§ The proviso to subsection (2) of section twenty-seven of the Finance Act, 1946 (which, amongst other things, prevents certain pensions payable under the National Insurance Act from being treated as earned income for the purposes of the increased personal allowance by reference to the wife's earned income provided for by subsection (2) of section eighteen of the Finance Act, 1920) shall not apply to any payment by way of retirement pension under the National Insurance Act (as defined in the said section twenty-seven), being a pension payable to the wife by virtue of her own insurance.—[Mr. Jay.]
§ Brought up. and read the First time.
§ Mr. Jay
I beg to move, "That the Clause be read a Second time."
As the Clause appears on the Order Paper there is a misprint, some lines having been misplaced. I apologise, although I am not sure that I am responsible. It will be put right in the final form.
We propose here to extend what is known as the wives' special earned income relief.
There is another new Clause in the name of the hon. Member for Ealing. South (Mr. Angus Maude) on page 1678 of the Order Paper—(Income tax on married women's retirement pensions)—which really relates to the same point as we are now discussing. Indeed, although I apologise for having put down this new Clause at this very late stage, the reason was that we considered the Clause in the name of the hon. Member for Ealing, South, and came to the conclusion that we wished to go some way to meet him; since this is the Report stage the most satisfactory way to do that appeared to us to be to put down a new Clause in what seemed to be the right form to give effect to our desire.
The House will recall that when the wife's special earned income relief was raised to £110 by the Finance Act, 1946. it was decided that that should not extend to a retirement pension even though the recipient of the retirement pension receives the ordinary earned income relief of one-fifth. The arguments for not extending the special relief were, namely, that the object of the increase was to induce married women either to go to work 1610 in industry or to remain at work. Obviously, that would not be done in the case of somebody who was ex-hypothesi retired. My hon. Friend the Member for Sowerby (Mr. Houghton) argued at the time that there was a strong case for making an extension at least in the case of those drawing State retirement pensions which they had earned by virtue of their own contributions.
I put the case on the other side, I remember, on the grounds that I have just mentioned. However, representations have been made to us by my hon. Friend and others, and we re-examined the point and came to the conclusion that there were two particularly cogent reasons for the rather limited concession which we are making here. The first is that, by the long practice of the Inland Revenue, ordinary pensions paid by private employers under private superannuation schemes to married women or anybody else are considered, for tax purposes to be deferred pay. Therefore, married women receiving such pensions get the advantage of the special relief.
It seems to us exceedingly anomalous that this relief should go to a salaried married woman who has contributed to some private scheme and probably has a higher pension than the National Insurance retirement pension and that it should be refused to a woman who has worked, perhaps in the cotton or wool industry, and has contributed throughout her working life towards the State retirement pension. The second cogent reason is that, under the existing arrangements, it is possible for the income of a wife who has been working and who retires to fall from whatever it has been in the form of wages to the present 26s. per week or, as it will be, 30s. per week and then for her to pay increased tax on the lower income.
We examined the cost, which happily amounts only to about £750,000, which is a good deal less than the cost of some of the other suggested changes in the Income Tax allowances which we have discussed in the last week or two. We came to the conclusion that this concession was justified in the case of those who had earned their retirement pension by their contributions. We do not think that we would be justified in going so far as is suggested in the new Clause of the hon. Member for Ealing, South, which would have extended this concession to chil- 1611 dren's allowances as well as to the retirement pension.
§ Mr. Angus Maude (Ealing, South)
It is not often that one comes prepared for a tug-of-war with the Treasury and finds that the Treasury team has overnight swung round and tagged itself on at the back end of one's own rope. While I hope that we shall be spared the disconcerting result of falling all in a heap together owing to the lack of opposition, I should like, on behalf of those 20 or so of my hon. Friends who put their names to my new Clause, to say how grateful we are to the Financial Secretary for looking again at this matter.
I believe that the hon. Member for Sowerby (Mr. Houghton), supported by my hon. Friend the Member for Chippenham (Mr. Eccles), raised this matter some two years ago, when the Government were not in so conciliatory a mood. I do not propose to speculate at any length on how it should come about that an anomaly which was not remedied two years ago comes to be looked at with a more kindly eye this year when the exigencies of the Revenue are supposed to be greater. It cannot be pure coincidence—indeed, the Financial Secretary suggested that it was not—that it is being done so soon after the tabling of the new Clause which I and my hon. Friends have on the Order Paper.
I should like to explain that the Clause in my name was deliberately drafted widely for the purposes of debate, but there is no doubt that the point we were primarily seeking to secure is that which is covered by the Government's new Clause, and we welcome it very much. It seems remarkable to me that the size of this anomaly appears not to have been recognised by anybody at the time when the proviso was originally inserted into the Finance Act, 1946. I have looked over the debates on that occasion and I cannot see that the point was raised by anyone on either side of the House.
I am sure that many hon. Members on both sides of the House must have received a fairly considerable number of complaints about this matter from constituents, because the hardship which is caused at a time of life when financial hardship bears most heavily is fairly considerable. As the Financial Secretary has said, it may come about that a married woman who is able, while working, to 1612 earn as much as £137 10s. a year free of tax, under the provisions of the Act, and who retires at the age of 60 and begins to draw a retirement pension earned in respect of her own contribution may, if her husband is still working, find that their joint income falls by the amount of the difference between £2 16s. a week and 26s. a week while the amount of tax increases, in many cases fairly sharply. There are cases where the husband earns an income where the tax may rise by £16 or £20 a year, which at that time of life is a fairly considerable figure.
The other anomaly was that the married woman wage earner found herself in an extremely unfavourable position vis-à-vis the married woman covered by some superannuation scheme, such as exists in Government services and certain industries and professions. The sum total of this has been that an anomaly which affects not perhaps many people, affects those few people extremely hard, and we felt it desirable to draw this point to the attention of the Government. We are extremely pleased that the Government have seen fit to make this concession, which I am sure will be widely welcomed both in the House and in the country.
§ Mr. Robert Carr (Mitcham)
I welcome this Clause particularly because, with my hon. Friend the Member for Ealing, South (Mr. Angus Maude) and other hon. Members, I feel some pride of parentage for it. Like my hon. Friend, I am rather surprised at the new god-parents which have sprung up overnight. We brought our Clause forward as a result of practical cases which arose in our constituencies, and I feel quite certain that as a result of my knowledge of those practical cases this Clause will give real help to a number of people at a time of life when help is needed and when they tend to suffer hardship.
Therefore, it gives me great pleasure that the Government have seized on this idea and have put it in a practical form. I think that the limitation which they have put on it is reasonable and, as my hon. Friend said, it achieves the main purpose we had in mind in putting down our Clause in the first place.
§ Lieut.-Commander Gurney Braithwaite (Bristol, North-West)
It is a truism that life is full of surprises, some pleasant and some otherwise, and the appearance of 1613 this new Clause on the Order Paper today has given satisfaction to all of us. I am not quite sure what is the procedural position if the Clause is read a Second time in the form in which it now appears. The Financial Secretary told us that there has been something in the nature of a printer's error. At present it commences with a bracket before the word "which," and I wonder whether, to put us in order, there ought not to be some manuscript Amendment making quite clear the real wording of the Clause. However, I imagine it is a matter which can be easily adjusted.
We all congratulate my hon. Friend the Member for Ealing, South (Mr. Angus Maude) and those associated with him who have described themselves as parents. However, there are also some grandparents present because, a new Clause was moved on Report stage, two years ago, by the hon. Member for Sowerby (Mr. Houghton), seconded by my hon. Friend the Member for Chippenham (Mr. Eccles), in what some of us thought was at that time an all-party operation.
Sir Stafford Cripps hardened his heart two years ago and I think this demonstrates the value of discussions which are sometimes regarded as irksome if they go on for hours at a time. It is an encouragement to Private Members to find that their efforts of even two years ago bear fruit in due course, due to the infusion of new blood from hon. Members behind them and the greater energy which a General Election brings with it.
Back benchers of all parties can derive great encouragement from this incident, though not from the grammar or the drafting of the clause. I hope the Government are not weary of well-doing in this matter, although I hope they are weary of ill-drafting. I should have been much happier had the Clause in the name of my hon. Friend been inserted, because its meaning is clear, it is easily operated and it goes a little further. We would like to see the Clause incorporated in the Bill if it could be done by some slight manuscript Amendment to make the wording clearer.
I think the Clause is all right. The hon. Gentleman moved it in the correct form.
§ Mrs. Castle (Blackburn, East)
I want to thank the Chancellor for the concession he has made on this important point. I am glad it has been recognised on both sides of the House that special credit is due to my hon. Friend the Member for Sowerby (Mr. Houghton) who took the initiative in this matter two years ago and who, with the help of many of us on this side of the House, has conducted a sustained battle on this matter ever since. I am glad that the pressure which we on this side of the House have had to bring has brought this to fruition this afternoon. Any of us who represent constituencies in which there are large numbers of married women workers have been gravely concerned about this rankling injustice to the married women under the present procedure.
Since the new National Insurance scheme was brought into operation, I have felt that there has been a kind of conspiracy between the Ministry of National Insurance and the Treasury to discourage married women from insuring in their own right. Their contributions have always seemed to produce quite inadequate benefit. When they insured in their own right, largely to get a retirement pension on reaching the age of 60 —in many cases before their own husbands retired—they have, after all their years of hard work and contributions, found themselves up against this incomprehensible Income Tax arrangement.
That arrangement has led to such cases as one brought to my attention in Blackburn where a married woman, who had been doing part-time work and insuring in her own right, but had not been earning much more than her pension, found when she came to draw it that the benefit was snatched away by an increase in the Income Tax payments of her husband. Two very vexed and irate people came to see me. I had to admit that the situation was such that one would be obliged, if it continued, to say to the married woman, "It just is not worth your while to insure in your own right."
One of the reasons which may have encouraged the Government to make this change is an appreciation of the fact that if in this re-armament situation we are to ask married women to come back into industry in increasing numbers, we must help to make the insurance provisions and 1615 the Income Tax provisions for married women more encouraging. Therefore I welcome this change, and I congratulate my hon. Friend the Member for Sowerby on the fruition of his long battle.
§ Mr. Douglas Houghton (Sowerby)
I rise only two make two or three short points. This new Clause will be warmly welcomed by all right hon. and hon. Gentlemen in the House who represent textile constituencies, because there we have large numbers of married women who have qualified for the retirement pension in their own right. There is no doubt that a continuance of the old arrangement would have given rise to a good deal of annoyance.
Under the present arrangement it is possible for a married woman, earning, say, the equivalent of the retirement pension in a part-time job, to find that she and her husband have to pay £14 more in Income Tax on exactly the same total joint income. That is the extent of the anomaly in the existing arangements.
I have details of a case where the joint income can fall by £60 on transfer from employment to retirement pension and notwithstanding a fall in the joint income by £60 there is a rise in the Income Tax charged on that joint income of £17 1s. Clearly, that is an indefensible state of affairs, and I shall not detain the House now by analysing the situation which existed when it was introduced in 1946, but perhaps I may be permitted to say that I drew the attention of the then Chancellor of the Exchequer to this anomaly at that time.
A further thing about the Clause which, I am sure, will not be lost on hon. and right hon. Gentlemen opposite is that in effect it will be retrospective to 6th April last. I assume that this is one of the occasions upon which the Opposition will not object to retrospective legislation. The advantage of the Clause will, I presume, be applied to Income Tax liability for the current financial year which began on 6th April last.
I welcome the Clause, and I am sure that my right hon. Friend the Chancellor of the Exchequer is to be commended for this improvement. Notwithstanding the advice that he gave me a little while ago to take my troubles to the Millard Tucker Committee, which I 1616 have done, I am glad that at least they will be relieved of any necessity to pay attention to this particular anomaly, although there will be others for them to consider during the course of their deliberations.
§ Miss Irene Ward (Tynemouth)
The satisfaction which has been expressed on both sides of the House at the Chancellor's decision to give this improvement indicates that on occasions it is essential for grievances to be raised in the House of Commons from year to year. I should, of course, be out of order to develop that argument but I hope I may be allowed to say that it would be worth while for the Chair sometimes to have regard to that aspect of the situation.
I should like to ask the Financial Secretary if he will take special pains to draw the attention of the Inland Revenue officials in every area to the concession which has been made, because, as has been rightly pointed out by, I think, my hon. Friend the Member for Ealing, South (Mr. Angus Maude), it is relatively a small concession; and it may well be that in areas where married women are not so numerous in employment as in the constituency represented by the hon. Lady the Member for Blackburn, East (Mrs. Castle), it is important that attention should be drawn to this concession. I should like special directions to go to the officials in the regions so that they may look out for cases in which previous applications have been refused and where those affected will now be able to have the advantage of the new concession. I should be grateful if the hon. Gentleman would pay special attention to this request.
§ Mr. Pitman
I think that the success of my hon. Friends the Members for Ealing, South (Mr. Angus Maude), and Mitcham (Mr. Carr) goes much further than their success in the Clause, because it means a return of government by principle of justice in the Treasury, which has been singularly lacking in regard to anomalies of this kind. It goes still further, because it means that in the hon. Member for Sowerby (Mr. Houghton) and the hon. Lady the Member for Blackburn, East (Mrs. Castle) we now have people on the other side of the House who will stand up, even if they will not put their names on the Order Paper, for matters of principle and justice.
1617 It is all very well for the hon. Member for Sowerby to say that he remembers bringing this specific anomaly to the attention of the Chancellor of the Exchequer of that day and that nothing happened about it. We on this side have spent all our time in bringing anomalies to the attention of the Chancellor of the Exchequer, and since there was no government by principle within the Treasury at all under its then masters, we got absolutely nowhere.
I remember raising in the House the case of a man who went back from retirement pension to work—there were women in the same position, I should like the hon. Member for Blackburn, East. to know—whose taxation was actually more as a result of working than the amount of salary for his job. My hon. Friend the Member for Chippenham (Mr. Eccles) and I introduced an Amendment to deal with the marginal cases of that kind, so that nobody should pay more in taxation than the amount he was earning. The hon. Member for Sowerby will know that although that was a major issue of principle, we got absolutely no response whatever. I should like the House to recognise now that we are at last getting a return to government by principle, and we particularly welcome the support from the other side in such matters.
§ Captain Crookshank
Perhaps we may soon be able to leave the Clause, which has caused so much satisfaction to everybody and a lot of congratulations. The person who really ought to be congratulated is the Financial Secretary to the Treasury, because it is exceedingly rare that a Financial Secretary is ever allowed to make a concession at all. This is really a red letter day in the life of Financial Secretaries and ex-Financial Secretaries of the Treasury, and I congratulate the hon. Gentleman on having had such a happy outcome of his deliberations.
We are delighted that this Amendment should have been accepted. The fact that the Clause has a little black star against it means that it was put down on the Order Paper only last night, whereas the Clause of my hon. Friend the Member for Ealing, South (Mr. Angus Maude) and my other hon. Friends has been on the Paper for some time. It is entirely due to them—it has nothing at all to do with the hon. Member for Sowerby (Mr. Houghton) that the Clause has come up 1618 for discussion this year. If anybody on the Government side had wanted to have it discussed, they could have put down a new Clause. They did not do so. It was my hon. Friend who did that, and it is to him that our thanks—and, much more important, the thanks of those who are to be relieved as a result of the Clause —should go.
The Financial Secretary said that the hon. Member for Sowerby moved a somewhat similar Clause two years ago, and the hon. Lady the Member for Blackburn, East (Mrs. Castle) talked about all the pressure exercised on her side of the House in this matter. Needless to say, we have no evidence of that pressure and there is no sign of it. When the Clause of two years ago was put down, where was the hon. Lady or any other Labour Member? It was my hon. Friend the Member for Chippenham (Mr. Eccles) who seconded the Clause on that occasion, and it was the hon. Gentleman who refused it on what he called the "classical justification" based on something pronounced in 1897. That is what happened two years ago.
§ Captain Crookshank
Then he must be feeling very uncomfortable today, because the Financial Secretary has produced exactly the opposite arguments.
I only want to make it quite clear that this improvement has nothing whatever to do with the hon. Lady the Member for Blackburn, East, or anybody connected with the Labour Party. It is all very well getting up in the House and telling us that pressure is being exercised somewhere else. We should like in these tax remissions to see a great deal more pressure being exercised and having results but we really cannot accept it from the hon. Lady or from anybody else on the Benches opposite, for on this occasion the Clause was put down by my hon. Friends and by nobody else. It has been accepted by the Government, and this is a very great success for a Member who has so recently joined this assembly.
§ Question put, and agreed to.
§ Clause read a Second time, and added to the Bill.