§ Motion made and Question proposed: "That income tax shall be charged for the year beginning the sixth day of April, nineteen hundred and nine, at the rate of one shilling and two pence in the pound and that an additional duty of income tax at the rate of six pence in the pound be charged in respect of incomes which ex- 1950 ceed five thousand pounds on every pound of the amount by which the income exceeds three thousand pounds.
§ "That no exemption, abatement, or relief under the Income Tax Acts shall be given to any person who is not ordinarily resident in the United Kingdom."—[Mr. Lloyd-George.]
§ Sir FREDERICK BANBURYWe are asked now to discuss this particular Resolution with a Resolution which was passed a short time ago by the House, and with which probably you are not acquainted, and which Resolution was supported by a large number of right hon. Gentlemen opposite, and which imposes a charge upon the Imperial Exchequer. We are now discussing how we are to meet charges which 1951 are imposed upon the Imperial Exchequer. Being desirous of promoting the despatch of business, and in order to give the Government an opportunity of considering how they will propose to meet the additional expenditure for which they have just voted, and for which a Resolution will be necessary, I beg to move to report progress.
The CHAIRMANI am afraid I cannot take any such Motion, as the House decided, at the interruption of business, that they would go on.
§ Sir F. BANBURYMay I respectfully point out that when the House decided, at a quarter past eight, to go on with the business, no one knew that this Resolution would be carried, much less that the Government would vote for it. My desire is to give the Government an opportunity of explaining the steps they propose to take. Under the circumstances, it would be for the benefit of the House and of the country that the Government should have an opportunity of explaining their attitude.
§ Mr. A. J. BALFOURI do not for a moment question that the decision you have just given is in strict accordance with the precedents which have been set by yourself and your predecessors; but I think everybody will admit that my hon. Friend and Colleague in the representation of the City of London had very peculiar and strong moral grounds for pressing upon the Government and those who support this Budget the gross Parliamentary impropriety of starting a Resolution of this character at this late hour. There may have been occasions—I doubt not there have been—when the proposal for the income tax has been disposed of at this hour without any gentlemen feeling themselves deeply aggrieved by the procedure of the Government. But what occasions were those? They were occasions when there was no fundamental alteration made in the tax as regards either its amount or the method of its collection. This income tax embodies an entirely novel principle, a principle which so far is absolutely unknown in our legislation, which would have been regarded with horror by the Finance Ministers who were the first to impose income tax for certain special purposes in this country; and it contains proposals of which we have had no 1952 defence as yet from the Minister in charge. I really do not know whether I ought at this period of our Debate upon this Resolution to make any complaint of that, because it is a familiar practice. The one thing which the Chancellor of the Exchequer never thinks it necessary to do is to explain his Budget. He did, indeed, earlier in the afternoon, for the first time, make some supplementary statement which elucidated his original presentation of his financial proposals; but that was, as I understand it, simply because he happened to have omitted five pages from the original statement, the result of which was that for nearly a fortnight the whole country has mistaken the nature of his proposals, and neither in this House nor in the numerous opportunities which he has given himself outside this House of explaining his scheme did he ever think fit to do so. When he at last thought fit to do so, when at last the five pages were replaced—[An HON. MEMBER: "Six."]—that are relevant to the question of procedure which we are now discussing—he had no opportunity, or took no opportunity, of discussing the new position in which we found ourselves. If that is to be the procedure on all the Resolutions, I quite understand that the Government think it natural—not only proper, but natural—that they should begin a most important, and a most novel discussion, after the hour that normally we conclude our Debates. If the Government never think it necessary to reply, does it matter at what hour of the evening we present our arguments? If the Government never think it desirable to explain, does it matter whether we put our questions at four o'clock in the afternoon, at eleven o'clock in the evening, or at four o'clock in the morning? Of course it does not!
The Chancellor of the Exchequer is in the habit of telling us that these are preliminary Resolutions to the Finance Bill. So they are. And if the Chancellor of the Exchequer had never done anything more reprehensible than bidding us to defer discussion on machinery and detail till we had the Bill in cur hands, I, for my part, would never have raised the smallest complaint as to the procedure. That is not what he does. There is no way of putting an argument so precise and clear as to extract a precise and clear answer from those in charge of the Bill. If I wandered into the loose rhetoric of the Secretary of State for War last night, or burst into—well, they evade all points which have been made on 1953 the ground that the proper time of reply was either yesterday, or will be weeks hence. They make up these deficiencies by a kind of rhetoric which I admire, but which I think extremely ill-placed, misplaced, on occasions like this.
The Resolution which the Government wish us to begin discussing at half-past 11 o'clock at night does not merely involve an increase in the income tax. It involves a wholly new method of dealing with the income tax. For my part, I agree—I think I have already said so—I agree with the hon. Gentleman the Member for Preston, who said that in his view there was no fundamental ground for objecting to graduations in the sense that you might take a proportionate view of a man's income, and that you might, though not necessarily, or inevitably, charge larger on larger than on smaller incomes. I am not going to dispute that proposition. What I really do think requires defence from the Government is not injustice—if there be injustice done to the higher income taxpayers—what we want is some justification from a practical point of view of the methods they have adopted. Everybody admits that the income tax is not only our mainstay in times of temporary difficulty—whether these difficulties be due to war or changes of taxation—everybody admits also, I think, that if you put too great a burden upon the income taxpayer in a time of peace you will do two things. You will, in the first place, destroy your power of using that great fiscal weapon when you most want it, and in the second place you will really diminish its yield by driving out of the country the income tax-paying capital, putting it in the form in which you can get income tax, and you will do a great deal to provoke evasions which destroy the yield now, and which probably for many years to come will destroy the yield from that income tax. I do not know what opinion the Chancellor has got on this point from those who advise him, nor do I pretend to have any minute knowledge on this subject; but I go about like other people, and I see the various conditions of men, and I get a great amount of correspondence, and I am inclined to think that there are a large number of income taxpayers in this country who have no desire to evade what they consider fair income tax, but who will undoubtedly set themselves to seeing to what extent they can defeat an income tax of which they disapprove. I am not defending that. I am no more defending 1954 that than I am defending smuggling when you have very high duties to deal with. I think they are both wrong. [An HON. MEMBER: "And on a par."] And, if you like, both are on a par, but every sound financier has always held the view that one of the objections to duties being made too high is, that human nature being what it is, you will get smuggling in certain circumstances. [An HON. MEMBER: "Oh!"] The hon. Gentleman below the Gangway who so lightly interrupted me just now, I am quite sure, if he lived one hundred years ago, in the time that smuggling did exist in large proportions, would not have been at all adverse to sharing with his friends a little smuggled French brandy on every possible occasion. But at any rate I hope the House understands I am not in the least discussing the morals of this matter. I entirely object to evasion, whether by smuggling or in any other way. I am looking at it from the Chancellor's point, and it is quite clear if you make any set of people evade taxes, however erroneous that view may be, the people who suffer will be, in the first place, the Treasury, and in the second place those who cannot evade and who have to bear more than their fair share, and in the third place the general body of the community. I should like to ask the Chancellor of the Exchequer whether he does not know, and whether he has not opinion leading him to believe, that as a result of this tax those who can, without difficulty, evade it will do so, who never would have thought of doing so before, and without that breach of the law which smuggling undoubtedly is. Hon. Gentlemen in all parts of the House know that, as a matter of fact, if a man is rich enough to accumulate his income abroad he does not pay any income tax upon it at all, and the law does not require him to pay income tax. It will be very difficult to prevent that. If a man is rich enough, and has his money in a sufficiently fluid condition to enable him to accumulate it abroad, he pays no income tax at all. I have heard from many quarters that the result of the proposals now before us is that people who have never thought of accumulating their money abroad are thinking of doing so now, in strict accordance with the law. Does anybody dispute the accuracy of that statement? I think it would be very difficult to stop that. That is my first complaint against this Resolution, and it is an objection based not upon the fact that you are charging higher incomes at a higher rate, but an objection based upon the fact 1955 that you will not get the proportionate yield from your charge, and those who can best afford to pay your charge will be the people who can most easily avoid it.
My other point relates to the super-tax. I do not object to the super-tax because it is a super-tax, but because it involves an amount of inquisition which hitherto we have been able to wholly avoid under the method we have adopted of collecting the income tax. [An HON. MEMBER: "Not wholly avoid."] Perhaps not wholly avoid, but at any rate very largely to avoid. I am quite confident that it is because we have been able to avoid that inquisition that a tax which is in its nature very unpalatable to the payer has been borne with a certain degree of patience. That is all over now, at all events in regard to every income which is, or is suspected of being, above £5,000 a year. I gather that the calculation of the Government—necessarily a very imperfect one—is that 10,000 persons are going to pay this super-tax, that is, they estimate that there are 10,000 people in the country with more than £5,000 a year. There are a great many more than 10,000 persons in this country who are suspected of having more than £5,000 a year, and every one of those persons will have an inquisition made into his affairs.
Again, I wish to approach this question from the Treasury point of view, and also from a business point of view. If you make what is naturally an unpopular tax doubly and trebly unpopular by this addition to its burden you give an additional reason to all those people who can invest their money abroad to do so, and they can then take off their hat to the income tax commissioner and say to him: "So far as you are concerned my income does not exceed £5,000 a year; here are my books, and I can prove it." I think that will be bad for the country and bad for the future of the tax and for every class of the community. Once these people begin to invest and re-invest their money abroad they will not be likely to give up that habit even if the income tax should afterwards be put upon a saner and more staple basis.
That is what I think is necessary for me to say on the point at this stage of the Budget procedure. I believe that the proposals of the right hon. Gentleman on the Treasury Bench will be extremely injurious to British finance. That view, I take it, is not held only by one side of the House, but by both sides of the House. It sets at nought the views of Sir Robert Peel, Mr. Gladstone, and Sir W. Harcourt, 1956 and a whole series of Chancellors of the Exchequer during the last fifty or sixty years. The whole of their authority may be quoted on the side which I have endeavoured to explain to the House. When a Government wishes to break with the traditions common to both sides of the House they ought not to compel us to discuss the matter at this hour of the night. I really do think that if anything could add to the cynical contempt of the discussions in this House it is the way in which this subject has been treated by the Government. It augurs ill for our future procedure, and during the three years during which the Government has been in office there has not been a more flagrant or a more deplorable contempt of what used to be a great deliberate assembly.
§ Mr. LLOYD-GEORGEThe right hon. Gentleman has devoted his speech, first of all, to a general complaint of our conduct of the business of the House, and, secondly, to the proposal now before the House. I should like to say a few words with regard to the first part of his speech. His complaint is that we have seriously departed from precedent in our procedure. I agree that there has been an entirely new procedure in two respects. First of all, for the first time the financial Resolutions have been printed on the paper. That is a serious departure from precedent. What is the second departure? It is on the part of the Opposition. It is the first time in the whole history of our finance in which Resolutions for the Budget have ever been debated at such length. I have examined precedents on this point. Take the Corn Tax and the Coal Tax. At any rate, these were two serious departures in finance. [Cries of "No."] They were new propositions. ["No."] The Coal Tax was undoubtedly a departure, and the Corn Tax had been abolished for many years. The two Resolutions were fiercely opposed on our side of the House. Yet they were passed in a single night. I will call attention to another instance. I recollect an occasion when practically the whole Budget was passed between 11 o'clock at night and 2 o'clock the following day, and we had six closures moved by the right hon. Gentleman. It was not a closure upon motions—it was a closure upon whole clauses. I do not know how many taxes were passed at that sitting, but, at any rate, it lasted from 11 p.m. till 2 p.m. or 3 p.m. the following day.
§ Mr. AUSTEN CHAMBERLAINTill 4.30 p.m.
§ Mr. LLOYD-GEORGEAnd that Debate was on very important proposals, including one for the imposition of the Coal Tax. Let me put it to the sense of fairness of hon. and right hon. Gentlemen opposite. What has happened here? I agree that ours are novel proposals, and I would be the last one in the world to say that they ought not to be discussed fully and thoroughly sifted. I am not pretending that for a moment, but all we are asking for now is the Resolutions on which to base our Bill. We have already had six days' discussion. In this I am not including the first night's statement, but we have had six days' Debate and have only passed four or five Resolutions. We have still eleven Resolutions to get. What does it mean? It means about three weeks' discussion upon the Resolutions. I do not quarrel with that, but it must be done within the three weeks. All we ask for from the Opposition is that we should, at any rate, get the Resolutions before we separate for the Whitsuntide holidays and secure the first reading of the Finance Bill. Is that a monstrous proposition? What does that really mean? It means three weeks' Debate on the first reading of the Bill. Can the Opposition give me a single precedent of that in the case of any Bill? I do not care what Bill it is. The Home Rule Bill was a gigantic undertaking, but it did not take all that time for the first reading. I ask the Opposition to point out a single Bill, financial or otherwise, that has taken three weeks on its first reading. Yet we are not challenging that in this instance. I really think that the sense of fairness of the right hon. Gentleman will allow that we are giving the Opposition, I will not say every latitude, but the most generous latitude in the way of discussion on the Resolutions necessary to enable us to introduce our Bill. I shall be very interested to know what is the right hon. Gentleman's view of what he ought to do under similar circumstances when he may have to introduce a Budget which contains novel proposals—whether he thinks three weeks will not be enough to discuss the preliminary Resolutions on which to base his Bill. I think we are treating them with the most generous latitude in Debate. I am not going back to the days when Mr. Pitt introduced a Budget which had 2,000 Resolutions and passed them all in a single night. The right hon. Gentleman is creating a very dangerous precedent. If 15 or 20 Resolutions are to take three weeks, what will 1958 2,000 take. That is all I want to say with regard to that question. I really am not complaining. It is the business of an Opposition to oppose. They object to the Budget, and have, no doubt, very strong feelings about it, but I do not think they can complain that we are treating the Opposition unfairly when we have given all this time—three weeks—for the discussion of the Resolutions upon which simply to base the foundations of our Bill, and are prepared to give time for the Report stage.
I now come to the questions on the Resolution itself which were discussed by the right hon. Gentleman. I would have preferred to have had further assistance before I got up, but the right hon. Gentleman has put some very important points to me, and therefore I think I had better answer them first of all. The right hon. Gentleman objects first of all to our raising the income tax by 2d., and he suggests that the effect of that may be that we shall lose money rather than gain by it, that it will have the effect of drying up the source from which we derive income tax. But the income tax has been much higher, and the right hon. Gentleman's Government was responsible for it. I think he was Prime Minister at the time when it was put up from 1s. to 1s. 3d. [An HON. MEMBER: "War."] Is war the only public object for which you are to raise taxation? Let the hon. Member put it from another point of view if he likes. Is not this preparation for war? Is not an increase of the Navy an equally important object of an income tax if he looks at the matter purely from the point of view of armaments? We have got to find money for them. Then the right hon. Gentleman said the effect will be that it will dry up the source, and the income from the tax will shrink. What was the result? In his case the income tax not merely went up in proportion to the rise, but the yield of the penny went up, and it has gone up steadily ever since, so that the experience of the last few years has been quite the reverse of the apprehensions of the right hon. Gentleman. Let me put another point. The right hon. Gentleman said, "After all, you ought to leave the income tax as a kind of reserve for a great emergency." I do not think any Government have done that for the last twenty or thirty years. Why should this particular tax be taken as a reserve more than any other tax? If we had not put this two pence on the income tax we should have 1959 had to put it on sugar or tea; or would the right hon. Gentleman suggest to put it on wheat? But whatever it is you have to put it on something else. You have to raise the money somehow. Why should the income tax be treated as a reserve, as something which is of a temporary character, while other taxes are regarded as permanent? Why should not the other taxes have their turn as temporary taxes, the taxes on the food of people, for instance? Why should taxes on the necessaries of life be regarded as permanent, and the taxes on high incomes as purely temporary? If any taxes are to be treated as a reserve, I should say the taxes which ought to be so treated are those which would press heaviest on the people who can least afford them. The hon. and gallant Member is in an extremely merry mood. What has caused his merriment? The idea that a tax on necessaries should not be permanent arouses a sense of humour that I should not have discovered in him. It is purely a question of which of these taxes you regard as a reserve. The right hon. Gentleman says his information is that the super-tax is regarded as being so pressing that it may frighten capital abroad. That is not my information. I have had no protest against the super-tax at all, and if he will look at the financial articles he will find that the super-tax is at any rate the one tax about which there is no large apprehension, and my information in the City is that they regard the super-tax as a perfectly fair tax, and I am not at all surprised. What does it mean? You do not begin the super-tax until a man has £5,000 a year, and then the tax you impose on him is something over 2d. Would a man with £5,000 or above really complain, in a time of emergency when you want money for national security, and for great schemes of social reform, if he is asked to contribute an extra 2d. as against men who are less favoured than himself? They do not complain, and I should be very surprised really if any friend of the right hon. Gentleman complained about having to pay an extra tax if he has an income of over £5,000. The right hon. Gentleman says they will go abroad. I ask the question which the Prime Minister has already asked. Where are they going? Has he followed the working of the income tax abroad? In Germany there are two income taxes. There is the State income tax, which is high now and which is going to be higher, which is graduated now, and on which they are going to superimpose a 1960 stiffer graduation, and in addition to that every Prussian town has an income tax of its own, and a much stiffer one. Take Essen, the great Krupp centre. A £5,000 a year man would pay not 1s. 4½d., as here, but 2s. [An HON. MEMBER: "There are no rates."] Well, really the hon. Member is very misinformed there again. There are rates, and there are taxes. There are capital taxes on property there. In addition to the income tax there are very heavy local rates, because of the expenditure of the German municipalities. As everybody knows, they are very enterprising—very much more enterprising than our municipalities are with us. There are many things in their municipal enterprises which we would not look at in this country. I am dealing with the question of capital going abroad. If capital goes abroad—if it goes to Germany, at any rate—it has to pay sometimes as much as 2s., and if the proposed new tax is imposed it will have to pay over 2s. 2d. in the £. Take the case of France. Has the right hon. Gentleman opposite read a very interesting article which appeared the other day in the "Morning Post" from its Paris correspondent as to what the effect of the new taxes has been on capital there, and especially capital which is invested in commercial enterprises? [An HON. MEMBER: "There is no income tax in France."] I am referring to the new proposals of the Government in regard to income tax. I am not the only Chancellor of the Exchequer in difficulties about the Budget. There are those of Germany and France who have also made new proposals. In France the proposal in regard to a super-tax on incomes is infinitely heavier than mine. These are two great rivals of ours in the matter of capital. France is a greater rival than any country in the world in regard to capital. I am not so sure that she has not more free capital than we have. It is a debatable point. She is an enormously wealthy country, and undoubtedly she has got a large reserve of capital for investing. She is our greatest rival in that respect. What is she doing? She is putting on a tax beside which mine is a poor insignificant thing. I would ask the right hon. Gentleman to look at the article in the "Morning Post." Well, that is the position in these two great Continental rivals of ours—I mean rivals from the industrial point of view. I might give the case of the United States of America. There are other taxes there. I think I heard an hon. Member say the other day that 1961 there are no death duties, but as a matter of fact there are in some of the States. There is very heavy taxation in New York, and it is growing. Really capital, wherever it goes, has got to pay this growing demand of the State for a contribution to public purposes, and, therefore, it is idle to talk about driving capital away. I am not sure that it would be better employed if it were driven to China or Japan. Take Japan. What happens there is a graduation up to 5s. in the £. Well, at any rate, you cannot go there. [An HON. MEMBER: "What about Belgium?"] I am not sure that capital would be able to go there. It is a very small country, and I should be very much surprised to hear that there is really enough room in Belgium for all this huge capital to fly to. We have got hundreds of millions in this country, and I do not think that it could all find profitable investment in Belgium.
The right hon. Gentleman has asked me with regard to the figures. Here I agree that they are not absolutely definite, but I will not say they are altogether conjectural. The question was examined very closely by a Committee over which my right hon. friend the Member for the Forest of Dean presided. The evidence was taken of Sir Henry Primrose and a good many officials. In addition, a very able statistician went into the question very closely. We accepted the most cautious estimate—that of Sir Henry Primrose. I think the view of the right hon. Gentleman is that it is a very cautions estimate, and that, as a matter of fact, the estimates of my hon. Friend the Member for Paddington and of Professor Bowley are much nearer the mark. Sir Henry Primrose's estimate of the aggregate of incomes over £5,000 a year in this country is £120,000,000. Professor Bowley's estimate is something like £200,000,000. I agree that until we got the actual returns it would be perhaps impossible to say with anything like accuracy which of the two estimates is the more correct. But as the right hon. Gentleman has said we here introduce for the first time an obnoxious inquisition into income, I do not think he could have had experience of the working of the income tax. The only inquisition that is introduced now is the inquisition with regard to an income which applies to practically only 10,000 of the population. You have got to draw your net a little wide and serve notices on probably twice the number.
§ Mr. SAMUEL ROBERTSSir Henry Primrose said you would have to send out 100,000 notices to get the 10,000.
§ Mr. LLOYD-GEORGEThat is not the view of the Inland Revenue. I think it is the view of the right hon. Gentleman the Member for East Worcester that probably it would be necessary to send notices out to three times the number. What is the present position? Very small tradesmen and considerable tradesmen as well have got to make declarations. Every professional man has got to make one. He has got to give a full account of his earnings, of all his income, from whatever source derived.
§ Sir F. BANBURYI have been a professional man myself, and all I had to do was to return the income that I made from my profession. The resources I had from my savings or from any other source were not returned.
§ Mr. LLOYD-GEORGEThat is exactly what I am saying, and I am obliged to the hon. Baronet for putting it in that way. He has got to render an account of the amount of his income derived either from his trade or his profession. That involves an inquisition of a much worse character. Most men would prefer having their books examined as to what their investments are to having the books of their trade examined. What happens now in a small country town? A tradesman makes a return and says: "My income is"—say—"£300 a year." If it is accepted by the income tax surveyor I believe that is an end of it. But suppose the surveyor says: "I cannot accept that; you are making more." The man has then got to take his books to be examined by him, and more than that, they are examined by the local Commissioners. The local Commissioners are people in the neighbourhood, and he has got to submit to his neighbours the books, not of his investments, but of his business. I am afraid the same thing applies to professional men, to whom it is an inquisition of a very obnoxious character. As a matter of fact the surveyors and Commissioners do their very best to make it as little obnoxious as possible to those who submit their accounts. ["No."] The hon. Member does not seem to think they do. At any rate, there are not merely tens of thousands but hundreds of thousands who have to submit their accounts not merely to surveyors but to their own neighbours. But, really, can these people object to going, I will 1963 not say through the same process, because it is a different one. They will have to submit their accounts, not to their neighbours, not to the local Commissioners, as my right hon. Friend the Member for the Forest of Dean pointed out, but to the special Commissioners, who will be in the Civil Service. That will be a very different thing from the sort of process through which small tradesmen and professional men have now to go. I do not think that under the circumstances there is any real ground of complaint. If the right hon. Gentleman investigated the process in Germany he would find that it applies throughout the whole of the income tax. In this country you have got taxation at the source. In Germany the whole of the income is submitted; there is a system of investigation which probably we would not stand in this country; it is a very severe one. We do not propose anything of the kind here. We have done everything in our power to make the conditions as little oppressive as possible to those whom we are obliged to submit to this process. I do not see that there is any real protest against it. There is no man who has filled the office of Chancellor of the Exchequer who has not got information through correspondents. The right hon. Gentleman knows very well that the Chancellor of the Exchequer receives numbers of letters, and I do not find in the communications I have received any protest against this proposal. I think the general feeling among the rich people is that they can afford to give more, and they are prepared to give more. I honestly do not think that this proposed income tax has created protests. That is not the information which I have got, and I do not think it is the information which the majority of Members have got. Certainly there is no real resentment against this proposal. We have not made it oppressive. We have made it perfectly fair. The graduations are quite gentle. They go up practically by farthings, and the very maximum is not 6d., because we take £3,000 from even the highest incomes; therefore it does not reach 6d. in any case. Under these circumstances I submit that our proposals are perfectly fair. Seeing that we want to get in the money, I am not sure that this is not the fairest way of raising the £3,000,000 which we propose to get by this tax.
§ Mr. HICKS BEACHI did not think that the Government really seriously in- 1964 tended to continue the discussion this evening on this very important Resolution. It is now twenty minutes past twelve o'clock, and in common decency and fairness I should like to move to report progress and ask leave to sit again. But the Chancellor of the Exchequer has given us a little further information, and I desire to say a few words on his reply. I will not go into recriminations as to the number of times on which various other Chancellors of the Exchequer have moved the closure, and the times at which they have taken this kind of resolution. We are entitled to ask for further information. With regard to this super-tax which we are now attempting to discuss, the right hon. Gentleman tells us that it is all very well to talk of investing their money abroad, but where are they going to invest it. He has told us that in Prussia and in France there already existed, or was going to exist, a large income tax, and in some cases higher than the income tax he now proposes. I venture respectfully to draw the attention of the Chancellor to the fact that Prussia and France are not the only two countries in which British capitalists are apt to invest their money. I think I am not exaggerating when I say there is a very large field which British investors do now utilise for investing, some in the United States, some in Canada, in the Argentines, in Egypt, in India, and various other countries, which do not at the present moment enjoy the luxury of the income tax, and in which the British investor would naturally try to invest his money. If he feels that he has been unfairly attacked by the imposition of this super-tax, he realises that he will be perfectly within his legitimate rights in investing a certain portion of his capital in other countries, and some of which I have already named.
The Chancellor asked why should the income tax be treated as one of the great reserves in this country in times of emergency. I will not attempt to quote to him the various expressions of opinion from various predecessors of his in his great office. I have a vivid recollection of the present Prime Minister, when he was discussing the rate of income tax two years ago, I think, and when he distinctly told us that income tax at a uniform rate of a shilling in the £ was a serious burden both on capital and also upon income and upon wages. Then he also stated—I forget the exact words, but they were something to this effect, that it destroyed, or tends 1965 to destroy, one of the greatest reserves in this country in times of emergency. I shall have pleasure in providing the right hon. Gentleman with that quotation later on in this discussion. I think it very pertinent to the remarks the present Chancellor expressed on that topic.
The right hon. Gentleman went on to discuss the question of declaration. He said it is a ridiculous thing to assert that by this super-tax you are starting a system of inquisition into the income taxpayers of England. He said you have got that now for a large number of small traders who are compelled to make a return of their income. I quite admit that is an inquisition, but it is also sometimes evaded. The local Surveyor of Taxes estimates a certain man's income at a certain amount which he thinks it to be, and the man pays taxes on that. Then a year or two afterwards the surveyor thinks that taxpayer is not properly assessed and he puts up his assessment, and very frequently cases have occurred in which local tradesmen have submitted to their assessment being up to a greater degree than it really ought to be, simply because they do not wish to have their own positions disclosed to the local income tax collector.
They have suffered the penalty of paying on an over-assessed income, because they did not wish local people to make an inquisition into their affairs. I do not know what machinery the right hon. Gentleman is going to set up for these declarations of income for the purposes of super-tax; but, as far as I could gather from his speech, he does not propose to allow the surveyor of taxes to say to a man, "Your income is over £10,000; therefore you are to pay on that." Although such a man's income might be only £9,000 he might be disposed to pay taxation on the higher sum rather than incur the obligation of setting out in a deliberate statement every penny of his income, derived not only from business, but also from his own personal savings. But as I understand the right hon. Gentleman, he proposes to compel everybody who the surveyor of taxes thinks ought to do so to make a full declaration; and if by chance he happens to omit a small portion of income he will render himself liable to very severe penalties. I call that a real system of inquisition into a man's private affairs. The argument has been used that already over 750,000 income taxpayers make a full declaration of their income; but that is 1966 a very different thing. They make a full declaration for the purpose of getting something back; whereas you are now proposing to ask a considerable number of people to make a full declaration for the sole purpose that they may have the joy of paying a larger sum to the Exchequer. There is a very great distinction between the two processes, and an objection to which the Prime Minister himself drew attention a year or two ago when he quoted some of the very obvious objections to the imposition of a super-tax.
There is another very obvious point which the Chancellor of the Exchequer has apparently forgotten, but to which great prominence was given by Sir Henry Primrose before the Income Tax Committee, when he pointed out most clearly that a super-tax on large incomes does now exist in the shape of death duties. A man with a considerable estate knows that at his decease his successor will have to pay a large sum out of the capital value of the estate. Sir William Harcourt, the author of the death duties, told the House on several occasions that the obvious thing for such a man to do was to take out an insurance policy, which at his death would enable his successor to pay in one lump sum the large amount of tribute exacted in the form of death duties. But what does that mean except the payment of an annual sum by that particular taxpayer? It simply means that a man whose estate is liable to death duties pays an annual sum, which can be very easily transformed into an additional income tax. If the right hon. Gentleman will look at the table handed in to the Committee by Sir Henry Primrose, he will find that the sum varies in amount, and that as the estate increases in value so the insurance premium may be explained as a larger income tax. And it amounts to this, that a man with a capital which produced him an income of, say, £5,000 a year, pays an additional income tax already of, I forget exactly, but something like 1s., and these larger incomes, which are derived from a capital sum amounting to something near £1,000,000, do actually at the present moment—or before this Budget was introduced—pay an additional income tax of something over 2s. in the £. Therefore it is quite unjustifiable to say that there is not at the present moment a very large super-tax on the possessors of large estates which produce large incomes. I do think the Government, or the Chancellor of the Exchequer, should in fairness explain to the House what is actually raised from the 1967 incidence of these death duties at the present moment.
Just one or two other points. Last year the right hon. Gentleman the Prime Minister introduced a new procedure into the income tax when he indicated that a man with an earned income should pay at a less rate than the man with an unearned income. That is very fair in certain cases. I pointed at the case of a man who has been very industrious, toiled hard all his life, and has managed to save a certain amount which produces him an income for the declining years of his life. The right hon. Gentleman gave way very fairly on the question of pensions. He accepted an Amendment to consider the income derived from a pension as earned income. He declined to give way on the proposition to consider income derived from savings as earned income. Though it may have been difficult to carry out, I do feel very strongly that this has created a very great injustice on a very deserving class of the community. It is doubly accentuated in this Budget. We find in incomes under £3,000 a year that a man who is fortunate enough to have an unearned income, or is living on a pension, will pay 9d. in the £, whilst a small man, a man whose total income may be just over £700, pays the full rate of 1s. 2d. I consider that a very great hardship on a very large section of the community. They will not even have the consolation of knowing that the actual value, in the eyes of the Treasury Bench, of each of the children under 16—a provision made for those whose earned income falls below £500—is exactly equivalent to the dog tax.
One other point: no exemption, abatement, or relief, under the Income Tax Act will be given to any person who is not ordinarily resident in the United Kingdom.
§ Mr. HICKS BEACHI may have some opportunity of dealing with it later on.
§ Mr. LLOYD GEORGEmoved: "That the Chairman do report Progress, and ask leave to sit again."
§ Resolution to be reported this day; Committee also report Progress; to sit again this day.
1968§ And, it being after half-past Eleven of the clock on Wednesday evening, Mr. Deputy Speaker adjourned the House without Question put, in pursuance of the Standing Order.
§ Adjourned at Twenty-two minutes before One o'clock.