the Income Tax upon the interest paid to these stockholders, should be able to keep that part which is due to the Inland Revenue, and, instead of the local authority getting less Income Tax, if they were permitted to keep that part they would be getting considerably more than 20 per cent.
§ 68. Mr. BROWN
asked the Chancellor of the Exchequer the authorities under which grants to local authorities to aid works in relief of unemployment are divided into grants to revenue and non-revenue producing works, respectively, giving the references to the relevant Sec- 801 tion of the Acts if the basis is statutory or, alternatively, if it rests on a Treasury Minute, if he will state its date and make its contents available to Members of the House?
§ Mr. LAWSON
I have been asked to reply. The authority to make grants to local authorities in aid of relief works is contained in Part II of the Development (Loan Guarantees and Grants) Act, 1929. The terms and conditions of grant as announced by the Unemployment Grants Committee in regard to all classes of works are determined by my right hon. Friend the Minister of Labour with the approval of the Treasury, and may be varied from time to time as circumstances may require. I am sending the hon. Member a copy of a leaflet (U.G.C. 25) which indicates the terms and conditions of grant which are available at the moment.
§ Sir H. SAMUEL
Can the Parliamentary Secretary say whether undertakings are passed as revenue producing, though, as a matter of fact, they bring in no revenue, but involve a charge upon the rates, and whether, nevertheless, they are to be liable to Income Tax?
§ Mr. HORE-BELISHA
May I ask whether Lord St. Davids Committee, at the time they made these grants, were aware that Income Tax would be deducted, and, if so, whether they proportionately increased the grants?
§ Mr. LAWSON
I cannot say. With reference to the question of the right hon. Member for Darwen (Sir H. Samuel) may I point out that the Chancellor of the Exchequer dealt with that point in his reply to a previous question?