§ The proviso to Sub-section (1) of Section 71 of the principal Act (which gives the right to persons resident abroad to claim relief, exemption, or abatement from Income Tax in certain cases) shall apply to a widow who is in receipt of a pension chargeable with Income Tax and granted to her in consideration of the employment of her late husband in the service of the Crown as it applies to the persons described in the proviso.
§ Motion made, and Question proposed. "That the Clause be read a second time."
§ Mr. HOBHOUSEOur proposal here is a simple act of justice to a very limited class of persons. If the Committee look at Section 71 of the principal Act they will see there that the power was for a long time held to be inherent in the Treasury to absolve certain persons from the payment of these taxes. The power was an extra-statutory one, though not, I believe, much exercised. It was finally abrogated under the terms of Section 71 of the principal Act. No person could get relief wholly or partially from the payment of any tax if they were resident out of the United Kingdom and if their total income from all sources brought it within the operation of the Act itself. Exemption was given by the first Sub-section in the case of certain Civil and Crown servants. The Clause which I will now move is going to extend that exemption in the case of widows of Crown servants—I will not call them Civil servants, because it would apply to Naval and Military officers as well as Civil servants—who are in receipt of an Imperial pension—not a Colonial pension—and whose total income, from whatever source, whether chargeable or not to Income Tax is within the statutory limit. The particular reason for introducing this Clause is that there are a very small class of persons, widows of Colonial soldiers who fought in the South African War, and who are in receipt of very small pensions from Imperial funds, and who have to pay Income Tax because they are resident outside the United Kingdom. This Clause will relieve them of the payment of that tax and remove a cause of injustice which. I am sure, the whole Committee would desire to remove.
§ Mr. AUSTEN CHAMBERLAINI am in entire sympathy with the object the 1197 right hon. Gentleman has in view. I hope the right hon. Gentleman is right in thinking that the Clause will effect the purpose he desires; but I think the intentions of the Government, as expressed by him, are narrower than what is actually expressed in the principal Act. The Proviso in the principal Act deals with:—
"Any person who is or has been employed in the service of the Crown or who is employed in the service of any missionary society abroad or in the service of any of the native States under the protectorate of the British Crown."
Surely that does not refer to the widows of servants of the Crown in the Dominions or Colonies, where the salary is controlled directly or indirectly by this House. I do not think the words of the Clause are sufficient, and certainly the words of the principle Act are not sufficient.
§ Mr. HOBHOUSEIf the right hon. Gentleman looks at the concluding words he will find that the Clause applies to payment from Imperial sources, and persons described in the Proviso of the principle Act.
§ Mr. AUSTEN CHAMBERLAINI do not think so. I think, under the provisions of the original Act, it did not matter from what source the pension was drawn, provided it was under the limit the recipient was entitled to the abatement. The principle Act provided only for abatement if the person resided out of the United Kingdom, and by the Proviso certain exceptions were made to that exception, and what I am calling attention to is, the case of persons who had been in the service of the Crown but who lived practically the whole of their lives abroad, and brought up their children there, and who would not at the age of sixty or later, when they retired, desire to break with the surroundings and conditions of a lifetime, and leave their children and return to this country. It would be very hard to expect them to do so, and it was to meet their case however arising, provided it arises in the service of the Crown, and it did not matter if it was only a portion of the service under the Crown controlled by this House or other portion of the service to the Crown controlled by the advice of other Ministers, other than those who sit in this House that I intervene.
§ Mr. BRIDGEMANI think this Clause was put down to meet the case raised by Clause of mine lower down on the Paper. 1198 This Clause does not seem to me to go far enough. As I understand it, the exemption in this Clause only applies to pensions which widows receive on the death of their husbands. The original exemption in Section 71 of the principal Act applies to the whole of such incomes. I cannot see if a man has been in the service of the Crown and for reasons of his own lived abroad when he left the service, why, when his widow succeeds him and has to keep a family upon a smaller income after a deduction of Death Duties and other charges she should not have the same exemption as her husband possessed. According to the Clause of the Government she will only receive abatement on that part of the income which is derived from his pension. If she happens to be the widow of someone who has been in the service of the Crown in such a way that she would not be entitled to a pension she would not get any advantage from the Clause. There are a large number of officials under the Crown who hold their salaries with pensions to themselves when they retire, but without any part of the pension being continued to the widows. If that be so the widows of officers in such circumstances will receive no benefit at all from this Clause. I venture to think that my Clause covers the case very much better than the Government Clause, because that simply extends the exemption to the widows of all those people exempt under the original Act.
§ Mr. HOBHOUSEI think the extensions which we give to widows covers the case of all persons in the employment of the Crown in whatever part of the world they may be employed as long as the pension is one founded upon the resources of this country and controlled by this House. If it was not a pension controlled by this House it would not be chargeable for income tax. It is only in respect of that we give relief. If a person has income arising from a foreign State or British possession which does not pay Income Tax, that income is to be calculated in the total income the person receives, and that may bring them outside the relief given them by this Clause. That is to say, the whole income is to be calculated as the whole income of the persons resident in this country is. We give them relief to which they are not entitled at present; we do not give them any relief that the people of this country are not entitled to also.
§ Mr. AUSTEN CHAMBERLAINI beg to move to leave out the words "to a 1199 widow who is in receipt of a pension chargeable with Income Tax and granted to her in consideration of the employment of her late husband in the service of the Crown as it applies to the persons described in the proviso," and to insert instead thereof the words "to the widow of any person mentioned in the said proviso."
§ Mr. HOBHOUSEOn a point of Order, I think the right hon. Gentleman could not move that Amendment because it would at once raise a charge not covered by the Money Resolutions. I venture to take that objection before I meet the arguments of the right hon. Gentleman.
§ Mr. AUSTEN CHAMBERLAINI submit on the contrary it relieves the taxpayers of the charge, and that we are always entitled to do.
§ The CHAIRMANI do not think the Amendment means any increased charge. It seems to me that the Amendment would be a relief to the taxpayer, and it is therefore quite in order.
§ Mr. AUSTEN CHAMBERLAINThe Amendment would make the new Clause apply to widows of any persons mentioned in the proviso. As my hon. Friend pointed out the new Clause of the Government is very much narrower than the old proviso of the principal Act. Under the principal Act you allow Civil servants or other servants of the Crown resident abroad, relief on the whole of their income provided they are small enough to justify it. You only propose now to allow similar relief to the widow on such part of the income as is represented by the pension drawn by the husband formerly. I shall be very glad to know if I interpret the words of the Government Clause too narrowly. The widow must be in receipt of a pension. Any person who is or has been in the service of the Crown shall be entitled to relief. There is no necessity, therefore, for being in receipt of a pension. There are cases where there may not be any receipt of a pension, but certainly the person is not likely on that account to be better off. I think that is a point which affects very few people, and has very little effect upon the Exchequer, but I wish the Government would put their new Clause into exactly the same form as the proviso. What I am asking is, first of all, that a pension should not be necessary to qualify for a relief which 1200 would otherwise be given upon the income, and that, in the second place. relief should not be confined in the new Clause to income of servants of the Crown, but should be extended to widows such as those indicated in the Clause of the principal Act to those obliged to serve abroad or to native States under the Protectorate of the British Crown, and to any person resident in the Isle of Man or the Channel Islands. I am quite ready to do a deal with the Government if they will do a deal with me. Will they give it to the persons who have been in the service of the Crown, whether they have pensions or not?
§ Mr. HOBHOUSENo.
§ Mr. AUSTEN CHAMBERLAINWhy? You say that a man may have this concession under any circumstances, and why should the widow not have it unless she has a pension. Upon what conceivable grounds of equity or justice can you do that. I am willing to put my Amendment in a more limited form, but if the Government are not prepared to make any concession it is not worth my while to explain the matter.
§ Sir RUFUS ISAACSIt is not possible for the Government to accept this Amendment. If a man goes abroad for the sake of his health and dies, and his widow remains there, she is not there for the sake of her health, and there is no reason why you should grant the exemption to her which you granted under special circumstances. What in substance is done by the Sub-section is to grant the same measure of relief as in the proviso. But it confines the relief given to the Civil servant or the widows of Civil servants and servants of the Crown.
§ Mr. AUSTEN CHAMBERLAINSurely the hon. and learned Gentleman is confusing the points which I raised. It is not necessary for the widow to have a pension. If she has £20 a year from investments in this country that would be charged with Income Tax, but if she lived in this country she would be exempt. If she lives abroad where her husband lived and died, then she will be chargeable. I do not stand by the words of my Amendment, but what I ask the Government to do is to remove the necessity for her qualifying by the receipt of a pension for relief which she would otherwise get.
§ Sir ALFRED CRIPPSI understand what my right hon. Friend desires is that the widow whose husband is dead should 1201 come under the same exemption her husband came under, and that she should be entitled to the same benefit. It is quite possible that the words proposed by my right hon. Friend go too far, and what the Attorney-General has pointed out is quite right upon the terms of the Clause itself. A widow in receipt of a pension gets no benefit at all. I ask the hon. and learned Gentleman to consider, apart from these particular words, if a widow under these conditions is abroad subject to the same limitation as her husband while alive she ought to have the same advantage which he enjoyed whether she is in receipt of a pension or not. I suggest to the Attorney-General that this is a proposal half-way between the Clause as it stands and the proposal of my right hon. Friend.
§ Mr. BRIDGEMANI cannot understand the justice of this proposal. The idea is to exempt the widow of a person who has been in the service of the Crown. By this Clause you exempt one and leave another without any relief at all. Where can justice come in unless you are going to carry out in favour of the widow exactly the same exemption as Section 71 gave to their husbands before they died. It is difficult to draft an Amendment at the moment, but I should have thought the Government might be willing to accept an Amendment which went as far as their own proposals down to the word "widow" and then insert the words "any person who has been in the service of the Crown abroad." If the widow comes home she gets the exemption anyhow. If you want to do justice at all you must make the exemption co-extensive with Section 71 of the original Act. There must be widows whose husbands' pensions die with them.
§ Mr. HOBHOUSEThat must be so.
§ Mr. BRIDGEMANThose widows are worse off than those who have got a pension or some portion continued to them after their husbands' death. Why are you going to cut them out? I suggest that this is a very small amount, and the Government might as well treat the matter in a generous way instead of the niggardly manner they are proposing.
§ Mr. HOBHOUSEThe suggestion is that any person resident abroad is to be exempt.
§ Mr. BRIDGEMANOnly the widow of persons in the Service of the Crown.
§ Mr. HOBHOUSEThe widow is to be exempt from Income Tax, as she would have been exempt in this country. We propose in the case of a pension controlled and payable from the funds of this House to the widow of any person abroad that such a pension should be exempt. If the widow chooses to live abroad, although she may be the widow of a servant of the Crown, she may think she is better off. If she gets her income from investments here and chooses to live abroad, I do not see why she should not pay Income Tax. She gets the security of this country for her investments, and she ought to contribute towards the safety and good government of the country in which her savings are invested. I really do not see why she should not contribute a small sum for that purpose. We think we have given a substantial relief to the persons who draw a pension and whose resources are small. I do not think we ought to go further than that. Those are the principles upon which I think we ought to proceed.
§ Mr. AUSTEN CHAMBERLAINThe right hon. Gentleman has misstated what the Government are doing. He does not understand what the Government themselves are doing, and, consequently, he has given me an answer that will not hold water. He says that the Government in the principal Act decided that where a man spent his life in the service of his country abroad he should not forfeit the relief that he would obtain in this country by reason of the smallness of his income because he continued to live abroad. We ask that the widow of that man should be given exactly the same relief, and the right hon. Gentleman says that the Government propose that if she draws a pension controlled by this House she shall have relief in respect of that pension, but not otherwise shall she be relieved.
§ Mr. AUSTEN CHAMBERLAINApparently the hon. Member does not know the principal Act. If an officer after retiring from the service of the Crown continues to live abroad, having been obliged by his service to live abroad, he is entitled to this relief during his lifetime.
§ Mr. AUSTEN CHAMBERLAINThe hon. Member is quite mistaken, for it is not only on his pension. It depends purely 1203 on the fact whether his income is so small that if he were living at home in this country he would get relief. We ask that the same privilege should be extended to the widow. The right hon. Gentleman says the policy of the Government is to extend it to any pension drawn by the widow which is controlled by this House, but not any further. The Financial Secretary to the Treasury mis-stated the Government case. If the Government's action meant that they could only give relief on a pension they would be consistent in saying where the widow has no pension she can have no relief. But the Government say they give relief on all incomes in the case of a man whether he has a pension or not. But in the case of a widow relief is only given on income if there is a pension, and no relief at all if there is not a pension. The probabilities are, other things being equal, that the widow who has no pension will be worse off than the widow who has. They are all people who are poorly off. They all live abroad, and the circumstances of their lives have forced them to live abroad. The Government oblige them to break up their homes. If I am permitted I shall be willing to withdraw my own Amendment and adopt the words proposed by my hon. Friend the Member for Oswestry (Mr. Bridgeman). I think the Government would only be doing an act of simple justice in conforming to the policy of the principal Act, and unless they accept some Amendment of this kind they will be inflicting hardship in a number of deserving cases.
§ Mr. HOBHOUSEI will make a suggestion to the right hon. Gentleman. I do not think I have mis-stated the policy of the Government, though it may not agree with what the right hon. Gentleman thinks ought to be the policy of the Government. I think I have stated it without any sort of mistake at all. The right hon. Gentleman asks for a wider exemption than it is proposed to give, and that is the difference between us. I stated the narrower limits within which we propose to give the exemption, and he has stated the wider ground which he proposes to cover. I am not prepared, I confess, at the present moment, to accept the wider interpretation he desires to give. I hardly like to make a suggestion, but, if he will withdraw the Amendment, I will take an opportunity between now and next Finance Bill, not this, to see what will be the effect of his proposal, and, if 1204 I can meet it, I undertake on behalf of my right hon. Friend to do so. I think now, however, I should have to ask the House to reject his proposal. Perhaps he would be as unwilling to get the opinion of the House on that matter as I should be unwilling to be forced to ask the House to reject the Amendment.
§ Mr. AUSTEN CHAMBERLAINI quite admit this matter has been rather sprung on the right hon. Gentleman, and I recognise he is under special difficulties. I do not like to put it off and make it subject to all the vicissitudes of another Budget, but, if the House will allow me, I will withdraw the Amendment at this stage.
§ Amendment, by leave, withdrawn.
§ Mr. BRIDGEMANThe Government have had plenty of time to consider this matter, because I asked a question about it in the House. The answer I met with was that if there was a general opinion in favour of it on all sides of the House, and it was regarded as uncontentious, it would be accepted. I am sorry they did not think of it until the last moment when it was too late, according to them, to introduce it in a Bill of this year. It could have been done perfectly well, but I suppose it is better to have half a loaf than no bread, and therefore I will accept the promise of the right hon. Gentleman, and hope he will carry it through.
§ Dr. HILLIERI would venture to ask the right hon. Gentleman, as he is going to take this matter into consideration between now and the next Budget, to consider on what ground he can possibly justify exacting from the same income for the Treasury a greater revenue from the widow than he was exacting from the husband while he was alive. That is the effect of the Clause as it stands.