§ THE EARL OF MANSFIELD had the following Notice on the Paper: To ask His Majesty's Government whether they are aware of the long-standing and Justiable grievance felt by members of the police forces of this country at the levying of Income Tax upon the lodging allowances paid in lieu of official accomodation where such accomodation is non-existent; whether they are prepared to take steps to end this anomaly; and to move for Papers.
§ The noble Earl said: My Lords, in normal circumstances the members of the various police forces in this country are accommodated either in police stations or in houses which are owned or leased by the police authorities. The tendency naturally is to get more and more houses which are actually police stations as well 391 as dwelling-houses, although a great deal of progress has still to be made in this direction. For example, in the parish in which I myself live, the local constable occupies a house on my own property. No difficulty, however, arises with this class of case. The difficulty does arise in regard to the position of the single man, or married man temporarily employed on a job where he cannot take his family and where no accommodation is provided by the police authority—that is to say, where the man in question, who may be a sergeant or even possibly of higher rank, has to find lodgings in the district to which he is assigned for duty. He is, of course, paid a lodging allowance which, if left intact, would probably be adequate, but unfortunately the Treasury appears to regard this lodging allowance as part of the man's pay and accordingly assessable for Income Tax.
§ In years past, when Income Tax was very much lower and personal allowances decidedly more generous, this exaction, although a nuisance, might not have been regarded in many cases as a very severe grievance; but with personal allowances now reduced to the minimum, and Income Tax standing at ten shillings in the pound, it has become, for many members of the police forces, a very real burden. To-day I am asking His Majesty's Government if they will take steps, or at least make an investigation, to see whether these lodging allowances could not be put on the footing of Army messing allowances, and therefore no longer be subject to Income Tax. The position at present often causes the ridiculous anomaly that an unmarried man, a constable or sergeant usually, who has done well in a headquarters where lodgings are provided, is transferred to a rural beat with much greater responsibility, but instead of getting at least the emoluments he formerly enjoyed, if not a rise in pay, all he does receive is an "Irishman's rise" by getting a lodging allowance which, being subject to Income Tax, leaves him worse off than he was before. I beg to move for Papers.
§ THE LORD CHANCELLOR (VISCOUNT SIMON)
My Lords, I wish to say a few words in reply to the important question which has just been put before us by the noble Earl in his short and very clear 392 statement. I have tried to inform myself of the particular matter, and I think that what the noble Earl has said in contrasting the two cases was accurately stated—that is to say, it is the case that if a policeman is housed by the local authority and has therefore an official residence, then the value of that residence is not taken to be any portion of his income, whereas if you have the case of a policeman who is required to live out, and is given a lodging allowance, the lodging allowance would be regarded as part of his income. I can quite conceive that that contrast appears anomalous. It arises really under the rules of Income Tax which are constantly revised at the instigation of another place, and which come before us in the form of the Finance Bill.
There are two rules of Income Tax which it is material to remember in this connexion. They are of a quite general character. The one rule is that the money payments which an employee receives from his employer by reason of his employment are all subject to tax. A clerk, say, who is serving a firm of solicitors, and is paid a certain income, normally has to provide his own lodging, and the amount of money payment that is made to him by his employer is all subject to Income Tax. He is not entitled to deduct from it the rent of the house in which he lives; we none' of us are, if we are serving an employer, even the State. That is one rule. The other rule, which is equally well established, is that, for purposes of Income Tax, you do not take into account the value of benefits in kind which come to an employee from his employer in virtue of his employment, provided these benefits cannot be turned into money. It is a practical rule. It is perhaps best to give an illustration which has nothing to do with policemen. Take the ordinary case of a domestic servant—if there is such a thing now—who lives in. For Income Tax purposes the amount of the income of such a servant is the amount of the money wages paid and the Income Tax does not seek to add—indeed it could not as a practical matter accurately add— the value of the meals or the value of the bedroom or anything else in the form of benefit which is not money and cannot be turned into money.
Those two principles are in practice quite well known and it is very difficult to see how you can begin arranging the 393 matter otherwise. But of course the result of that is undoubtedly that a policeman, who in addition to the money payment he gels from the local authority, also gets house room, will pay Income Tax on what he receives in the form of money without anything additional being charged to represent his shelter, whereas on the other hand a policeman who is given also a money allowance in order to find his lodging will find that the Income Tax interests itself in the way we all know, not only in respect of the rest of his remuneration, but in respect of the amount he gets for lodging allowance as well. It arises, I can assure the noble Earl, in a great variety of cases and a good many of us have been concerned to see if some better adjustment can be devised.
I think it has been at one time suggested—I am not sure whether at one time it has not actually been done in some parts of the country—that an effort should be made to try to give the policeman who is going to live out and be given a lodging allowance not only the amount which will cover his rent but more than that so as to try and cover his extra Income Tax as well. I believe that has sometimes been attempted. It is not a very easy calculation to make; and it has become a far more difficult calculation than it ever was before. Of course it always involves that problem which is usually illustrated by reference to Achilles and the tortoise. If you give him something more to represent the Income Tax, well he has to pay income Tax on that too. But what has made this a matter of particular application now is the provision recently introduced by which there is something stored up in toe future which is given back to the Income Tax payer—the post-war credit.
There is another way in which an attempt has been made to reduce the contrast. I quite recognize that it is an unfortunate contrast and I think the noble Earl is performing a useful service in calling attention to it. There is, I know, an effort being made, and I rather think the authorities in England and Scotland have endeavoured to encourage it, to increase the number of cases in which the policeman is housed by his employer and so reduce this kind of abnormal case to the minimum. I do not know that this is a very good time to talk about finding more houses, even for the police, and there is 394 also this consideration, which must not be altogether overlooked and which comes in on the other side. There are cases where a policeman may find it a positive advantage if he can choose, within limits, where he lives. If he has to live in the official house he has to take the official house whatever it is. He may be a man with a large family who may want on that account to add something to the lodging allowance and to spend more of his total income on rent, or he may be a man who has special calls upon his resources, is bound to be desperately economical and would be glad if he could to arrange for lodging for himself at less than the allowance. All that has to be thought of if a policeman is going to be required to live in the official house. I mention these things, I hope the noble Earl appreciates, not in the least to minimize the importance of this matter, but I give this answer because it represents the facts, and I hope perhaps that what I have said about Income Tax rules will be of some assistance in understanding the difficulty.
I believe it is the case, as the noble Earl indicated in a sentence, that some rather different arrangement is made with reference to the messing allowances and lodging allowances of Army officers. I really do not know how that comes about. I do not suppose at this time any of us would want to propose that that should be stopped, but if you are really to try logically to adjust the position of the two policemen whose cases have been described by the noble Earl, speaking bluntly, the really logical way to do it would be for the policeman who lives in official quarters to be treated as though he was getting more than his money salary but was getting also a benefit to be taken into account in assessing Income Tax. That would be the logical solution, but it would not suit the police at all.
I made some inquiries, knowing this question was coming up and being told that I should be asked to deal with it, of the Home Office to know whether at this time this problem was engaging attention. It is not a new problem I know, but I did not know whether it was a live question now. I am informed that I may say this, and I gladly do so. It is in contemplation to investigate whether this anomaly could be reduced by increasing the number of cases in which the local authority provides the houses, 395 and it is proposed to take steps to investigate the position and see if there is any possibility of a solution on these lines. The suggestion, I am told from the Scottish Office, has been made in Scotland that the police authority should rent more houses, and this will be among the points to be reviewed. That is all I can say on the matter. I can well understand the noble Earl saying it does not completely satisfy him and those for whom he is speaking, but I think it does show that attention is being given to the matter.
We really must remember that if we are to adopt the easy solution of saying that a policeman who lives out and provides his own home is not to pay any in-Income Tax on his lodging allowance, then you produce at once the most startling anomaly between him and his next-door neighbour. His next-door neighbour, perhaps a clerk who may be getting the same income as the policeman and who is also providing his own home, must undoubtedly answer to the Income Tax authorities for all the money that he gets. He is not going to be let off what is called "living allowance." All of us of whatever grade who live in a rented house and pay the rent are under no delusion that we are entitled to deduct the rent when we are making a return to the Income Tax authorities. It is a most complex question and all I can do is to assure the noble Earl that it is honestly considered as a very difficult question both here and in Scotland. I hope he will feel that what I have said shows that that is so.
THE EARL OF MANSFIELD
My Lords, I must thank the noble and learned Viscount very much for his reply, delivered of course with that unrivalled lucidity we always expect from him. I feel, however, that it leaves me rather with a feeling of Omar Khayyâm. I… heard great ArgumentAbout it and about: but evermoreCame out by the same door wherein I went.The noble and learned Viscount's suggestion seems to be centred round the provision of more houses. Speaking as Chairman of a Police Committee I entirely agree with him, and it is our effort, either by erection of police stations or leasing of houses, to get as much accommodation as we can. We shall never reach a solution by that method, 396 however, so far as bachelors or widowers are concerned who are not going to have houses but are in the position of lodgers.
The noble and learned Viscount, with his usual skill, skated delicately round the point of subsistence allowances. I submit that further attention might be given to the matter because it seems both unfair and unreasonable that what may be found practicable for one branch of His Majesty's Service may not be found equally practicable for another branch. I submit that the position should be probed a little further because at the present time it does produce anomalies. To me it seems that the anomalies which confront an Income Tax inspector in preparing one of his abominable forms are worthy of less consideration than the anomalies which confront an unfortunate policeman employed on the, to him, equally difficult task of drawing up his domestic budget. I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.