HC Deb 29 June 1915 vol 72 cc1690-703

No deduction for Income Tax shall be charged or made from the pay of any sailor or soldier of His Majesty, irrespective of the total amount of his income, provided that such pay does not exceed the sum of four hundred pounds per annum, and in cases where the pay of any sailor or soldier exceeds such amount, Income Tax shall be charged and collected only on such part of such pay as exceeds the said sum.

(2) In this Section sailor and soldier shall mean and include all sailors and soldiers for whose pay provision is made in the Estimates presented to Parliament for the Navy and the Army, but shall not include any sailor or soldier who has been placed upon the retired list.

Clause brought up, and read the first time.


I beg to move, "That the Clause be read a second time."

This is a Clause designed to effect a simple measure of justice. At the present time there is a large number of men engaged in the forces of His Majesty who left positions of far greater value, and are now giving their services to the country and receiving the small pay of an officer. A portion of the pay of an officer is, of course, exempt from Income Tax. Take the case of a man who is receiving £300 as salary. He would be entitled to deduct, and have repaid to him Income Tax on £160 a year; while a man in receipt of £400 would be entitled to have repaid to him the Income Tax which is deducted on a sum of £150 a year. I think everybody agrees that it is rather hard to expect soldiers in the field to be able to pay the same attention to matters which belong entirely to the civil side of their life, as they would under normal conditions if peace prevailed. This Clause is an endeavour to prevent our imposing a real injustice upon soldiers in the field. If this Clause is not adopted, the ordinary course would be this: Pay would be made through one of the Army agents to those who are entitled to receive such pay, and officers thereupon would be entitled, upon filling up the proper forms and transmitting them through their Army agents and other channels, to a repayment to them of a sum which, in the first instance, has been improperly deducted from their pay by the Treasury.

I do not believe there is very much money involved in this from the Treasury's point of view. I think this is a mere question of an act of justice on the part of this House to the gallant men who are serving their country in the field. The purpose of the Clause is that with regard to pay up to £400 a year there should be no deduction for Income Tax at all, the presumption being that the officer or other person who is receiving that sum would be entitled, as and when the opportunity offered, and when papers were placed before him, to a deduction in respect of an adequate proportion of the sum, or rather a reimbursement of the Income Tax which had been improperly deducted. The result of the Clause would be that in most cases the State would have acted with full justice to those serving her well, and if there were any injustice at all it would be the State which would be the sufferer, because by the State's generosity it would not have deducted the amount which, under ordinary Income Tax law, they would be entitled to deduct, although at a later stage there would be a right of reimbursement or abatement from the sum so deducted.

A soldier is entitled to certain privileges by the law of the land. As I mentioned on the Second Heading of the Finance Act, his will has always been a matter which has received favourable consideration at the hands of the courts, and he is entitled to make a will which would not be valid under ordinary circumstances if made by a civilian. I urge the Committee to pass this Clause so that we may I pay in full, sums which have been undoubtedly well earned by men to whom those sums are paid. Instead of putting upon them the burden of receiving back the sum which the State is not entitled to deduct, let the State first of all pay in full. I only urge a favourable consideration of this Clause by the Financial Secretary. It really only amounts to this: that, whereas a certain number receive their pay after a deduction is made, if the Clause is accepted no such deduction will be made, and in most cases those who would be entitled to receive back sums improperly deducted would have that burden withdrawn from them.


As I understand the Clause of my hon. and learned Friend, its chief object is to avoid troubling the sailor or the soldier with the complicated business of making returns in order to get relief; but his second object is to relieve altogether from payment of Income Tax the income of any sailor or soldier who receives under £400. I do make the most earnest appeal to the House on this subject. The Inland Revenue authorities assure me that the Clause would cost the Revenue £970,000 a year. We cannot afford, just for pure instincts of sentiment, however admirable that sentiment is, at this time to increase so substantially the cost of carrying on this War. As I have said on this subject in this House before, the services which sailors and soldiers render to their country to-day cannot possibly be measured by any financial payment at all. We read from day to day, and we yearn for greater opportunities of reading, of the valiant deeds and the unfaltering bravery of all our soldiers and sailors. But you cannot say, "We will let you off twopence of taxation in consideration of the great services you are giving to the State." If you do not think the soldiers and sailors are adequately paid, then the proper thing is not to let them off taxation but to increase their pay. And it is because of that that already during this War the pay of junior officers in the Army has been increased.

It seems to me that the Income Tax is always and obviously graduated by our Statutes with reference to the means of people. On the other hand, remuneration for service is not in any way concerned with the general financial position of the person remunerated, but only with the value of his services. To regulate the amount of an individual's Income Tax by reference to the value of his services would seem to me very nearly as inconsequent as to regulate his remuneration by reference to the amount of his other sources of income. But I would point out that if the hon. and learned Member's desire is to save the soldier trouble, then I do not see he would accomplish very much by his proposal, because he would be still liable to any Income Tax on any private sources of income, and still be liable to obtain by a form the abatements to which he is entitled. Therefore we propose to do all we can to meet that second intention of the hon. and learned Member by an administrative arrangement.

At the present moment the Inland Revenue is considering the best means of simplifying the procedure for sailors and soldiers. We are not going to issue any more forms of return to sailors or soldiers unless they are asked for, and the general principle on which it is proposed to act is that, where a doubt exists, the officer, while the War lasts, should be given the benefit of the doubt. Where there is sufficient information available without troubling him, that information will be utilised and he will not be troubled. For instance, where allowances were known to be granted in 1914–15 they will be continued for 1915–16, unless promotion or something of that kind shows that the officer is no longer entitled. Where there is absence of information as to private income, the Service pay will be regarded as total income for purposes of abatement and for relief. I can assure my hon. and learned Friend by those indications the Inland Revenue propose to do everything in their power to avoid troubling the soldier and to avoid taking from him any tax for which he is not really liable. But I do ask the House to resist a proposal which will cost us a large sum of money, which seems to me to act unfairly as between officers who pay Income Tax and private soldiers who pay indirect taxation, and would appear to me to be a poor way of showing our gratitude for the services they render, and nothing like so good a way of increasing their emolument as by increasing their pay, should such an increase be thought desirable.

6.0 P.M.


I wish to say a word or two in reply to the arguments put forward by the Financial Secretary to the Treasury. The main arguments seem to be that this Amendment would cost £970,000 a year. Earlier in the year I had some correspondence with the present Minister of Munitions when he was Chancellor of the Exchequer in regard to this question, and he did not put forward any objection on the ground of cost. On the contrary, he told me that the cost would not be considerable. The last argument put forward by the right hon. Gentleman was that to do justice to the officers in this way would be unfair to the private, and I want to deal with that argument, because it is one which has been put forward before. I do not believe that it is an argument that holds water. The special War taxation which has been imposed upon articles of consumption applies mainly to alcohol, tobacco, and tea. In regard to tobacco, the members of the Expeditionary Force not only do not pay the War taxation, but they pay no taxation at all, because their tobacco is taken out of bond, and when it is sent from this country they get the tobacco absolutely duty free. The same applies to alcohol, and the only article that remains is tea. Officers do not have a separation allowance, while privates, or rather their dependants, do have a substantial separation allowance, and do not have the cost of the maintenance of the breadwinner of the family, which forms a large part of a working man's expenses. I think there is nothing in the argument that for these reasons you must not do justice to the officer.

In peace times the ordinary Income Tax is chargeable on all salaries whether military or civil, and on all incomes at corresponding rates. That is a perfectly just principle, because every citizen, whether engaged in military operations or any profession or industry, benefits more or less pari passu with others in the expenditure of the ountry's income, the total amount derived from taxation. We are, however, at the present time paying a double Income Tax. The main charge is for the cost of the War, and the principal item in the expenditure is the payments to our soldiers and sailors. The Financial Secretary says the Government have made some advance in pay recently in the junior grades of officers, but may I point out that captains of twelve years' service get 1d. a day less than they did under the old scale, and majors also get less. Therefore, the advance referred to does not apply to a great many officers, and all that the right hon. Gentleman's argument amounts to is that some small increase has been made in the pay of some ranks, and on that account it is claimed that the Government are perfectly justified in deducting Income Tax at 2s. 6d. in the £, although it is admitted that half of that tax is to meet the expenses of the War. Therefore, you are asking those who undertake military duties not only to give their services, and in many cases their lives, but you are asking them to make provision by a very substantial deduction from their small incomes to pay their own pay. The right hon. Gentleman says that this is a very trivial thing, and he argued that we cannot liquidate the debt we owe to the officers of our Army and Navy by making them a remission of taxation. Of course, we cannot, and nothing we shall ever be able, to do will liquidate that debt. But is that any justification for making this deduction, which is a charge that ought to be borne by the civil population, who cannot go on active service, and are we justified on that account in making this deduction from their pay.

I can assure the Financial Secretary that I received a very much more sympathetic reply when I wrote to the hon. Member for the Blackfriars Division (Mr. Barnes), who at that time was leading the Labour party, and as he is now on quasi-military duties for the Minister of Munitions in Canada, it is not out of place for me to say that I received the warmest commendation from him, and he hoped that I should go on and bring forward this matter of the Income Tax upon officers, because they get precious little pay and they ought not to be subjected to a tax which makes such big inroads upon their incomes. I find from correspondence with the late Chancellor of the Exchequer that although he did not promise to carry this proposal into effect he regarded it sympathetically and said he thought it was something which he would have liked to incorporate in his Budget, the main argument put forward being that it might do some injustice to the private. When this matter was raised before, the Under-Secretary of State for War, on the 10th February last, said:— I will represent what has been paid to the Chancellor of the Exchequer, but I would like to point out that there may be many officers—I do not say a majority or a minority—who are not so deficient in the goods of this world that they should have a deduction from their taxation. My hon and learned Friend in drafting this Clause has met that argument, and we only ask that it should apply to the first £400 a year of pay or income, and even in the case of those officers who have got private means it is a very small matter whether the £400 they are paid is allowed to go free or not. In the case of officers who have practically got no means independently of their pay and have to keep wives and children without any separation allowance and provide lodgings and everything else for them, I think, considering the cost of living in this country, it is perfectly monstrous that the Government should resist this new Clause and insist upon deducting Income Tax from their small pay exactly in the same way as they deduct Income Tax from men in civil life, who for one reason or another have been unable to give their services. For these reasons I hope my hon. and learned Friend will persist in pressing this Clause upon the attention of the Committee, and I can see no possible reason why he should not divide the Committee upon it, and let every Member of the House have an opportunity of voting which way they think on a matter of this kind without any relation to political prejudice or anything else.


I want to ascertain a little more about this point than is contained in the answer which has been given by the Financial Secretary to the Treasury. I cannot make out whether his answer was scornful or sympathetic. If the right hon. Gentleman will not meet my point I am ready to divide the House upon my Clause, and I should like to see the names of those hon. Members who are ready to register their votes against this Clause. I am not unfamiliar with the Income Tax Act. Does the right hon. Gentleman mean that he is going to pay all the pay to officers without any deduction at all, or does he say that he will deduct a certain sum according to certain procedure and returns which have been made in the past? If he is going to make the payment without any deduction for Income Tax I ask under what Section, what power, and under what statute is he going to do that. If he says he has got the power, I wish to know under what legislative authority he is going to act. If he has not got that authority I am not going to accept his answer that by some administrative authority, without any right or power to do it by statutory authority, he will make this deduction in cases where this particular deity who lives in the Revenue Office thinks some returns have been made in previous years, and if, according to this deity, there has been no promotion and matters remain much as they were before this person, who is quite unknown, will kindly see that the whole pay is remitted in spite of the duty of the Department to deduct the Income Tax when it is paid. That is the sort of statement to which we have become accustomed. If the Financial Secretary means that he is going to take power to see that in every case at least there is no deduction in respect of £160 a year, and says that he is going to bring in a Clause, on Report which will enable him to do that, then I understand his position. If he has not that power, and if he does not intend to take that power on Report, or at some other time, the right thing for us to do would be to divide the House on this new Clause. It is all very well to say that, we cannot liquidate the debt to our officers. That is so, but we can take power to prevent us doing an act of injustice, and it is because I do not see any legislative authority at the present moment to prevent this injustice being done that I adhere to my Clause.


I need hardly say that I deprecate as much as any one else that we should have a hostile division at times like this, but this is a matter upon which many of us, and many people outside, feel very strongly. Unfortunately I did not hear the right hon. Gentleman's speech, but I understand that he based his refusal to accept this proposal mainly upon the ground of cost. When you are spending £1,000,000,000 a year I think that is a very thin pretext to justify a distinct want of generosity towards men who are laying down their lives. These men are giving up everything. You ask the civilian population to make sacrifices, but what are the sacrifices which we who stay at home are called upon to make as compared with those who fight our battles and lay down their lives. They give everything. Even if it should involve some increase of taxation upon those who remain behind, I should like to see the hon. Gentleman who would object in this House, or on any platform in the country, to pay the small quota of increased taxation which is necessary to do this act of justice to our officers. We have been told that the proper way to deal with this matter is to increase their pay. I was told the same thing when I made a protest against the Death Duties. In that case there was a concession made which I think was totally inadequate when you consider the circumstances. I was told the proper way was to increase their pay, but was that ever done? Not a bit of it.

There was a totally illusory increase of pay given to officers some six or eight months ago, which gave a very small increase to junior officers, but I think I am right when I say that the increase given to senior officers such as captains and majors was almost infinitesimal. What is the good of putting us off with excuses of that sort, saying, "Increase their pay"? We would increase their pay if we could. If the Chancellor of the Exchequer will get up and say, "I now promise to give an increase of pay to these men equivalent to the amount of the concession which is demanded," we shall be all agreed; but if he will not, then I certainly advise my hon. Friend to press the Chancellor of the Exchequer to make this concession, and, if he does not, to divide the Committee, although personally I hate the thought of a hostile Division. Perhaps that is too strong a way of putting it; it is a Division which would really enable us to take the sense of the House. I therefore withdraw the expression "hostile"; probably it is a totally wrong one. It is a decision which would really inform the Government what Members think upon the point. There would be no question of party or even of stigma on the Government; it would only help them to carry out the wishes of the House.


The speech to which we have just listened very accurately explains the meaning and purpose of this Amendment. It is an Amendment intended to increase the pay of officers.


To prevent a dimunition of pay.


No, that was not the speech that was made. The explanation was made quite frankly, clearly, and fully. I congratulate the hon. and learned Member, and I am not quarrelling with him at the moment. He has stated, quite fairly, what the Amendment does and what it is intended to do. It is intended to increase the pay of officers.


That certainly was not the point of my speech. My point was this: Here you have an enormous increase in the Income Tax on account of the War. Men are losing their lives as the result of the War, and say that they ought not to have their incomes very largely diminished by the War as is done by this increased Income Tax.


I think that is a second thought. The explanation the hon. and learned Member now gives is not the Amendment. The Amendment does not propose to relieve officers of the extra Income Tax during the War; it proposes to relieve officers with incomes under £400 of all Income Tax, and it is therefore in effect and in intention a proposal to increase the pay of officers.


The hon. and learned Member was not in the House when I moved the Clause, and I do not think that he heard my speech, but as I drew the Clause and as I am responsible for it perhaps he would like me to put him right. The purpose is not to increase the pay of officers; it is to prevent the State acting unjustly in paying over sums in respect of which the State knows that the recipients have a right of abatement. That is altogether a different point, and £400 a year is chosen because it is up to that point that abatements are sanctioned.


I cannot congratulate the hon. and learned Member upon his draftsmanship, because his Clause does a great deal more than he says.


I really do not mind whether my draftsmanship is good or not. That is a small, stupid point.


If we are going to divide, we must really understand what we are dividing about. We are going to divide about a proposal to relieve from all Income Tax, not merely Income Tax proposed for the purposes of the War, all officers with income under £400 a year. That is in purpose and in effect to increase the pay of officers. There is absolutely no answer to the argument put forward by the hon. and learned Member for York (Mr. Butcher) that these gallant officers who are making such sacrifices for their country are entitled to the fullest recognition by the country. There is no answer to that argument, but it does not stop at £400 a year or at a relief of £20 a year. That argument, if it is to be interpreted in money, must be taken at a very much higher rate. But I do not think it is an improper thing to remind the hon. and learned Member that it has never been the habit of this country, historically, and I hope it never will be, to weigh the qualities of an officer nicely in the money scale. In resisting an argument of that kind one runs the risk of being charged with failing to recognise the claims which officers have upon the country. It is not the duty of the Chancellor of the Exchequer on the Finance Bill to determine what the officer's pay ought to be. If there is a proposal to increase the officer's pay, let it be brought forward in its own guise. Let the proposal be made to the Secretary of State for War that he should increase the pay of officers, and I see no reason why it should stop at £400 a year. An officer who receives £450 or £500 a year and who is not less gallant is equally entitled to consideration. Consequently, I would submit to the Committee that we should be very ill-advised in determining in Committee on the Finance Bill what should be the right scale of pay for officers.

With regard to the point of the hon. and learned Gentleman that he intends, by this Amendment, not to increase the pay of officers although his Amendment relieves all officers under £400 a year of all Income Tax, but to legalise the practice of the Inland Revenue officers in paying officers their pay in full up to £160 a year, I would say that I think the hon. Gentleman is mistaken in supposing that any legal authority is required. The Inland Revenue officers, provided that they do not make any illegal payments, are perfectly justified in meeting in every way in their power the convenience of the taxpayers, and I hope that will always be their practice. There is absolutely no reason to deduct Income Tax before payment of the income when you know that the recipient of the income will be entitled to recover the Income Tax. No legal authority is required to enable the Inland Revenue officers to refrain from deducting the Income Tax when they know that the Income Tax will have to be repaid. I think, under those circumstances, that this is a question, if it is to be discussed and divided upon at all, which must be divided upon and discussed in Committee upon the Army Estimates. It would be really an abuse of a Revenue Bill to take the occasion to effect a complete change in the scale of pay of officers. Let the Committee mark what they are going to do if they accept this proposal. A junior officer, junior in relation to his seniors, who receives the pay of £400 a year is to get his pay in full. He is promoted, and as the result of his promotion or on account of his services his income is raised to £420 a year. He immediately has to pay Income Tax, and the result is to reduce him below—[HON. MEMBERS: "No!"]—to reduce him down—[HON. MEMBERS: "He pays Income Tax on £20!"] Then that does not arise.


What junior officer is in receipt of £420 a year?


I said "junior in relation to his seniors." In these circumstances, I beg hon. Members to proceed with the Finance Bill by arguments which appertain to the Finance Bill, and not to mislead the Committee into questions of purely a military character.


Is the Chancellor of the Exchequer quite right in saying that this is additional pay? It is certainly limited to officers on active service. And when he appeals to history is he quite right? Does history show him that the Income Tax ever stood at this figure at any time, or that there was ever such circumstances as we are called upon to face now? This simple proposition is that officers on active service—it certainly should not be extended to officers who are not on active service—ought not to be called upon to pay the additional Income Tax brought about by the War in which he is personally engaged. That, so far from being extra pay, is merely a recognition that he is already giving such service to the State and ought not therefore to make a pecuniary sacrifice as well. If it is limited to officers on active service, the right hon. Gentleman's argument does not apply.


The right hon. Gentleman astonished some of us on this side of the House by the argument which he applied to this Clause. I do not use the words offensively, but I never heard a more flagrant instance of special pleading. The Finance Bill is the proper place to discuss any relief to taxpayers from taxation, and that is what this Clause proposes to do. The Chancellor of the Exchequer may not approve of the proposal, but to say that we ought to go to the Minister in charge of the Army Estimates and ask for an increase of pay instead of proceeding by this Clause is an argument with which the Minister in charge of those Estimates would not agree. We are proposing to relieve certain officers of the excessive taxation which the War entails. If the Clause does not do that to the satisfaction of the Chancellor of the Exchequer, then unless he contests the principle he should help us to so draft the Clause as to carry out the principle for which we are contending. We contend that those fighting in the War should not be subjected to the very heavy taxation imposed upon those at home. That is what we are proposing and those are our arguments. [HON. MEMBERS: "No!"] I did not hear the Mover and the first reply, but those are the arguments which have been used, and it is on those arguments that I take the proposal. Will the Chancellor of the Exchequer accept an Amendment to insert the words "exceeding one shilling in the pound," so as to bring back the taxation on this £400 to the scale which was usual, and which prevailed before the War commenced? That would meet both our principle and the argument of the right hon. Gentleman. We are not proposing to increase their pay. I should like to get the whole of the Clause, but, if I cannot, I am certainly prepared to accept an Amendment of that kind if the Chancellor of the Exchequer will agree. Otherwise, I am afraid that we shall be obliged to divide the House and take the sense of the House on the whole Clause.


I hope that the Chancellor of the Exchequer will not consent to accept this Amendment. I do not think the Finance Bill is a measure upon which one should enter into any differentiation between classes. The question of the rebate which should be given to officers ought not to be introduced here. More than that, the Amendment which has been moved differs very materially from the speeches which have been made in support of it. The effect of the Amendment would be to increase the allowance of £160 given to Income Tax payers to £400. It is to be given to every officer, and not merely to poor men, because the words are to the effect that it shall be irrespective of the total amount of income the officer may have. He may, in fact, have an income running into many thousands of pounds. I do not think there is any reason why a differentiation should be made in respect of the Income Tax on such incomes. The differentiation is also to be made wherever the pay exceeds £400 a year. This proposal is quite different from the speeches which have been delivered. There is one point on the other side of the Amendment with which I rather disagree, because it provides that a man who has given his services, and has been wounded and retired, is not to receive this allowance. It is only intended for those on active service. I hope the Chancellor of the Exchequer will not accept the Amendment.


I am sure everyone of us would be glad to do anything in the world to promote the welfare of those men who are serving us so very gallantly abroad at the present time. But I own that what has passed through my mind during the last few minutes, while I have been listening to this discussion, is a doubt whether our gallant officers out there would themselves quite like to be treated in this particular manner. I present that idea for the consideration of my hon. Friends. I heartily wish we could have heard in this discussion the personal opinion of an officer. I am a little uneasy on this point. When I think of the gallantry of these men, and of the splendid service they have done, and are doing, for us, I cannot help feeling, personally, that one of the last things they would have in their minds is what they are going, or are not going, to be paid.

Question, "That the Clause be read a second time," put, and negatived.