HC Deb 30 September 1915 vol 74 cc1104-8

Resolution reported,

24. "That—

  1. (a) The exemption from Income Tax now granted to persons whose income does not exceed one hundred and sixty pounds shall be limited so as to extend only to persons whose income does not exceed one hundred and thirty pounds; and
  2. (b) The abatement of tax allowed under Section thirty-four of the Finance Act, 1894, and Section eight of the Finance Act, 1898, shall be reduced so as not to exceed—
    1. (i) in the case of persons whose incomes do not exceed four hundred pounds, the tax upon one hundred and twenty pounds;
    2. (ii) in the case of persons whose incomes exceed four hundred pounds but do not exceed six hundred pounds, the tax on one hundred pounds;
    and any Acts relating to Income Tax shall have effect accordingly.

It is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Captain AMERY

I should like to appeal to the Chancellor of the Exchequer to consider the case of the small Income Tax payer with a large family. I know it is impossible to attain absolute fairness in the distribution of this burden. I submit, however, that with the rate of Income Tax as it now is, and with the rate of exemption lower, the position of the Income Tax payer with £200 a year and a family is very hard, and very much harder than that of the man with only £100 a year who is a bachelor. I know in this respect the Chancellor of the Exchequer's predecessor introduced a most beneficent innovation, namely, an abatement of £20 for each child. What I would like to urge upon the right hon. Gentleman is whether, before he brings his Finance Bill to its final form, he could not see his way to increase that abatement of £20 to £30 or even £40 or £50, and make good the extra money required by increasing the Income Tax in its general rate, or lowering the exemption limit still further. I submit that the man earning £2 a week, or £104 a year, is in a very good position compared with the man earning £3 or £4 a week with four or five children. [An HON. MEMBER: "He would not have to pay anything!"] At any rate, in the case of small Income Tax payers with families I think we ought to consider whether that £20 should not be further increased.

There is another small point in that connection I wish to allude to. As the thing stands, I believe at present only children, and not dependants, come in for the abatement. There are cases in which a man undertakes the bringing up of orphan children, and I know a case of a man bringing up five orphan children upon a small income. I think it would be worth while considering whether we could not assimilate dependent children to that of a man's own children. There is another exemption on which I should like to ask a question, I understand a Loan is being raised in America, free of Income Tax, and I would like to ask what would be the position of an English taxpayer who invests in that Loan, because that Loan yielding £5 16s. per cent. is equal to a 7 per cent. investment. Is there not a real danger of that Loan passing into the hands of English taxpayers to the detriment both of the Income Tax and also incidentally to the detriment of any future loans the right hon. Gentleman may raise? I only ask this question for information, and I dare say the Chancellor of the Exchequer has fully considered it.


Representing as I do a large Constituency, consisting almost entirely of people whose means come within the narrow limits which have been referred to by the hon. Member for South Birmingham (Mr. Amery), I wish to support the appeal which he has made to the Chancellor of the Exchequer to take into his very careful consideration this question, and to do what he can to make the Income Tax press less heavily upon such cases as have been mentioned, where people bring up a large number of children and who have dependants to support. Personally, I should be very glad to see this concession made to the poorer classes, even if the amount of the Income Tax is increased upon the richer classes.


I should like once more to put in a word or two in support of the plea that has been made on behalf of Income Tax payers on the lower level. I may be wrong, but I do not think that it requires any alteration of the law. Under the Income Tax laws now, a man who is paying an annuity to a dependant—I believe it has to be in some legal form—is entitled to claim abatement. I myself—I hope the House will excuse me giving a personal instance, but it illustrates the matter—had occasion in times gone by to discuss this matter with the surveyors, and, although I have been subject to a charge amounting to over £20 for many years, quite voluntarily, I cannot get any exemption, because I have not put it in some legal form. Why not exempt the man and take his statement, with some proof if you like, that he has actually paid the money? It does not matter whether he is compelled to pay it or not if he has paid an annuity to maintain or help to maintain a mother, or the children of a diseased brother, or as in some cases I know an aunt, or somebody who cannot work and earn their own living. There are innumerable such cases. I suppose that those who are not conversant with that particular class of people do not realise the burdens which fall upon them. In many cases a man with £200 a year has not only got to maintain his wife and family, but also some poor relation. I know that he may be compelled to subscribe a certain amount towards the support of his mother or father, but it is very small, amounting to one or two shillings a week, and I have in mind those cases which involve an expenditure, quite voluntarily, of four or five times that amount. I would suggest that the Chancellor of the Exchequer should make some provision in the Finance Act whereby if, as a matter of fact, a man subscribes to some poor relative for a number of years he should on that amount be exempt from Income Tax, especially now that it has been so largely increased.


The point raised by my hon. Friend is a very interesting one, and I am sure everyone will agree that some relaxation might be valuable if it were found to be practicable. As I understand the law now, if a person binds himself to pay an annuity, then he is entitled to that reduction; but if it is only a voluntary gift which he can withdraw at any moment, it is really impracticable to allow him a reduction for Income Tax. I think my hon. Friend will see that in some cases it would open the door to fraud. It must really be a binding arrangement to pay the annuity. The hon. Member for Birmingham (Captain Amery) put a question to me with regard to the Income Tax on the American loan. A British holder of the loan will be subject to Income Tax.

Captain AMERY

Yes, if he brings his income here.

Mr. McKENNA Oh, no! Wherever he holds it and whether he brings it home or not. If he holds it in America, and whether he brings the income here or not, he will be subject to Income Tax. Under the existing law a British subject is liable to Income Tax in respect of property wherever held, whether he brings the income home or not. That is a change in the law which I think was made two years ago. Consequently, although this stock, unlike any Government Stock, will not be subject to Income Tax in the hands of a foreign holder, it will, like all other securities, be subject to Income Tax in the hands of British subjects. There is consequently no such danger as that suggested by my hon. Friend to be feared. May I also observe, in passing, that I think his calculation of £5 16s. per cent. interest to the holder is a little generous. If he examines the figures more closely he will see that it works out at just under £5 10s. per cent.

Captain AMERY

Does that allow for the advantage of the option of obtaining 4½ per cent. bonds afterwards, which is worth something?


No, I think that option could hardly be calculated, inasmuch as it is an option to carry 4½ per cent. interest afterwards. I do not think it can be said to work out the interest beyond £5 10s. per cent. to £5 16s. per cent. The hon. Member for Liverpool (Colonel Pennefather) referred to the case of the man earning £3 or £4 a week with children. It was pointed out that if the children were numerous enough, and the responsibility is great enough, he would be relieved of all Income Tax.


I referred to the case of a man with dependants other than his own children.


Dependants would not be subject to the same relief. The case of dependants is really an answer to the argument put forward by the hon. Member for Birmingham. He spoke of the bachelor earning £2 per week. In my experience in nearly all such cases the bachelor has someone depending upon him. Even when the working man gets married he very often retains a liability, not a legal liability, but a liability of filial affection, to contribute to the support of those at home. It would, I think, be a proper subject for consideration by this House at a later stage of the Bill whether, in view of the amount of the abatement and the increase in the tax, some further consideration might not be shown for children. That is a matter which we should be quite ready to discuss in Committee, and to ascertain the general sense of the House at the proper time. On the general subject of lowering the abatement, I hope that the House will agree to the present rates. I can assure my hon. Friends that they have been the subject of very careful examination, and, after taking into account the usual charges upon a man earning £3, £4, and £5 per week, what he would pay generally for the consumption of taxed commodities, and comparing his condition with that of persons in life slightly better than himself, the proposal now put forward is a genuine effort to get a fair scale. We will do the best we can to deal with individual cases when we discuss the Bill in Committee, but I hope that the House will accept these rates as on the whole fair and reasonable.


May I ask the right hon. Gentleman whether he will consider the case of people, like pensioners and so forth, who have small incomes, or, say, £200 a year? Such a person at present pays £4 on an income of £200, but under the new scale he will pay over £11. That is a very serious rise, and I should have thought that it would have been possible to have given some consideration to that class by placing them on the same basis as earned income.


I will consider the point without making any promise. There are great technical difficulties.