NEW CLAUSE.—(Provisions with Respect to Income Tax of Married Persons.)

HC Deb 15 July 1914 vol 64 cc2013-61

(1) If an application to the Commissioners of Inland Revenue is made for the purpose in such manner and form as may be prescribed by those Commissioners, either by a husband or wife, within six months before the commencement of any Income Tax year—

1. (a) Income Tax (including Super-tax) for that year shall be assessed, charged, and recovered on the income of the husband and on the income of the wife as if they were not married, and all the provisions of the Income Tax Acts with respect to the assessment, charge and recovery of Income Tax (including Super-tax), and the penalties for failure to make a return, shall apply as if they were not married; and
2. (b) All the provisions of the Income Tax Acts which relate to claims for exemption, relief, or abatement, and the proof to be given with respect to those claims, shall also apply as if they were not married; and
3. (c) The income of the husband and wife shall be treated as one in estimating the amount to be repaid or allowed in respect of any exemption, relief, or abatement which depends wholly or partially on total income, and the total amount of any exemption, relief, or abatement given in respect of the incomes of the husband and wife shall not exceed that which would have been given if an application had not been made under this Section; and
4. (d) The benefit of any such exemption, relief, or abatement may be given either by way of reduction of assessment, or by repayment of any excess of tax which has been paid, or by both of those means, as the case requires, and shall, in the case of relief given in respect of earned income, be given in proportion to the income earned respectively by the husband and the wife, in the case of relief given in respect of insurance premiums, be given to the husband or wife, as the case may be, by whom the premium is paid, and in any other case be given in proportion to the respective incomes of the husband and wife; and
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5. (e) For the purpose of any exemption, relief, or abatement, a return may be made by the husband or the wife of the total income of the husband and wife, but if the Commissioners of Inland Revenue are not satisfied with such return they may obtain a return from the wife or husband, as the case may be; and
6. (f) The income of the husband and wife shall be treated as one in estimating total income for the purpose of Super-tax, and the amount of Super-tax payable in respect of the total income shall be divided between the husband and wife in proportion to their respective incomes, and the total amount payable shall not be less than it would have been if an application had not been made under this Section.

(2) The Commissioners of Inland Revenue may require returns for the purposes of this Section to be made at any time, and Section fifty-five of the Income Tax Act, 1842, shall, with the necessary modifications, apply in the case of the refusal or neglect to make or wilful delay in making any such return.

(3) Where Income Tax (including Super-tax) is charged on the profits or income of a married woman, whether in the name of her husband or separately in pursuance of this Section, the power to distrain in the case of non-payment of any Income Tax payable either by the husband or the wife shall extend both to the goods and chattels of the wife and to the goods and chattels of the husband.

(4) Section eleven of the Revenue Act, 1911 (which relates to the assessment and recovery of part of the Super-tax from the wife in certain cases) shall cease to have effect; and Section five of the Finance Act, 1897 (which relates to the exemption of the income of a married woman in certain cases), shall not have effect in a case where an application has been made under this Section.

Clause brought up, and read the first time.

Motion made, and Question proposed. "That the Clause be read a second time."

Mr. CASSEL

It would hardly be fair or courteous on my part if I did not say a word of acknowledgment of the fact that the Chancellor of the Exchequer has given us the opportunity of discussing this matter. It is quite true that the right hon. Gentleman gave a promise that he would do so last Session, but I recognise that, notwithstanding the difficulties of time in which the Government have been placed, he has carried out that pledge in the fullest and fairest way. I am emboldened by that to think that the right hon. Gentleman himself considers that this is a very important subject, and one well worthy of the consideration of Parliament. The anomalous position of the law at the present moment arises from the fact that the Income Tax Act of 1842 was passed long before the Married Women's Property Act. It was passed in the time while married women were still incapable of owning property, and that property was, in fact and in law considered the property of the husband. The husband had the management and control of it, and in those days it was not unreasonable to treat the two incomes as the joint income of one person. But since then the position has completely changed. Married women carry on businesses and earn considerable incomes, and they are recognised by law as having independent control of their property, and as being able to do with it what they please, dispose of it by will, and spend it as they please, without any control on the part of their husband. I do not think the Income Tax law has ever been brought into conformity with these changes in the law relating to the powers of married women in connection with the ownership of property. The grievances which arise from this are really of a threefold character. The wife is treated as a mere nonentity by the law, as far as Income Tax is concerned. It is true that she pays, but for the purpose of assessment, collection, and fixing the amount of abatement or exemption or the rate of tax, it is treated as if the wife did not exist and it was all the husband's property, notwithstanding the fact that it is not the case under the Married Women's Property Act.

That system is unjust to the husband and to the wife and, most important of all, it places a special penal tax upon marriage. It is unjust to the husband because the husband can be actually put in prison because his wife does not disclose to him what her income is. He is supposed to return her income, but has no power of compelling her to tell him what it is, and he is bound to pay the tax upon her income but has no right of recovering the amount of the tax from her. The absurdities flowing from this were prominently brought to the attention of the public by the Wilks case, when Mr. Wilks was clapped in Brixton gaol because his wife would not tell him what her income was, and because the Commissioners then proceeded to assess the wife's income without knowing it, and he refused to pay the Income Tax upon his wife's income so assessed. That is on the face of it an absurdity which cannot be allowed to continue. But it is also unjust to the wife, because, though she may be earning an income in a business or profession, she is given no opportunity whatever in the making of the return. The return is made through the husband, and she has no voice in the matter at all. And so far as claims to exemption or abatement are concerned, she cannot do it for herself, but it is left to the husband to claim it or not as he pleases, and if he does claim it she has no right of recovering from him the amount which he recovered by way of abatement or exemption. I think this Clause does something to meet the first two injustices which I have dealt with, but it does nothing to meet the third. The third is what I call a special penalty tax on marriage under our existing law. Under our law, we still treat the income of husband and wife added together, although it is the income of two persons with the requirements of two persons, as if it were the income of one person. The result of that is that husband and wife are called upon to pay more Income Tax in proportion to their ability to bear taxation than either bachelors or spinsters, or persons who live together, or whose relationship is of any other description than that of husband and wife legally married.

I propose to illustrate that by four cases which I shall give to the Committee. The first case I will take is one where neither the husband nor wife before their marriage paid any Income Tax at all. I will take the case of a clerk earning £160 a year. Before marriage he pays no Income Tax at all. He marries a woman who, under her father's will, has got £100 a year. Before marriage neither of them pay any Income Tax at all. Their income remains precisely the same after marriage, and their Income Tax is £5. Assume that instead of being a married couple, it was a case of father and son, or father and daughter, or brother and sister, living together, and having a joint household. In the case of the brother and sister, or father and daughter, although they live together, no Income Tax will be payable at all. It is only in the case of husband and wife that the £5 tax is payable. I will assume that they had three children. The right hon. Gentleman has done something to meet the case where there are children, and I think we are indebted to him for what he has done in that direction. If they have three children, there will be an allowance from the £5 in respect of each child. But even so, the husband and wife living together with their three children, would pay Income Tax, while the father and son, or the father and daughter, would pay nothing. I say that is not only an anomaly, but a gross injustice.

Let me give my second case where there is a slightly higher Income Tax in each case. Take a case where a man is earning £180 a year, and his wife has an income of £150 from savings or investments. As a rule the wife's income is treated as unearned income and is taxed at the unearned rate. Before marriage the woman has been paying no Income Tax, and the husband has been paying a tax of 15s., that is to say, 9d. per £1 on £20. What would be the tax after marriage? It would be £9 10s., or twelve times as much. If, instead of being legally married, they were cohabiting, the tax would be 15s., because they were not legally married. But after marriage, if there was no judicial separation, and no divorce, the tax would be more than twelve times greater. That is really a very important matter. Even if they had five children, after getting credit for the allowance for children they would be paying nearly £3 as Income Tax, while two people illegally cohabiting, or a father and child, would not pay any Income Tax I do submit that these are cases well worthy of the consideration of the Chancellor of the Exchequer, with a view of seeing if anything can be done to meet so practical an anomaly.

I will not trouble the Committee with the third case, because it is much on the same lines. I will take the fourth case, which is an actual case I have known only quite recently. It is a case of a rather larger income—that of a retired Indian Civil servant. The ordinary pension is £1,000 a year. That Civil servant has no other means but his pension. Pension pays at the earned rate of 9d. The fact that his wife is left £50 tinder her father's will has this result: Not only does she pay 1s. 3d. on her income, but the husband pays on his whole £1,000, and instead of paying at the rate of 9d., he pays at the rate of 10½d., because of the fact that his wife has been left £50. She may use her income for her own purpose. The result of that is that the whole of the tax falls on the husband's income, and he pays not 9d., but 10½d. in the £. If the relationishp were anything else than that of husband and wife, and if they were living in a joint menage, that consequence would not ensue. In this case if the wife sold out some of her securities, or spent some of the capital so as to reduce her income to £4 a year, a strange result follows. Because she has £4 a year the husband pays £6 5s. more Income Tax, so that the husband's Income Tax is actually increased by more than the total of the wife's income. I am sure that kind of case is not capable of defence on its merits in any sense whatever. I have been comparing, so far, the position of persons before they were married with the position arisng after marriage, and also comparing the case of a joint household where the persons are married with the case of a joint household where the persons are not married.

Take another case—that of husband and wife living together as compared with bachelors and spinsters. Here the present law is grossly unjust to the married persons, because the bachelor who has £600 a year is surely in a better position to pay than married people who have the the same amount of income and who have three children. Now you treat husband and wife as if they were one person, when for all practical purposes and requirements they are two persons. They eat twice as much. [An HON. MEMBER: "What about the children?"] I am leaving out the children. This is not a case in which there will be the special exemption for children, because the income is over £500. They want twice as much in clothes. [An HON. MEMBER: "Three times as much!"] The wife requires as much clothing as the man. They require more house accommodation, and for that reason they contribute more to the local authority in the shape of rates, and more to the State in the shape of duties on food, because they consume more tea and sugar. I say it is indefensible that for the purposes of Income Tax, and from the point of view of ability to pay, a bachelor or spinster should pay on the same level as two persons who are married, even if they have no children. When in addition to that you take the fact that they may have children, and consider all the expense of their education and upbringing, the injustice is very much accentuated. I submit that if you were to select any particular relationship for special taxation, marriage is the very last which you should select. It is the interest of the State that marriage should be encouraged, and with a declining birth-rate it becomes a more and more important factor. I do not believe very much in taxation as a great encouragement either to marriage or an increase of the birthrate. But it is impolitic and unjust for the State to select marriage as the one relationship for special and penal taxation when it is the married people to whom the State has to look to bring up its future-citizens. In the Clause of the right hon. Gentleman I detect the subtle hand of the Treasury. I do not wish to be offensive in my criticism of it, because I am grateful to the right hon. Gentleman for having given me the opportunity of discussing it, but I am obliged to put forward my criticism. The only grievance which the Clause meets in any sense is in connection with the collection and recovery.

Mr. LLOYD GEORGE

Rebates.

Mr. CASSEL

The only way in which it improves the position so far as rebates are concerned is in the collection and recovery of rebates. As a result of this Clause not a single married couple will be relieved from a single farthing of what I call the marriage tax. It is quite true that under the conditions in which the Clause applies they may be entitled to be assessed separately for the purpose of the return, and the actual collection and enforcement of the duty. But the amount of the duty on the two will be precisely the same as it was before, and even so far as recovery and collection are concerned, every possible obstacle has been placed in the way of their being able to get the benefit. Under the Clause it is necessary that notice should be given of a desire to be separately assessed six months before the yearly assessment. Why is that notice required? It is as long that the notice is given to terminate a yearly tenancy, and it has this extraordinary resemblance that you cannot get the relief in a great many cases for more than a year after you make the application. Take the case of the people who are married after the 5th of October. Those people cannot get the relief in the next Income Tax year, but can only get it in the Income Tax year after that. I do not know whether the right hon. Gentle- man wishes particularly to encourage marriages early in the year. Why people married early in the year should be in a better position than those married after the 5th of October I cannot see. Why should so long a notice as six months be required to bring this Clause into operation? The right hon. Gentleman, speaking to a deputation of ladies that waited upon him, described the present position as a humiliation to women. Why should a woman who is married after the 5th of October be humiliated for one year and a half?

There is no reason why the Treasury when an application is made should not comply with it at once. There is not the slightest difficulty about that, unless it is that the Treasury want this Clause to apply to as few cases as possible. I can see the hand of the Treasury official in this Clause. He looks at everything from the point of view of revenue, and naturally so. I ask the right hon. Gentleman's assistance in removing that obstacle from the working of the Clause. The right hon. Gentleman has not carried to its logical conclusion the principle which is embodied in the Clause. The logical conclusion is to treat married people as they are treated under the Married Women's Property Act, and give them their exemptions and abatements on that basis. The present Clause leads to extraordinary difficulties in administration in making apportionments between husband and wife. It also involves this result that you must in every case where this Clause applies tell the wife what the husband's income is, and tell the husband what the wife's income is. Are we all prepared to accept the position that that is desirable? There are many cases where the husband may not wish to disclose his total income, and, although he is entitled to exemption, sooner than reveal the fact that his income is smaller, he will pay more tax. If a wife asks to be separately assessed this Clause cannot be carried out unless you also assess the husband. If she is told "You have got to pay so much," she must be entitled to know at what the husband is assessed. So you are driven to the logical conclusion of carrying out to its full extent the Married Women's Property Act. This raises a number of difficulties. As an example, the effect of this Clause would be that the married man, although he is not a Super-tax payer, would be compelled to make a return of his full income. It is very difficult to carry out the Clause without this. But was it intended that he should make a return of his full income and be under a penalty if he does not make that return?

The unmarried man if he is not a Super-tax payer is not bound to make a return of his total. He is only bound to make a return of that income which is not taxed at the source. But under this Clause, my interpretation at first sight at all events, seems to be that you compel a married man who is not a Super-tax payer, or within reach of being a Super-tax payer, to make a return of his total income, although you could not compel an unmarried man. I do not know whether the right hon. Gentleman intended that, but it shows the difficulties which arise from not giving full logical effect to the Married Women's Property Act. There are two other points connected with this Clause which probably the right hon. Gentleman will be prepared to meet. I do not think that it is intended that the actual effect of the Clause should be to take away any benefit which is now given under Section 5 of the Act of 1907. Under that Section in cases where the joint income is under £500 and it is earned income on both sides, earned in entirely separate businesses, there is power to claim exemption and abatement as if there were two separate incomes. Under this Clause the right hon. Gentleman has taken away that right. I do not think that he intended to do so, and I am sure that if that is the effect of the Clause he would be prepared to meet it by an Amendment on this point. There is one other thing which I am sure the right hon. Gentleman did not intend, and which provides that in future the Treasury can turn the screw much more tightly than before on married people. That is Sub-section (3), which ought to be amended. I think I see the subtle Treasury hand in this elaborate Sub-section which has been worked in, from their point of view, quite rightly, for they want as much revenue as they can get. But ought this change to be made, that you should have the right to distrain on the husband's goods or the wife's goods for Income Tax, even where the tax is levied on the wife's income?

The DEPUTY-CHAIRMAN

The hon. and learned Gentleman is now, and has been for some time, dealing with the Amendments. I may take it that when he moves the Amendments he will deal with them shortly.

Mr. CASSEL

I said at the commencement that I should make a statement as to the Amendments, in order that the right hon. Gentleman might have the full facts before him.

Mr. LLOYD GEORGE

If I may say so, Sir, the hon. Gentleman at the outset stated that he was going to put the whole of his case on those Amendments, and that he did not intend to repeat his arguments. If I may respectfully say so, I think that is an advantage, not only for the Committee, but for the Government as well.

The DEPUTY-CHAIRMAN

I quite see that. I was desirous of saving the time of the Committee later on, not only in reference to the speech of the hon. and learned Member, but the speeches of other Members of the Committee.

Mr. CASSEL

I will undertake not to repeat myself at a later stage. I think it is rather an advantage that the right hon. Gentleman should have a little more time to consider the matter before the particular Amendments arise. The other point was that this new Clause for the first time gives the right to distrain on the wife's goods for the tax for which the husband is liable, and vice versâ, to distrain the husband's goods in respect of the tax for for which the wife is liable. If that were carried out it would be a great hardship, and I think the Sub-section ought to be omitted. In conclusion, I will only state that I have considered the difficulties and the anomalies. I quite recognise that there are difficulties in solving the problems which I raise. The right hon. Gentleman said that he would lose so much revenue if logical effect throughout were given to the Married Women's Property Act. I think he said he would lose as much as £2,000,000 of revenue, apart from the possibility of evasions of the tax. I think that is based on a very uncertain estimate, though I will not pursue that point further. I think the right hon. Gentleman would get more revenue from it in other directions. I know the amount is serious, and what the Treasury argument always is. The right hon. Gentleman says that £2,000,000 is too great a loss of revenue. I submit two alternatives. In the first instance, I suggest that the proposal should apply only to incomes below £700, which are the incomes in respect of which abatement will be allowed under the Income Tax Act, and in respect of which this Marriage Tax is most severely felt. In connection with those incomes evasions would be less likely to occur, and the loss of revenue, according to the right hon. Gentleman's estimate, would only be £500,000.

I suppose that could be met by saving expenditure, but, even if the right hon. Gentleman had to raise the money, it would be less than a farthing in the £, and if he retained a farthing in the £ off the penny which he has deducted it would fall only upon certain incomes. I am not suggesting that the farthing should be taken as the actual figure, because it cannot be done this year, and must be done in future years, but it would fall only on incomes of over £2,500, or on unearned incomes of over £500. I think the more useful suggestion would be to take one which has been recently introduced in regard to the American Income Tax. If you treat married persons who are really two persons as one for the purpose of the Income Tax, you ought to give them some special consideration, in view of the fact that they are married. The suggestion I make is that, in the case of married persons, 20 per cent., 10 per cent., or, at all events, some percentage should be deducted from the tax which they pay. I have embodied that in an Amendment which is on the Paper. The various alternatives which I submit are contained in the Amendments standing in my name. There is a good deal to be said from the point of view of simplicity for the suggestion that there should be a special exemption for married persons in the sense of allowing them a certain percentage off the tax, which, otherwise, they would have to pay. That is following out the recently introduced system in the American Income Tax. The right hon. Gentleman may say that this is a complicated problem and that he would rather refer to the Royal Commission about to be appointed. If he says that, I should like to anticipate that argument, because I ventured to use it myself the other day in connection with Clause 5 as to foreign investments, and the right hon. Gentleman then said that a little experience would be helpful to the Royal Commission.

Mr. LLOYD GEORGE

dissented.

Mr. CASSEL

I venture to think that the problem that is raised is one which is deserving of the attention of the House, and which sooner or later will have to be met. Whether it is met this year or next year, we cannot allow it to continue, that this special and penal taxation should be imposed upon the one relationship in our community on which, least of all, we should impose special burdens.

Mr. LLOYD GEORGE

The hon. and learned Gentleman has raised one of the most important questions that could engage the attention of the Committee of Ways and Means. If I may say so, I think he has stated with great lucidity and ability the difficulties that present themselves in attempting to arrive at a fair solution of this extremely complicated problem. I regret that under the conditions of the time-table he has had to make his very important statement in a House which is necessarily rather a thin one. There are at least four main issues or problems which the Committee will have to consider in this Clause, and the Amendments of which notice has been given, and which appear upon the Paper. The first is the method of assessing married people; the second, the question of rebate; the third, the question of a special method of procedure as to distraint; and the fourth, which is a much larger problem, of not merely separate assessment, but the treatment of the income of the husband and the income of the wife as if they were two separate persons. As regards the first three I am in entire accord with the hon. and learned Gentleman, and I think the case he has made out is unanswerable. The Clause we think meets those points, and, in so far as it does not, we are certainly prepared to consider favourably every Amendment that has been moved. With regard to the last, I am not going to say merely that the Government are not in a position to meet it because of the special financial difficulties. I am prepared to go further and to say that the case which was made out is not a good case on the merits. I am not going to say that there is not a special case for special consideration for the joint income of married people. That is a different matter, but I am entirely opposed to the suggestion that you ought to treat the incomes as if they were separate, and I shall give my reasons.

The hon. and learned Gentleman has referred, speaking of the first three points, to a deputation which appeared before me. There was the case mentioned of a very famous actress whose husband was a medical man. He followed his profession and she ran her theatre. The Income Tax demand in respect of the theatre went to the husband, Dr. Simpson, who had absolutely nothing to do with the theatre, and there was inserted in brackets "for wife." She was treated as if she were a person of no account at all in running a business which was entirely her own. She stated with very great force that if she was to be treated as a nonentity for the purpose of assessment, she ought to be treated so for the purpose of taxation. That is a case which I agree is quite unanswerable. Therefore we propose whenever there is a claim put forward for that purpose, and whenever a married woman insists that she should be assessed separately, in those cases we should allow her to be so assessed. Coming to the question of rebates there was a case where the whole of the income was the wife's, the husband having no income at all, and the husband claimed the rebate and got it. She had an income, I think, of £300, on which 1s. 2d. was charged, and the whole of the rebate amounting to twelve or thirteen pounds was paid to him, and he never saw it. That of course is perfectly indefensible, and they claimed that in a case of that kind the portion of the rebate which is attributable to the income of the wife ought to be paid to the wife if she makes the claim. That is a case which can only be answered by a Clause of this kind. There is then the case of distraint which arose out of the Wilks case. In that case the man was assessed upon their joint income, the wife's income being the larger of the two. She refused to pay, and she supported him in that respect. When the distraint took place she claimed the goods, and under the present law you cannot distrain in that case on her goods. Thus the husband would have to be sent to gaol to recover a debt due by the wife. We put in a protection for the married woman, and I think the husband ought also to be protected.

We must not altogether forget the male partner in the matrimonial alliance. The woman stated, very fairly, that since she incurred the penalty by refusing to pay, she expected to pay the penalty; and it is not only a grievance to the man, but the woman feels it is a grievance that the man should have to pay the penalty for what his wife has done. That is the justification for the Clause. We have attempted to redress the grievances before me as to separate assessment, separate claims for rebate and separate distraint by this Clause, and I think we have done so. In so far as we have failed we are quite willing to accept any Amendments which have been put down. I come to the fourth claim put forward by the hon. and learned Gentleman, and that is that you should make a separate assessment and treat married people as if they were seperate persons. There I am entirely against him. He has contrasted the position of married persons with their joint income with the position of a brother and sister living together whose incomes are taxed separately, and with the case of persons cohabiting together without marriage. He says this is a penalty on marriage. Let me reassure him on that point. He has given the case of the Indian Civil servant with an income of a £1,000 and whose wife had an income of £50, which caused him to be taxed on the higher scale, and that if they had not been married that would not have happened. Let me tell him that is a case where the Death Duties come to the rescue. Take the case of persons cohabiting together, and that the man has the money left to him. In that case he would pay Death Duties as if they were strangers.

Mr. CASSEL

Estate Duty would be payable although they are treated as one for the purpose of Income Tax, being married people, on succeeding to each other's property, and they would pay the same Succession and Legacy Duty as lineal descendants.

Mr. LLOYD GEORGE

That is not the point in this case. In the case of persons cohabiting together the man would have to pay 10 per cent., whereas if they had gone through the form of marriage he would not have had to do so. The rates would be totally different. Therefore, the Death Duties come in there to redress the balance. I do not think the hon. and learned Gentleman will seriously put it forward that this has the slightest effect on the question whether persons go through the form of marriage or not. This practice has existed ever since the Income Tax Law of 1842, and I do not think the hon. and learned Gentleman will suggest that it has had the slightest effect on the question of whether people will marry or cohabit without going through the form of marriage. The hon. and learned Gentleman has contrasted the position of a brother and sister with a joint income with that of a husband and wife. Has he taken the trouble to contrast the case of a husband and wife with a joint income with a case where the whole of the income is earned by the husband. Let me give a case of that kind. Take, first, a case where there is an income of £400, all belonging to the husband—£200 earned and £200 unearned. In that case the tax paid is £10 16s. 8d. There are of course allowances for children. But supposing it is a joint income, of which £200 earned belongs to the husband, and £200 unearned to the wife. In that case, if this Amendment were carried, they would pay only £3 10s. Is that fair? Is it fair that a man whose income is his own should pay £10 16s. 8d., while in the other case, simply because the income is divided between husband and wife, only £3 10s. should be paid as the contribution of that household to the State? Where is the justice of that?

Further, who would make up the deficiency? I suggest that there would be a deficiency of at least £2,000,000, without making any allowance for the kind of arrangement that would undoubtedly spring up. The deficiency would mount up by millions. Husband and wife in a case of that kind would undoubtedly make arrangements to reduce their taxation. Stocks, shares, and other property would be put in the name of the wife or of the husband, as the case might be, in order to save Income Tax. I would not suggest that it would be fraudulent. It would be worth their while to make a bonâ-fide arrangement of that sort, in order to save in the higher incomes hundreds of pounds a year. I will give two or three more cases. Take an income of £5,600 a year. If it all belonged to the husband, and was unearned, that household would contribute £27 10s. to the Income Tax. If it were divided between husband and wife, the household would contribute only £12, although the income and the expenses were the same as in the other case. In fact, in the first case there might be five children, and in the other none at all, and yet the first household, with more expenses and the same income, would contribute £27 10s., while the second household, with less expenses, would contribute only £12. If this Amendment were carried, the first household would have to bear a considerably heavier burden, in order to make up the deficiency caused by giving relief to the second household.

9.0 P.M.

I come now to the Super-tax region. Take an income of £6,200, the husband having £4,700 and the wife £1,500. The tax at present would be £133. If the incomes were treated separately the tax would be £65. Then take a joint income of £8,900, £6,700 belonging to the husband and £2,200 to the wife. The Super-tax at present would be £299, which, if the incomes were treated separately, would immediately drop to £160. Does anyone imagine that with such substantial inducements arrangements of that kind would not be promoted? The household which treated the revenue quite honestly would suffer. The household where the whole income was attributable to the earnings of the husband, and consequently precarious, would suffer in comparison with the household where the income depended on investments which were not in the slightest degree affected by the husband's health or employment. Is that fair? I submit that it is not. I repeat here an observation which I made earlier in the afternoon—that all these cases, when you come to relief which runs to millions a year, are treated as if there were some inexhaustible pool at the Treasury for the purpose of dispensing relief to various classes. You cannot do it without imposing burdens on other classes.

Lord ROBERT CECIL

Hear, hear!

Mr. LLOYD GEORGE

I am glad the Noble Lord cheers that. He was not here when I made the observation first of all, and it is worth repeating to get his approval. It means that the households where the income depends on the husband's health and fitness, sometimes on his life, would have to bear heavier burdens in order to relieve the privileged households who were able to divide their investments with a view to getting up to £5,000,000 dispensed among them. There is absolutely no reason why they should not contribute this money to the State if the others have to do so. When the hon. and learned Gentleman says that "you can save this," and "you can save the other thing," I reply that if you can save money it ought to be saved for the benefit of the whole of the taxpayers of the country. If there is a saving, I can see no reason why you should give the benefit of that saving to people who have got joint incomes of this kind, rather than to people whose income depends entirely upon the exertions of the husband. When the hon. and learned Gentleman says that you ought to favour certain people, and there is a case for the special exemption of married people, I agree with him. But that is a very different proposition. His case, and the case of the Amendment, is that you ought to assess the incomes separately and not jointly, even if there were a special exemption for married people.

He says you ought to have an exemption of 10, or, if you can afford it, of 20 per cent., as they have in the United States of America. I agree on one point, I do not think the bachelor contributes fairly. I have made several very small adjustments of the Income Tax which, at any rate, establishes that principle. There is a distinction established now between married persons with children and married persons without children and the bachelor. It is not a very substantial one, I agree. It costs £100,000 a year. I agree it ought to be much more considerable. If I might suggest to the hon. and learned Gentleman that is the direction in which relief ought to be given, not this: that is to give exemption to people who have in justice the right to claim it. He says I am penalising marriage. He refuses to recognise the essential principle of marriage—that is, identity of interest. You cannot have it both ways. He desires that married people's incomes should be treated separately. You cannot have it. That goes to the very root idea of the marriage law. When he talks about the married husband who does not want his wife to know what his income is, I think that is a very extraordinary conception of the relations between the two.

Mr. LEIF JONES

Hear, hear!

Mr. LLOYD GEORGE

Here is a bachelor who agrees with me!

Mr. LEIF JONES

I am simply stating the idea to which I have been brought up.

Mr. LLOYD GEORGE

I do not think the view of the hon. and learned Gentleman is one to be encouraged. As a matter of fact, I believe that even if the grievance were attempted to be redressed the vast majority of people would not claim this special treatment. I think there would be very few persons indeed who would claim this special treatment, so complete is the identity of interest amongst married people. There are people who say that the law should be altered. That is a very different thing to saying to me now that I am to find anything between, perhaps, £2,000,000 and £5,000,000 of money in order to give a special privilege to certain households. The hon. and learned Gentleman said, "Why did you not keep the penny on the Income Tax? We could have done something with that." That penny has been useful for very many purposes this afternoon; it is to go in order to pay rates; it is to go in order to relieve the Death Duties; it has been suggested in order to relieve these specially privileged people. It is like the widow's cruse, the more you take out of it the bigger it becomes. You cannot really use it for all these purposes. The hon. and learned Gentleman must remember that that penny is for his constituents. He pledged himself to get it. He cannot go lavishly squandering it in the way he suggests. We must jealously guard that penny so that no one shall touch it. The hon. and gallant Gentleman the Member for Chelmsford tried to get it from me this afternoon, and I defended the interests of the hon. and learned Gentleman so that it should not be taken away. Now I have to protect it against himself. He has been dipping into that till, and he must not do it. He has promised it to his constituents, and it is my business to see that his pledge is redeemed.

Mr. MITCHELL-THOMSON

Quis custodiet ipsos custodes?

Mr. LLOYD GEORGE

It has been recognised by some on the other side that the only way to do what is asked is to raise an extra farthing, or a penny, or whatever the sum may be. I do not think we should be justified in increasing taxation on particular households in order to spare households that have got the good fortune to have part of their income invested in something that returns interest, and for that reason, though I am prepared to consider the grievances that were presented to me by the deputation the other day, I cannot see my way to accept the Amendment.

Mr. RAWLINSON

I have had the privilege of moving an Amendment of this kind every year except last, since I have been a Member of Parliament. I believe that not until this afternoon has any Chancellor of the Exchequer ever stood up and defended this idea of taxing married people's incomes as if they were a joint income. Even the right hon. Gentleman himself has never defended it before to-day. I have much admiration for the advocacy of the right hon. Gentleman, but I think even he was driven pretty hard when he really had to tell the House that there was something inherently just in not treating the joint income of married people as separate incomes—as in fact they are. Of course the right hon. Gentleman towards the finish got on to sure ground. I am sure those of us who know can always tell by the tone of his speech when he is and when he is not on sure ground. Like other Chancellors he got on to sure ground when he said: "We cannot afford it. There is a lot of money required, and we cannot find this £2,000,000 therefore we cannot do it." When I first began to move this. Amendment, the sum that would have been necessary was a comparatively small one. Is it any real answer to the case to say what the Chancellor has said? As time goes on the injustice becomes very much greater and, therefore, the only real argument in the matter is that we cannot levy this in any shape or form because if we were to do it the loss would be too-gigantic.

Let us look for a moment at the justice of the case. There are two different ways in which I have moved this Amendment on various occasions. There is the one which I believe really would properly meet the justice of the case more than any other—though I admit there is much that can be said against it—and that is to allow married people to aggregate their income. I am very strongly in favour of the taxation of married people, and of the bachelor. I thoroughly agree with it, though I am a bachelor myself. I am in favour of the taxation of luxuries, and I am perfectly prepared to pay my share of a luxury which I have enjoyed so happily and for so long. I think that to divide up the sum would be a perfectly fair thing to do. I proposed to this House before that where the joint income is £600 it should be divided by two and looked upon as two separate incomes of £300 each. My hon. Friend restricts his claim to £700. Surely no great injustice would be done by that because, undoubtedly, married people are far less able to pay taxes than unmarried people. If the Chancellor of the Exchequer is not inclined to go so far as that—and I admit it is much further than it is necessary to go this afternoon—is there any sort of objection to his seeing that people who have two separate incomes when they are married should not have them aggregated as a joint income? The right hon. Gentleman says we must treat people in the married state as one. That is one of those pieces of eloquence which adorns his speeches. It was merely a burst of eloquence, because he and his party are treating them differently every day in the matter of Estate Duties, because when people die they are treated as separate for the purpose of taxation. People who are single are entitled to exemption, but when they are married they are not, which is essentially unjust. The Chancellor of the Exchequer cannot really seriously contend, despite what he said, that it is otherwise than a gross injustice.

Many of us remember the long discussions, continued into the early hours of the morning, that took place upon the Deceased Wife's Sister Bill. The argument was frequently put forward that where a man married his deceased wife's sister before that Bill they were exempt from Income Tax, but at the moment the marriage was recognised by law they had to pay Income Tax. I am bound to admit that that was a five-o'clock-in-the-morning argument, but, at the same time, it was a fair illustration of the present method of dealing with Income Tax. That being so, I submit that the justice of the case here made out ought to be met. This Amendment is a step in the right direction. My hon. Friend only suggests that it should apply to incomes under £700. I admit that is illogical, but it would be a step forward, and it would be a step in the right direction. The concession the Chancellor of the Exchequer has made is hardly worth talking about. His new Clause will not reduce the amount people have to pay by one penny. It may possibly avoid anomaly in the recovery of taxes, but it is likely to raise more anomalies, more especially Sub-section (3), which allows distress upon the husband's property for the Income Tax of the wife, and on the wife's property for the tax of the husband, because it must be remembered, as far as I understand it, that applies not only in the case of persons living together, but it applies also to people living separate. And on these occasions we, who see the unfortunate side of the law as well as the fortunate side, know there is considerable friction between such people. The Chancellor of the Exchequer laughs at the idea that the husband and the wife do not know each other's incomes.

Some years ago, when I brought forward this question before the House, I had considerable correspondence on the subject, and I remember stating to the House that I was surprised to find the number of cases of husband and wife who did not know each other's incomes, and cases where they would make any sacrifice sooner than ask. It may sound strange, as it sounded strange to me then, but many cases came under my notice, and I could give the names, if necessary, of people living in one's own station of life where the husband never liked to ask the amount of his wife's income, and equally where the wife did not know the exact amount of the husband's income. I hope it is not common, but it does exist, and I have not the slightest doubt of it. And if it is true of people living together under the same roof surely it applies in the case where the husband and wife are living separately, and if they are living separately this Clause will lead to further anomaly and further trouble, because all a spiteful husband will have to do is to decline to pay his Income Tax and suggest that his wife's goods should be distrained for the amount. There is only one way of dealing with this question of elementary justice, and that is not the way put forward by the Chancellor of the Exchequer for treating the incomes of the husband and wife. When they are married and have separate incomes they are entitled to separate assessment, and they should be treated as separate individuals. If that is done no injustice will follow. If it is not done anomalies and difficulties will occur. I differ from my hon. Friend and from the Chancellor of the Exchequer in what they say as to this being a very complicated question. I venture to suggest that it is not, and if you want to do what is right you should, at all events, make a beginning now.

Mr. LEES SMITH

This is a proposal which I have heard made a good many times by the hon. and learned Member. I am bound to say that during the first, two or three times I heard him he convinced me, but I have since learned that I was misled. His proposal breaks down upon this ground, that it goes in the teeth of the main principle upon which Income Tax is based, the principle of payment according to ability. The proposal supposes that you ought to charge at a. lesser rate of taxation a family and household, where part of the income is dependent upon the wife's investment, than a similar household dependent upon the earnings of the husband. That appears to me to be a proposal which gives the relief where it is least needed. After all, if you take these households where the wife has an income of her own, in the majority of cases that means that the wife has private means for other investments, but just to the extent that she has these investments, is it stronger and more secure than a family with a similar income entirely dependent upon the earning capacity of the husband. The hon. Member who has just spoken appeared to me to avoid dealing with what is, after all, the main practical difficulty which the Chancellor of the Exchequer presented to the House. We have adopted the principle that we charge the tax higher on unearned income than on earned income, but this proposal must inevitably mean that a large section of the unearned income of the country would not only evade taxation, on the higher scale, but evade it altogether. Take people with small investments. If they invest their money in the name of their wives, provided the wife's income did not amount to more than £160, they would evade taxation altogether. The sum of £160 represents a capital of between £3,000 and £4,000, and therefore this proposal means that they would be able to have capital up to £2,000 or £3,000 and pay no tax at all. That is a difficulty which ought not to be lost sight of. The hon. and learned Member for St. Pancras (Mr. Cassel) mentioned the case of the United States. I believe that the system in the United States is that they have abatements which we have here, but the abatements for married households is on a higher scale than the abatement for single persons. That is, I think, a wise provision, but it does not appear to me to have anything to do with the proposal before the Committee.

Mr. CASSEL

I have another alternative proposal on the Paper.

Mr. LEES SMITH

I am dealing with the particular alternative that you should differentiate between households where the wife has an unearned income and households dependent upon the earnings of the husband. The system in the United States was not differentiated at all, and it allows this abatement to households of both kinds, and therefore it does not seem to me that the hon. and learned Member is justified in quoting it in favour of this proposal.

Mr. CASSEL

I quoted it in favour of my second alternative which is on the Amendment paper—to insert the words,

"Provided that from the duty thus ascertained to be payable by husband and wife, respectively, there shall be deducted by way of special allowance to married persons a sum equal to twenty-five per cent. of the duty."

Mr. LEES SMITH

I will pass from that point. The hon. and learned Gentleman stated that the present system penalises marriage. I am bound to say that that seems to be a rather fanciful argument. I do not think that throughout the expanse of the United Kingdom any hon. Members could quote a single case which has ever occurred in which a couple who were desirous of getting married refrained from doing so because of the few shillings payable as Income Tax. If such a case had occurred I should say that the Chancellor of the Exchequer was acting the part of a wise father in forbidding the marriage, because neither of them are likely to bring happiness to the other or to anybody else. It appears to me that the hon. and learned Member's proposal does penalise, and this is its injustice, that it penalises the households with children. The Amendment proposes that in those households where the wife earns an independent income there should be a lower rate of taxation than in the households where the wife stays at home. It must be true that in the majority of cases where the wife is able to earn an income outside the home she is only able to do so because she is not occupied with the cares of the family. I see no justice whatever in the claim that married households where the wife earns an income outside should be treated favourably as against the married household where the wife earns an income for the State by staying at home. There is one suggestion which the hon. and learned Member made to which I think the Chancellor of the Exchequer has not referred, and it is contained in his Amendment. He proposes that the whole of the provision for six months' notice should be abandoned, and that this system should be made universal throughout all married households.

The DEPUTY-CHAIRMAN

I foresaw that this would happen. There is now going on a general discussion ranging over the Amendments which have been subsequently put down, and if it goes on I really do not know where we shall find ourselves. With much respect, I suggest to the Committee that it would be better to read the Clause a second time, and then proceed to deal with the Amendments on the Paper.

Mr. POLLOCK

There are certain points which I wish to discuss in the Clause itself. I desire to call attention to one or two matters which I feel quite sure the Attorney-General will give me an answer upon, and I want to do this before we read the Clause a second time.

The DEPUTY-CHAIRMAN

I intimate now that I shall listen very carefully to the remarks of subsequent speakers, and I shall keep them very strictly to the Clause.

Lord ROBERT CECIL

Is it not a fact that every part of the Clause is now before us, and is open for criticism? I submit that it is impossible to carry out criticism without pointing to specific injustices in the Clause.

The DEPUTY-CHAIRMAN

I do not mean to rule in the way the Noble Lord appears to suggest, but I shall certainly rule out the discussion of any particular Amendment.

Mr. LEES SMITH

Then I will reserve my remarks until the Amendment is moved.

Mr. POLLOCK

Perhaps I may say, in reference to the speech made by the Chancellor of the Exchequer, that he has not really answered the broad question which was put by my hon. and learned Friend as to the purpose of the Clause, and as to the tax which it really puts upon married persons. The right, hon. Gentleman gave us some very interesting examples of what would be the effect if he did differentiate in favour of married persons, and he gave us the illustration that a certain number of married persons might feel disposed to put the property of either the one or the other in the name of the other, so as to avoid paying the Income Tax. But the right hon. Gentleman in his own speech answered that difficulty himself, because he pointed out that in may cases, and particularly in this case, the Death Duties would come to his assistance, and would prevent that wholesale alteration in the tenure of property, because there is also the risk of the one dying before the other and being liable to very severe Death Duties, which would not exist if the scheme or strategy had been resorted to. Then we have the old figure of £2,000,000, that old stalking horse of the Chancellor of the Exchequer. I know it so well. It is the same old £2,000,000 we always hear whenever we move a new Clause. I once asked him how he got this figure of £2,000,000. He told me that there was not sufficient material on which to found a precise estimate, and he was informed that it would be unwise to assume that the Amendment would entail a less loss. It is a sort of nightmare which is based on nothing, on no detail, and on no figures worth quoting. The Clause itself is a very remarkable one. I am going to assume that its purpose is wholly beneficient, and that the Chancellor of the Exchequer is going to try and relieve the husband and the wife from anomalies to which they are at present subject. In Sub-section (1) (a) it is provided that

"Income Tax (including Super-tax) for that year shall be assessed, charged, and recovered on the income of the husband and on the income of the wife as if they were not married, and all the provisions of the Income Tax Acts with respect to the assessment, charge, and recovery of Income Tax (including Super-tax), and penalties for failure to enter a return, shall apply as if they were not married."

The meaning of the Clause, as I understand, is that a return will have to be made both by the husband and by the wife. They will have to make a return not only in relation to Income Tax, but also in relation to Super-tax; otherwise, they will not fulfil this Sub-section (1) (a), because, if all the provisions relating to Super-tax and Income Tax are in force, and they have got to make a return, it is quite clear that in the return they make they will have to keep in mind the possibility of liability to Super-tax as well as Income Tax. Let us look at paragraph (f):—

"The income of the husband and wife shall be treated as one in estimating total income for the purpose of Super-tax."

I think I, therefore, make my proposition quite good by saying that if in this return required under paragraph (a), which deals not only with the Income Tax, but also with the Super-tax, and if under paragraph (f) the income of the husband and wife are to be treated as one in estimating the total income for the purpose of the Super-tax, it is quite plain that the return which will have to be made in relation to Super-tax under Sub-section (1) (a) will be a return including, in the case of the husband, the wife's income, and, in the case of the wife, the husband's income. I cannot imagine that is really intended, but that is how the matter stands.

"And the amount of Super-tax payable in respect of the total income shall be divided between the husband and wife in proportion to their respective incomes."

The effect, therefore, is that whereas at the present time the husband has to make a return and to include in his return for Super-tax his wife's income, we shall now have the anomalous position that both the husband and the wife, with their eyes on the Super-tax Clauses, will have to make a return, and the one will have to include the income of the other, because, in estimating whether they are liable to Super-tax they both have got to have regard to the income of the other. That is an anomaly and a new burden, which I do not for a moment think was intended, and which must be due to some error by the draftsman. It is almost impossible to read paragraphs (a) and (f) together and to find that any relief such as is intended is effected. Let me also call attention to the fact that under Section 2,

"The Commissioners of Inland Revenue may require returns for the purpose of this Section to be made at any time, and Section 55 of the Income Tax Act, 1842, shall, with the necessary modifications, apply in the case of the refusal or neglect to make, or wilful delay in making, any such return."

Section 55 of the Income Tax Act of 1842 is the Section by which the penalties for not making a return are imposed. When you take the two Sub-sections to which I have referred and this Sub-section (2) together, you have put upon the wife the burden of making a return of her husband's income, and you have subjected her to all the penalties which at the present time exist under the Act if that return is not properly made. The net result is that you have imposed a more curious burden than existed before. In the case given by the Chancellor of the Exchequer, of the actress and the dentist who were married, the dentist will have to return his wife's income for the purposes of the Super-tax, and the actress will also have to return the dentist's income, and, if there is any default on either side, they will both be liable to the penalties imposed by Section 55. I have no doubt that the Attorney-General will be good enough to give the matter his consideration. I have endeavoured, in company with some of my learned Friends, to try and make sense of paragraphs (a) and (f) and I cannot find that I have overstated the effect of them as drawn. Why is it necessary to repeal the relief which is given under Section 5 of the Act of 1897? Sub-section (4) says:—

"Section 5 of the Finance Act of 1897 (which relates to the exemption of the income of a married woman in certain cases) shall not have effect in a case where an application has been made under this Section."

I assume there may be an answer, and I only want to know what it is, but I really cannot see why that relief should now be withdrawn. Section 5 of the Finance Act of 1897 is one under which relief is given where the husband and wife are engaged in earning income. Sometimes the wife is engaged, we will say, in keeping a shop, and the husband may be engaged as a schoolmaster. Those sort of cases are by no means infrequent. The cases which came before the Courts were very ordinary cases, such as that of the schoolmaster and his wife, the schoolmistress. Why is it necessary to withdraw a privilege and an exemption which has existed since 1897, because, under this Clause, there is to be a separate return made of the income of the husband and the income of the wife. I cannot follow it at all. If the exemption was good in 1897 I do not see why it is not still good, and I know no reason for withdrawing it because of the separate mode of assessment which is laid down by this Clause. There is really no actual relief from taxation given under this Clause. The effect is only to give relief from the oppressive machinery which has hitherto existed in the case of the husband's and wife's incomes. The return to the revenue will be just as much as before, but the machinery will not be quite so burdensome as it has been in the past. If that is all the effect of the Clause, as I think it is, we should watch carefully what we are doing. It is not the time, as the Chancellor of the Exchequer said, to put a further screw upon the incomes of husband and wife. Indeed, the tendency of the right hon. Gentleman is in the direction of some relief, although he will not concede the relief which my hon. and learned Friend asks for. I, at any rate, can see no possible reason for withdrawing this exemption, and I hope on this point we shall get some answer from the Treasury Bench to the criticisms which I have offered—criticisms which, I venture to assert, have indicated points where the Clause really fails to accomplish the object with which, I believe, it was originally introduced into this House.

Mr. DICKINSON

I am one of those who regret that this Clause has been brought forward. It has been suggested, in order to meet what, in my opinion, are very minor difficulties. Three points have arisen in connection with this particular branch of the law. Defects in the law as it stands have been pointed out; it has been shown that under the existing law the husband is able to get the whole of the rebates in respect of the wife's property, and it is also the fact that the money due from the wife has to be recovered from the husband, and if he has not the cash he is compelled to go to prison. These are very plausible points, and the question is whether it is necessary to adopt principles very far reaching in their effect and of very great importance in order to meet them. This Clause lays down for the first time a principle which bas never before existed in Statute law. The words are:—

"The income of the husband and wife shall be treated as one in estimating the amount to be repaid or allowed in respect of any exemption, relief, or abatement which depends wholly or partially on total income."

And then there are similar words used in regard to Super-tax. This particular law is even now the subject of judicial consideration, and I understand that the decision arrived at by Mr. Justice Rowlatt may come before the Court for review. I do not think, therefore, it is quite fair for us to legislate at the present moment, before the point is finally settled, especially in view of the fact that these proposals have been brought in almost at the last moment, and were not in the Finance Bill as originally presented. The Finance Bill as brought in had no reference to this particular subject, and I submit, with great respect, it is not fair either to the public or to those particularly concerned that this attempt should be made to deal with it. Of course the case is one of great difficulty. Those of us who listened to the case put forward by the hon. and learned Member for West St. Pancras (Mr. Cassel) must have come to the conclusion, at the end of his speech, that it was quite unanswerable. And, again, those who listened to the speech of the Chancellor of the Exchequer must have come to the conclusion also that his case was quite unanswerable. They both of them quoted cases which looked at from one side or the other seem to settle the thing altogether. The hon. and learned Member for St. Pancras cited a case in which he showed that two-persons who before marriage had been liable to a tax of 15s. only, became liable after marriage to a tax of £9, and he urged that that was extremely unjust. Then the Chancellor of the Exchequer cited a case in which the husband and wife now pay £27, whereas, if they were allowed to divide their Income Tax as suggested, they would only pay £12, and he asked, "How can I possibly justify bringing in a change in the law which will enable these people to escape their obligations?"

The whole question depends upon what is the justice of the case. If it is unjust that these incomes should be lumped together, then we ought, to remedy that injustice. I have always believed that it is an injustice which cannot stand. But I had hoped that when we were called upon to deal with it it would not be in relation to a Clause brought in at the last moment, but it would have first been made a subject of careful inquiry and consideration. This matter must be looked at with very considerable care. It might be dealt with in various ways. For instance, you might give a rebate to married persons in the same way as you give a rebate for children, or you might adjust the Super-tax and the higher taxes so that the joint income might pay what was considered to be a fair share. I am not prepared to say that they ought not to pay rather more than if they had been living under single conditions. But it certainly is not fair that they should pay on the basis that now holds good. I do not know what the Government are going to do with regard to this Clause. I think it ought not to have been proceeded with, inasmuch as it only deals with a very small section of the community, and does not attempt to meet the real question of the particular system of taxation which should apply to married couples. I say it is not reasonable it should have been brought forward at this particular period.

Mr. SANDERSON

I quite agree with some of the remarks made by the hon. Member who has just sat down. What we have to look at in this case is what is the justice of the matter, and whether it is really right that the incomes of married people should be lumped together and taxed as one entity. I listened with much interest to the speech of the hon. Member for Northampton (Mr. Lees Smith), and I understood him to say that he had been entirely converted by the earlier speeches of my hon. and learned Friend the Member for West St. Pancras (Mr. Cassel), but had recently changed his mind. Then he gave us the reason for it. With great respect to him, I am bound to say I do not think his reason was a good one, and I have some hope, if he listens to me, that I may turn him round again. He said he thought the proposal of my hon. and learned Friend is running in the teeth of the principle upon which all taxation ought to be based, namely, that of ability to pay. He instanced two cases: first, the case of a man who had an income of his own of £600 a year; and, secondly, the case of a family where the income of the husband was £300 a year and the income of the wife was £300 a year. He said that in the second case the family were better off than in the first case, and that they ought not to be let off more easily than the first case. May I point out to him the fallacy of that? In the case where the husband's income is £600 a year it is his income, and he has complete control over it. He can spend it as he likes, or he can keep his expenditure within his income and reckon the amount of the tax he has to pay. But in the second case, where the husband has only £300 and his wife has the other £300, since the Married Women's Property Act he has only £300 over which he has control. His wife can do whatever she likes with her £300 a year. She can say, "I am going to spend so much of this a year," or, if she is extravagant, she may say, "I am going to spend the whole of the £300 on my clothes," or she may say, "I am going to save it and keep it for one of my daughters when she gets married." The husband has only control over £300. In the first case, where the income is entirely his own, he has full control, and you tax him according to his ability to pay; but in the second case you do not tax him according to his ability to pay. I do not know whether that argument appeals to the hon. Member for Northampton, but I hope he will consider it before he gives his vote.

10.0 P.M.

There is one matter we ought to notice, which is that we have got one very valuable admission from the Chancellor of the Exchequer to-night, namely, that the incomes of married people ought to be treated more favourably than the income of a bachelor. He admits that the concessions which are now made are not anything like large enough. I submit that he has a very good opportunity of making a beginning to-night. He is not going so far as some of us would like him to go, and, perhaps, he will go a little distance to-night when we come to the propositions, as I hope we shall before long, of my hon. and learned Friend the Member for St. Pancras. The Chancellor of the Exchequer pointed out that in the course of a deputation which waited upon him on this matter, one of the ladies said that if the woman was in default in making a return or paying Income Tax she only ought to be made to suffer, and that the husband ought not to be punished in any shape or form. If the right hon. Gentleman will look at the Clause he has introduced, especially at Sub-section (3), he will see that he is not attempting to remedy that matter at all. As I read that Sub-section it means that if the incomes are separately assessed, as he proposes in his previous Sub-section, and the Income Tax in respect of the lady's income is not paid, execution can be levied upon the husband's goods. The words are perfectly clear. The Sub-section says:—

"The power to distrain in the case of non-payment of any Income Tax payable either by the husband or the wife shall extend both to the goods and chattels of the wife and to the goods and chattels of the husband."

That is quite contrary to the principle laid down by the Chancellor of the Exchequer this evening. The concessions made by the Chancellor of the Exchequer in this Clause are really of little value. They only apply to the questions of assessment and recovery, and do not make the slightest alteration as regards the amount the husband and wife have to pay. They do not apply to the general complaint which is made, but only to a few specific cases which have been brought to the attention of the Chancellor of the Exchequer. We are greatly indebted to my hon. and learned Friend the Member for West St. Pancras for the way in which he has put this before us. We all felt, and in a vague way we knew about the injustice which is perpetrated by the Chancellor of the Exchequer in many cases, but I do not think we ever knew the extent to which that injustice goes. I am certain that we have never had it so clearly stated in this House as it was stated by my hon. and learned Friend to-night. I hope that the Committee will have listened to the arguments he put forward and will vote for the Amendments he will propose later.

Lord ROBERT CECIL

There are in the case of this Clause a certain number of detailed criticisms which might be made. I do not propose to do more than mention them, because, no doubt, they will be dealt with on Amendments later. The point raised by my hon. and learned Friend (Mr. Pollock), that apparently under this Clause for the first time, both husband and wife will be compelled to make a return in respect of Super-tax seems a serious injustice, although it may not be an important matter in point of numbers. There is also the point mentioned by my hon. and learned Friend the Member for the Appleby Division (Mr. Sanderson), that apparently this Clause greatly increases the power to distrain on the goods of the husband or wife in respect of the tax due from the other person. That certainly seems to be a very strange way of remedying the injustice which resulted in Mr. Wilks being sent to prison. Lastly, there is the point that, for some reason not explained, Section 5 of the Act of 1897 has been repealed. These are details, and I do not propose to trouble the Committee with any further observations upon them, nor do I wish to say very much about the points which the Chancellor of the Exchequer said in the beginning of his speech that he had dealt with—the right of separate assessment, and the question of rebate. These points are, of course, of importance, but they are not the substantial questions which have been raised in connection with this matter, and I do a little regret that the Chancellor of the Exchequer should have been led, in connection with that matter, to have said that in the deputation he received no claim was made in respect of the substantial question, namely, that husband and wife are treated as one person for the purpose of Income Tax. He is entirely mistaken. That point was certainly raised. I find that Miss Amy Hicks said this:— May I ask a question. You lay stress on the fact that it is the households which should be taxed, and not the separate parties making up that household. I should like to know if there is any reason why a hus- band and wife should be singled out for taxation, and why the household should not be taxed in the same way as, for instance, a mother, brother and sister, or father and daughter. Why is the household regarded as the unit? That is the whole argument, and the Chancellor of the Exchequer dealt with it afterwards, and if you read the whole of his speech it is quite plain that that was by far the largest part of the matter which, was brought before him on that occasion. It is a matter to be regretted, because what is said in this House is very closely watched in matters of this kind, and there are many people only too ready to say-that the claims and suggestions made by women are not properly considered by this House, and are not properly dealt with, because they have not got power to enforce them. I think that extract which I have read really puts the exact point. The hon. Member (Mr. Chiozza Money), who loves to go back to the theory of the thing, stated as the theory of the Income Tax that it depended upon ability to pay. Of course, in that sense that is true of every tax, but the theory of the Income Tax is a much simpler matter. It is a tax upon the income of the individuals who make up the population. There is no doubt about that at all. There is no trace of any other form of taxation in the whole of the Income Tax, and it is perfectly plain that that is so, because, in fact, households are not taxed. The incomes of households are not taxed in any other case whatever. The Chancellor of the Exchequer, in dealing with the deputation, referred to the fact that wherever there is more than one wage-earner in a family the income of all the wage-earners is quite commonly dealt with as the income of the house. But it is not taxed. Each individual is taxed.

Take a manufacturing town where you may have a father and, it may be, one or two sons and, maybe one or two daughters, all earning income, and the joint income will come a great deal above the minimum under the Income Tax. In those cases there has never been a suggestion that on that ground you should tax the household, or tax any individual in the household, because the joint income comes to more than £160 a year. So it is where you have two or more brothers or unmarried sisters living together—people of the richer class who club their incomes in order to live together. I know of my own knowledge several households where unmarried sisters, who have been left tolerably well off, have lived together for the purpose of joining their incomes and living more comfortably, treating their joint incomes as one for the purposes of the household. Sometimes they make contributions to the joint household expenses, and sometimes they pool the whole of their incomes in order to live more comfortably. In none of those cases are the individuals taxed on their household income. This doctrine of a tax on a household is absolutely unknown in nearly all these cases. In the other case, which was much less common and much less important, the case of a man and woman living together who are not married, the point does not so often arise, as in those cases there is no attempt to tax the household. The individuals are taxed according to their taxable capacity, whatever it may be. In this case alone, where you have married persons living together and joining their income, they are treated by a pure survival as a single person. It dates back from the very origin of the Income Tax in 1842, because at that time married women had no property, apart from certain exceptions. It was treated as her husband's property, and it was quite fair, since that was the general rule of the law, that he should also obey the rule in respect of taxation. But that has been entirely swept away.

In point of fact, in spite of the hon. Member (Mr. Chiozza Money), this really is a tax on marriage. For all purposes a man and his wife are treated as economically independent, except for income. If they were taxed fairly and justly according to their economical position they would be treated as individuals. They are taxed in addition a certain sum, which the Chancellor of the Exchequer put at £2,000,000 a year, by reason of the fact that they are married. Supposing that had been put quite plainly. Supposing they had been told "you shall each pay your tax as economic individuals, and in addition to that, because you are married, you shall be taxed £2,000,000 a year"—that is the plain English of what has been done—there would not be a single man who would defend such a tax for a moment. I am amazed that anyone can be found to defend it on principle, and I listened with great interest when the Chancellor of the Exchequer said that not only did he resist this proposal because it was inconvenient to the Exchequer, but he resisted it on prin- ciple, and I listened with great interest to hear what his argument on principle really was. I do not know of any argument he put forward on principle, except that the whole foundation of marriage was indentity of interest. The right hon. Gentleman really ought to have lived forty-four years ago and opposed the Married Women's Property Act in 1870. That was the argument which was used no doubt by those who were the political ancestors of hon. Members sitting near me now, that their interests were identical, and that it would lead to splitting up the family and all the other terrible results which we are always told will follow if you do anything to emancipate women from the control of men. That really is the whole difference on principle, as far as I understand the Chancellor of the Exchequer, because he very soon felt that he was not on very sound ground on principle. It is not perhaps the ground which the Chancellor of the Exchequer takes with the greatest pleasure or the greatest success, and he passed to what is undoubtedly a much stronger ground, namely, the practical difficulties. I am not going to say for a moment that he did not make a strong case as regards the practical difficulties. I think he did. It is a strong argument to put before the House that to make this alteration means a loss of £2,000,000. That is a conventional figure, but the alteration means a considerable loss to the Exchequer immediately, and a larger loss when the adjustments have been made between the incomes of husband and wife.

If the proposal of my hon. and learned Friend (Mr. Cassel) were simply to sweep away the whole of this injustice at one swoop, I should find great difficulty in supporting him, because of the financial difficulties which would occur. That is a different proposition, and I admit that it is indefensible. When addressing the women the Chancellor of the Exchequer went so far as to say that if this were a new tax which was being imposed, it would be imposed in an entirely different way from the form in which it appears. That is a reasonable position to take up. Admitting that you have no right to impose this special tax on marriage, it is reasonable to say, "We cannot abolish it at a stroke, but we will make a start to-night. We will lay down the principle, so far enshrined in the new Clause, that husband and wife ought to be taxed on their separate incomes. Having separated the incomes of husband and wife for every other purpose, and having laid down that for practical reasons we cannot carry out this proposal to the full at the present moment, we will, therefore, begin with incomes under £700 a year, or provide for a special abatement in the case of married persons. We will begin by giving some partial relief from the injustice, and in future years we will hope to sweep away the whole of the injustice. We ought to remedy what is at present a blot on the taxes of this country." I do feel that as long as women have not the franchise, there is in this matter a special case for the consideration of the injustice with regard to women, which ought to be dealt with with the utmost generosity. We, as a body, have refused to enfranchise them, and we are bound, therefore, to treat their claims with special consideration. I think that this claim, having been made out absolutely to the full, the Government will behave very wrongly and regrettably if they do not make a serious effort to remove the injustice which has been so fully established.

The ATTORNEY-GENERAL (Sir John Simon)

The Noble Lord has said some strong things as to the general sufficiency of this Clause, and about that I should like to say a word before I sit down. But in the first place I ought to deal with two or three special points of criticism of the Clause which were made by earlier speakers. The hon. and learned Gentleman (Mr. Cassel)—and he has been followed by one, or it may be more than one, of the other speakers—questioned the following words at the beginning of the Clause:—

"If an application to the Commissioners of Inland Revenue is made for the purpose in such manner and form as may be prescribed by those Commissioners, either by a husband or wife, within six months before the commencement of any Income Tax year—"

The hon. and learned Gentlman seemed to think that these words meant that no husband or wife could get this relief in respect of the tax beginning on 5th April unless he or she shall give notice of his or her intention six months before that date. That is not the meaning of the words "within six months" at all. The meaning of these words is this: We cannot have notice given an unreasonable time beforehand. That would obviously be a great inconvenience, and in the case of married people they might change their minds. The meaning of the Clause is that as soon as you get within six months of the beginning of the Income Tax year, from that time, right up to the day before the Income Tax begins, you may give notice on any day you like. That is the meaning and intention of the words, so that that particular criticism is based on a misapprehension. The hon. and learned Member for Leamington said that under the existing law, whether a married woman lived with her husband or did not, for all purposes except the special case of the Act of 1897 the law regarded the income as being the income of the man. I do not think that that is so. The provision that a wife's income is to be deemed to be part of the husband's income is a proviso of the Income Tax law, in the case of a married woman living with her husband, and it is limited to that case.

The same hon. and learned Member complained that Sub-section (f) of this Clause was either inconsistent with Sub-section (a) or nullifies it and makes it entirely absurd. The particular instance put is this: The hon. and learned Member contends that the Clause, as drafted, will have this effect, that a wife claiming the right to make a return separately from her husband would have, in the case of Super-tax, to return a figure which was the total of her own and her husband's income, and the husband in the same way would have to return the wife's income as well as his own. Again, that is not the intention of the Clause, and I do not think it is the effect of it. It is quite true when you come to determine the total income on which Super-tax is payable you have to link the two together. If the man has just under £3,000 a year, and the married woman has just under £3,000, they are expected to make a contribution to the Super-tax, inasmuch as every single person who has got £3,000 or more has got to pay Super-tax. But it is not the fact that the effect of this Clause is that either has got in his or her return to include the income of the other.

Mr. POLLOCK

The Attorney-General has not appreciated the case I stated. In (f) it is quite clear that the income of the husband and wife should be treated as one in estimating the total income for the purposes of Income Tax. Therefore under (a) they have got to make a return, not only on the Income Tax, but on the Super-tax, and a return which puts on them a burden which does not exist at present.

Sir J. SIMON

That is what I have been trying to explain. It is quite true that you discover the amount of tax by estimating the total income of the two, but there is nothing whatever in the Clause to say that either has got to return the income of both. One other criticism made on Sub-section (4) is that it is proposed, as some critics have suggested, to repeal Section 5 of the Finance Act of 1897. That is not so. What is proposed is that where advantage is taken of this new provision you cannot have Section 5 of the Act of 1897 operating at the same time. Anyone who studies that Section will see why. That Section does not provide quite what we say in the Bill. It provides that, where the total income of the two is not more than £500, and where some portion of that income is earned by one party and some portion of it is earned by the other party, in that event the wife's returns may be assessed quite separately and dealt with exactly as though she was not married. But what is to happen in the case where the wife has got a certain portion of her income earned and some unearned? The Section provides that the wife's unearned income is to be lumped with the husband's. Supposing her husband earns £200 a year, and his wife £150, and that she has also got £100 a year of her own unearned, making the total income £450, the Section of the Act of 1897 will apply. But how does it apply? It applies by saying that the wife has to pay on the £150 which belongs to her, and she is to be assessed separately on the £150, and the £100 is to be counted as part of the husband's income. You cannot do more than say to the husband and wife, who are able to take advantage of the Act of 1897, "Take advantage of it if you think it is really better for you than coming under this Clause, but if you come under this Clause we cannot at the same time, as a practical matter, indeed, as a logical matter, apply the Act of 1897 as well."

To come to the more general matters, it is quite true that this Clause which we propose does not do all which some who are most concerned to see our Income Tax altered in relation to married women, would desire. May I refer, for instance, to a right hon. Friend of mine (Mr. Dickinson) a very good friend, as we all know, of the cause with which he has been so much identified. He seems to complain that such a proposal should be made at all. He says, "Here you are at the last moment flinging at my head a Clause which I cannot understand." I should have thought that my right hon. Friend would have known that this Clause is almost exactly the same as appeared on the Paper last year, and he has had a year in which to study it. The Noble Lord opposite will regard the Income Tax laws as a tax on marriage, and he criticises this proposal. Is he really quite fair? This Clause, whatever else it does not do, does two things, and I should have thought that, as far as they went, those two things were things which Members holding the opinions of the Noble Lord and my right hon. Friend would most certainly have welcomed. It says that a married woman shall be entitled to claim that she, in her own right and in her own name, may make a return in respect of her own income, as being the person who knew most about it, and is accountable for it, who ought to be recognised by the State, and she can insist that the fact that she is married to her husband does not mean that her husband has, in relation to Income Tax, to be regarded as the only person that the tax gatherer has ever made acquaintance with.

It says in the second place—and this is an entirely practical thing—whereas, under the present law, the husband returns the income of both, and if there is any question of exemption or abatement (although, as a matter of fact, the exemption or abatement, may be in respect of income which is entirely the wife's), he is able himself to claim and to receive the whole of the exemption or abatement, from this time forward, if exemption or abatement is due to the fact that it is the wife's income which entitles exemption or abatement to be granted, it is to belong to the wife, it is she who is to get it. I really think from those who take, as I take, a very sincere interest in changing the law, so far as it affects unfairly the position of women, we might expect from them some recognition that these changes are changes of some value. The Noble Lord says, oh yes, but you have not done this, you have not said so far as Income Tax law is concerned that it does not know whether men or women are married or not, and since you do not do that you are really putting a penalty on marriage. I confess I do think there may be very good grounds for arguing that the mere fact that a man and woman are married is not in good logic a reason why the extent to which exemption or abatement is given, should be exactly the same as that which would be the case if their joint income was the single possession of an unmarried person. I quite see it does not at all follow. You cannot properly, or logically, or entirely justly say that you do not make any distinction between the two cases. That is a very different thing from saying that if a man and woman are married they ought to be regarded under Income Tax law as being in precisely the same position from the point of view of contribution which they are asked to pay as though they were not married. Let me give one single illustration to show how very strangely such a contention would work. It is common ground under our law to-day that it is desirable that you should not put a heavier burden upon earned income than you should put upon unearned income. That distinction, which was made by the Prime Minister, is one which has entered into our recognised and accepted Income Tax law. Take this case. Suppose you have got a man who by his own exertions earns £800 per year. He marries a woman who has no income, earned or unearned. They may have children. What is the position under the law of such a man. He has got to pay Income Tax on an earned income of £800 per year, and that would be found to be £30. There is no allowance for children because the man has £800 of an income. Suppose instead of that that the man has got an unearned income of £400 and marries a lady who has also got an unearned income of another £400 per year. You have now got a household with £800 per year unearned. Suppose they have children as before, and if you treat those two people in the same way in which you would treat them as though not married, the result would be that the husband who has got £400 per year unearned would have to pay £14, and the wife £14, so that the unearned income of £800 will pay less taxes than the sum of £800 which is earned by the exertions of the husband in the first case.

I do not say at all that the changes which we are contemplating now, and which we are entering upon, do not make it very proper to survey this subject with a view to seeing whether or not Income Tax law does do justice by treating men and women, when they are married, as completely one for the purpose of exemption or abatement. On the other hand, I submit it is really quite absurd to say that £800 of unearned income should pay a tax of £28, which the Committee will observe will be reduced substantially for every child that is born, while exactly the same sum of money earned by the exertions of one of the parties has got to make a larger contribution, and that is not reduced even though children are born. I give that illustration because it appears to me to be quite sufficient to show that you cannot be quite so cocksure about this matter as some hon. Members seem to think. What is necessary is that we should realise that we have reached a point, as the Noble Lord said, where we by common consent want to change the Income Tax law so as to recognise the position which a married woman really occupies. It is not accurate to say that when the Income Tax Act of 1842 was passed, a married woman was treated as if for all purposes she was absorbed in the property of her husband. If she had any separate property of her own then, as now, it was treated quite separately. If she was a sole trader by custom she paid in 1842, quite separately, as she does now. But, no doubt, the principle in 1842 was that, supposing you had a woman and a man married and living in a home, it was right to regard the husband as responsible for the expenses of the home, and answerable, so far as Income Tax was concerned, for the whole of the revenue of the home.

I agree that the time has come to revise that arrangement. And we do revise it very substantially by saying, on the one hand, that the idea that a married woman has no position, and nothing to recognise in this matter, must be put an end to, that she must have her rights here. We recognise it still further by saying that every exemption or abatement due to her income, as distinguished from her husband's income, should belong to her, be paid to her, and remain hers. But I submit that when these rearrangements are made—I do not call them concessions, because they seem to me to be thoroughly warranted by the facts of the case—unless this matter has been much more thoroughly thought out by some who criticise this Clause than I think is really the case, it is a little unreasonable to say, "It is quite simple; there is no difficulty but an obscurantist Government and a Chancellor of the Exchequer who talks about £2,000,000 being lost. Any honest, reasonable person would in a moment say that even if two persons are married they ought to have each, separately, all the exemptions and abatements." The exemptions and abatements in the Income Tax code were fixed by Parliament on the basis that a husband and wife living together were for some purposes in a special position. It may be that that is a bad basis. If so, let us change the basis. But if you change the basis, you must also revise your system of abatements and exemptions.

It is a complete confusion to suppose that there is anything in the Income Tax law of America to justify this criticism of our Clause. The Income Tax law of America, it is true, allows certain abatements in respect of the income of the home, but it allows it without the slightest reference to whether the income of the home is built up by a contribution from the wife and another from the husband, or whether the whole income of the home is due to the exertions or the investments of one party. It has absolutely nothing to do with the question who owns the money. Therefore I suggest that it is time that we read the Clause a second time. I am glad to think that some of the detailed points will come up for discussion on subsequent Amendments. With all sincerity I submit to the House that if this matter is going to be dealt with fairly, it ought not to be treated as a proposal which is intended to put off those who are asking for this reform and will concede nothing. It ought to be recognised as making a concession in two Departments which are of great importance; at the same time that the further concession which is urged should be recognised as one which prudent and careful legislators would need to have considered in connection with the whole scheme of Income Tax. I agree that it is desirable to carry this thing now, and not to wait until any Committee or Conference has reported. The hon. and learned Gentleman the Member for St. Pancras made a point with which I agree; by all means let ns carry it now, and let us remember if you are going to pull up the basis of a great deal of our Income Tax law, that there may be a great deal more that needs to be adjusted and varied than even this particular provision. For these reasons I invite the Committee to read this Clause a second time, and I trust that we shall now move to the discussion of some of the more detailed Amendments.

Mr. WORTHINGTON EVANS

The right hon. and learned Gentleman gave the House a case in which he said even if our arguments were accepted that the husband and wife ought to be treated as separate individuals for the purposes of the Income Tax, a grave injustice would be done to single people, who are now separately taxed. He took as his case a man with an earned income of £800 a year, who at present pays a tax of £30. The right hon. and learned Gentleman said, if you divide that £800 and make it £400 unearned income of the husband and £400 unearned income in the case of the wife, the total tax payable by them would only be £28; and he continued that that would be a grave injustice, because in respect of that unearned total income those concerned would be paying £2 less than the man who is paying upon the £800 earned income. But the right hon. and learned Gentleman forgot to remind the Committee that there is compensation in those cases in connection with the Death Duties. Let us continue his narrative where he left off, and see where the injustice really does exist. If there is an unearned income of £400 a year it presupposes a capital of something like £10,000, which belongs to the wife and £10,000 that belongs to the husband. Death Duties at the rate of 4 per cent. would be £400 by the wife and £400 also by the husband. If they were prudent people they would be insured for the purpose of paying these death Duties. To insure at, say, thirty or thirty-five, they would have to pay a premium of about 3 per cent., and 3 per cent. on £400 is £12, so that the actual tax that the husband and the wife would be paying would not be £28, but £28 plus £24 premium.

We find that they will be paying in respect of their unearned income, to maintain the capital from which the unearned income is derived, the sum of £52 a year, compared with the £30 which is paid by the single individual in respect of earned income. That, after all, is a perfectly fair test, and a test which the Chancellor himself has been using in order to prove that there is no tax on marriage. My hon. and learned Friend who opened this Debate pointed out—and so many hon. Members were not present that I do not apologise for repeating it—that in. the case of a clerk with £180 per year before marriage he paid 15s. as Income Tax. On marriage he had his Income Tax not doubled, but multiplied by 12, and turned into £9 10s. That difference between 15s. and £9 10s. is a difference due solely from marriage. If, instead of marrying, he had lived unmarried, that tax would not be payable at all. It is surely perfectly true to say that that is a tax due solely to marriage. The Attorney-General in his answer does not deal at all with that case, but he picks out a case of somebody else with £800, and I think very unsuccessfully, and tries to show that some imaginary grievance would arise if this were altered. The Chancellor of the Exchequer dealt with it in a different way. He said, we have compensated, because where people live together without marriage they are strangers in blood, and will have to pay heavy in Death Duties or 10 per cent. Legacy Duty. The Attorney-General refuses to consider Death Duties at all as compensation, although it is a good enough argument in the mouth of the Chancellor of the Exchequer in his endeavour to meet the case my hon. and learned Friend advanced. All the way there is this question of compensation by Death Duties. You do already assess the husband and wife for Death Duties. You make them each pay Death Duties in respect of their property, and if the husband passes on his property to the wife Estate Duty is payable, and if the wife passes on her property to the husband Estate Duty is payable both in respect to the original property and the property derived from the husband. So I think it can be shown that almost in every case—the case the Chancellor of the Exchequer gave and the case the Attorney-General gave—Death Duties when taken into account will be found to compensate for any apparent difference, and if that is so it is quite true to say this extra tax is a tax upon marriage which the proposals of the Government not only do not remove, but actually accentuate. It is accentuated by Sub-clause (4), which the Attorney-General dealt with. He seemed to think that my hon. Friends who have spoken were mistaken in their reading of this Clause, but he admitted what was given by Sub-clause (4) to the married woman was an option. They could either come within the provision of the new Clause, or else remain under the exemption under Section 5 of the Finance Act of 1897. And the Attorney-General admitted it would be better for them in a good many cases to come within Section 5 of the Act of 1897, and that they would be actually losing something by accepting the proposals the Government now offer as a solution of the grievances put before them.

It would be easy, I think, to make Section 5 of the Act of 1897 also apply to those who exercise the option to be separately assessed under that Act. The Attorney-General took one case only under the Act of 1897, namely, that the surplus of unearned income belonging to the wife would be treated as the husband's income, but while that is so there would be no difficulty in amending Section 5 of the Act of 1897, so as to allow the unearned income of the wife to be treated as her income, and to allow her to have the privileges now given under Section 5, to have separate assessment and separate abatement in respect of her earned income. She is entitled to that under Section 5, and why should she give up that if she comes under the new Clause the Government propose and which they say is a concession? I only intend to deal with one point of detail, and that is Sub-clause (3). The Attorney-General did not answer the case made out. I do not think he referred to it at all. Does he say the law is not being altered by Sub-clause (3)? The proposal amounts to this, that you can destrain upon the wife's goods for the Income Tax for which the husband has been separately assessed, and which he fails to pay. What possible justification can there be in seizing the wife's goods for Income Tax for a debt due to the Crown by the husband? The Attorney-General did not answer that. It is an alteration in the law at the present moment, because at present the law does not allow the wife's goods to be seized for a debt due to the Crown by her husband. If that is the law, why does the Government now wish to take the power to seize a woman's goods for her husband's debts? Do the Government really mean that? The Attorney-General did not deal with that point. If there is no opportunity on account of the Closure to move such an Amendment, will the Government move it and so save the married woman from a still further injustice which is going to be put upon her in the form of a concession?

Mr. EVELYN CECIL

It appears to me that this Clause is very little more than an attempt to improve the Treasury machinery in respect of this Tax. It does not relieve married couples from any taxation, and we ought really to take a step forward. I suggest that we ought to have began to-night either by making some advance towards giving a special allowance or exemption to married persons of some 25 per cent. of the duty, or that we should have made an exemption according to the number in the family. That would be better than the present Clause. The point which has not been sufficiently worked upon in the Debate is the fact that the Chancellor of the Exchequer in his speech has emphasised so emphatically that in this matter the whole idea of marriage is that the two persons are one and legally identical, and therefore you cannot separate their incomes for the purpose of relief, and therefore the right hon. Gentleman is obliged to continue the present system. I wish to call attention to a proposal I have on the Paper which it is not likely that I shall have an opportunity of moving. It provides that—

"Notwithstanding the provisions of any Act to the contrary, no Estate or Succession Duty shall be chargeable on the transfer by death of property passing from husband to wife, or wife to husband."

I submit that every single argument of which the Chancellor of the Exchequer has used to-night is an argument in favour of that Amendment. What I should like to know directly from him is whether in view of the arguments he has used he would be prepared to support an Amendment of that kind My Amendment assumes that for the purposes of Estate or Succession Duty husband and wife are one. The argument of the right hon. Gentleman has been that in this matter husband and wife are to be treated as one. Therefore, if it is right that in the matter of the Income Tax and Super-tax husband and wife should be treated as one, we ought to insist that in the Estate Duty and the Succession Duty also husband and wife should be treated as one. If the excuse of the Treasury is that there would be too great a loss, I do not think that is an adequate reason. We want to go upon a general principle, and we must choose which we are going upon. If they are to be counted as one, as the Chancellor of the Exchequer has argued to-night, my Amendment ought to be accepted, but if, on the other hand, we are going on the principle that they are not to be counted as one, then my Amendment ought not to be accepted, and the Chancellor of the Exchequer ought to make a real difference in distinguishing their separate incomes.

Mr. LEIF JONES

The Attorney-General complained, not without some reason, that there had been no sufficient expression of gratitude on the part of those supporting the women's movement for the Clause which the Government has introduced, and I do not want the Debate to close without expressing my gratitude, as one who has supported the claims of women, to the Government for having dealt with this question, and for having introduced this Clause. The Attorney-General misconceived the attitude of those supporting this movement It is not that we are not grateful to them for trying to deal with the question. We are grateful, but the Clause does not go far enough to satisfy the women or those representing the women in this House. If this were the final word of the Government on the question, I do not think that we could express satisfaction with it, but I regard it as the beginning of a great movement to treat women fairly under the Income Tax Acts, and for that reason I shall certainly give my vote for the Second Reading of the Clause. What is the object of the reforms for which we have asked? It is in order that justice may be done and justice will not be done to the incomes of women until they are treated exactly like the incomes of men and taxed in the same way. The Attorney-General took some hard cases. He took the case of a man with an earned income of £800 who pays £30 and compared it with two unearned incomes of £400 each, one belonging to a woman and the other to a man, and said that they would pay less than the man with the £800. He is there falling into the fallacy, from my point of view, of treating the second £800 a year as if it were £800 a year belonging to the man. He is reverting to the old position in order to compare them. We say that £400 belonging to the husband and £400 belonging to the wife is a different sort of income to £800 a year belonging to a man, and it ought to be taxed differently. They ought to be taxed as incomes, and not aggregated for the purposes of the Income Tax Acts. That is what is ultimately meant by every supporter of the hon. and learned Member for St. Pancras in this matter. I quite recognise that to enact at once that you should treat the incomes of the husband and the wife as if they were independent would create immense confusion in the coming year, and that it is quite impossible for him to deal with it this year. I also recognise that existing abatements are made on the basis of the theory that there would be this aggregation of income, and therefore I think the Government are perfectly right not to attempt at once to right the whole grievance. I only want to-night to enter a sort of caveat that I cannot accept what is done to-night as a final settlement of the women's claim, but I regard it as an instalment which is most welcome, and I thank the Government for it.

Mr. PRETYMAN

As the Second Reading has been very fully discussed, we do not propose to divide against it, especially in view of the statement of the Chancellor of the Exchequer that he is prepard to consider any Amendment which may be made to strengthen it in the direction of the three points which have been raised.

Committee report Progress; to sit again to-morrow (Thursday).