WAYS AND MEANS. (Hansard, 11 July 1916)

§ The CHANCELLOR of the EXCHEQUER (Mr. McKenna)
It will be remembered that on the Committee stage of the Finance Bill a Clause was passed relating to insurance premiums in certain cases. That Clause was passed on the understanding that between during the interval before the Report stage of the Bill I should do my best to come to an arrangement with the representatives of the life assurance companies as to the best form of Clause to be introduced to the House. I have now come to an arrangement with the life assurance companies as to the principle of the amended Clause. The only point on which we have not come to an agreement is as to whether the Clause is to apply to existing contracts or not. Upon that point I am quite prepared to listen with a perfectly open mind, as I think it is a point which should come before the House. Subject to the consideration of that matter, the new Clause, for which this is the foundation; Resolution, is an agreed Clause. Therefore, I hope the Resolution will be 217 accepted by the Committee in order that I may be enabled to show the Committee what our new proposal is.

§ Sir F. BANBURY
I have heard the Resolution read, but I do not in the least understand it. I do not know whether any other hon. Member does. It is a striking instance of the inconvenience the House is put to by these important Resolutions not being put on the Paper. I have heard a certain number of words read; to my mind they convey no information of any sort or kind.

§ Mr. BOOTH
Are we to understand that the Resolution will enable that point to be debated as to whether or not the proposal falls harshly upon bad lives-that is to say, men who are not medically or physically fit? Is the Resolution widely enough drawn to enable us to discuss that point?

§ Colonel GRETTON
The House is under a great disadvantage owing to the procedure which has been adopted and in the way the terms of this Resolution has been submitted to the House. I want to ask you, Sir, whether there is any reason why this Resolution should not have been put on the Paper? Certainly it is a very important Resolution, and an extremely complicated one, and the House is asked to pass it. I have no doubt the matter has been satisfactorily negotiated between certain persons and the Government. The House is asked to assent to the principle, but we are in this great difficulty: No Member of the House knew the terms of the Resolution which was to be proposed to the House, and we are really no wiser now that you have read it over. You read the words, Sir, perfectly clearly and distinctly, but the proposal is very long and very complicated. I do not know that any hon. Member of the House, except perhaps the hon. Gentleman who last spoke, possibly understands what it means. Is there any printed Rule or Order of the House by which a Resolution like this is not to be placed before the Members? If there is such a Rule, obviously it is working very harshly and very unfairly to Members on this occasion.

§ The CHAIRMAN
The hon. Gentleman has asked my opinion on a point of Order. There is no Rule that I am aware of to prevent a Resolution that is going to be proposed in Committee of Ways and Means being put on the Order Paper, but it is not the custom to do so. In Committee of 218 Ways and Means we follow the procedure upon which we begin the introduction of the Budget, namely, no one except the Chancellor of the Exchequer is supposed to know what the proposals are until they are moved. On some infrequent occasions the practice has, on request, been departed from, but these are the exceptions and not the custom.

§ Colonel GRETTON
I beg to thank you, Mr. Whitley, for the very clear and courteous reply. I must now appeal to the Chancellor of the Exchequer to postpone this very complicated Resolution, and to put it on the Paper, so that we may know what is the proposal.

§ Mr. McKENNA
The hon. Member will see it on the Paper to-morrow on the Report stage.

§ Colonel GRETTON
It is no consolation that we are asked to take on Report an important matter of principle. We really know nothing about it. It is desirable, of course, in the ordinary way, that the Chancellor of the Exchequer should, in the imposition of new taxes, take means to avoid a loss to the revenue by anticipation. But there is nothing in the subsequent stages, and in the present matter, to prevent this Resolution being put on the Paper. I must make a serious protest against the present procedure, and ask the Chancellor of the Exchequer seriously to reconsider the practice adopted by the Treasury.

§ Mr. J. SAMUEL
I quite agree with the right hon. Gentleman the Member for the City of London that this Resolution, read from the Chair, is a very difficult one to follow.

§ Sir F. BANBURY
I do not know that I am more stupid than any other Member of the House.

§ Mr. SAMUEL
Quite so. I think we are all more or less in the same position. I am asking for information, and I should like to know whether I understand that the Resolution means this: That there has been an agreement come to between the right hon. Gentleman the Chancellor of the Exchequer and the Insurance Commissioners—I do not know to whom the invitation has been extended—that all persons who pay Income Tax up to 3s. in the £ will get relief—will get it for the amount of the assessment of their premiums from total Income Tax up to 3s. £ in the £? Where men pay Super-tax, and 219 where the possibility may be that a man is taking a very extended policy amounting to £50,000 or £100,000, no relief will be given?

§ Mr. McKENNA
Beyond 3s. in the £.

§ Mr. SAMUEL
Do I understand that that is really the meaning of the Resolution?

§ Mr. McKENNA
was understood to assent.

§ Mr. SAMUEL
In that case I think it is a very fair compromise to the ordinary or small Income Tax payer, to whom it will be a great relief. The right hon. Gentle-man is now trying to avoid what is going on in the insurance world of large investors in deferred annuities getting relief when they pay Super-tax. I think we ought to have an explanation.

§ Sir F. BANBURY
May I support the suggestion made by the hon. Gentleman (Colonel Gretton). Everyone, of course, knows that in Committee of Ways and Means there is an excellent reason for not putting on the Paper a Resolution that is to impose increased taxation or to alter taxation. This is quite a different Resolution. The matter has been discussed for a long time, and it is now, I under-stand, something that has been agreed upon. Therefore the people concerned know perfectly well, though this Committee does not, the terms of the Resolution. From that point of view there can be no objection in putting the Resolution on the Paper. I should like to point out to the right hon. Gentleman, as I have done on several occasions—and may do so again, because what I have said does not seem to have had very much effect—that when the right hon. Gentleman sat on this side of the House no Members were more indignant than the members of the present Government when the Conservative party followed the course that the right hon. Gentleman is doing now. Over and over again I have read out from "Hansard" extracts to prove what I say, and said. The right hon. Gentleman and his Friends were most eloquent in showing how wicked and wrong it was that these Resolutions should not be put on the Paper. On one or two occasions the Resolutions were put on the Paper; now right hon. Gentlemen opposite have gone back to their old principle, of never, under any circumstances, putting these Resolutions down. There is 220 no necessity for being in a hurry. We really have very little to do at present. The right hon. Gentleman might accede to the request of the hon. Gentleman behind me to put this Resolution on the Paper, so that we may know something about what we are doing; at the present time we do not.

§ The CHAIRMAN
I really must admit that there is a misapprehension. It is not the custom, but really a departure from the custom, to put these Resolutions on the Paper. It is my duty to keep the Committee informed of that.

§ Sir A. MARKHAM
Would the Chancellor of the Exchequer kindly tell the House what the effect of this Resolution is? I do not follow it. Would he also say if it makes the law stricter than in the original proposal? Am I to understand from what the hon. Member for Stockton (Mr. J. Samuel) said, that no one is to get relief for the purpose of Super-tax, although he may have a wholelife policy? Surely that cannot be so.

§ Mr. McKENNA
After my hon. Friend's appeal, I shall be very glad to state what the effect of the Clause will be when it is moved. It is proposed that in no case shall the relief given in respect of premiums paid for life insurance be greater than 3s. in the £.

§ Sir A. MARKHAM
On the gross income?

§ Mr. McKENNA
No, on the amount. No deduction is allowed in the payment for Income Tax in respect of premiums paid for life insurance. Income Tax and Super-tax may both be deducted in respect of insurance premiums under the existing law, with certain limitations. It is proposed now to limit the deduction to a maximum of 3s. in the £. That is to say, the limit is put at the amount of deduction which existed down to about a year ago, when no more than 3s. in the £ was deducted in respect of both Income Tax and Super-tax from premium payments, and it is proposed to limit the possible deduction hereafter to 3s. in the £. The only point left open for discussion in the House is as to whether this limitation to 3s. shall apply only to contracts made after the 22nd June—that is, after the introduction of the other Clause—or whether it shall be retrospective and cover contracts already made. That is a question which the 221 House can discuss on the Clause, and which is not agreed between the Government and the life insurance companies. This deduction up to 3s. in the £ will be allowed in future in respect of all life insurance, herein differing from the Clause introduced on the Committee stage with a single exception, that it will not be allowed in respect of a policy which becomes fully operative only after the expiration of a certain period—that is, a policy in which there is no death clause, but is purely endowment—and then no deduction will be allowed. In every other case a deduction up to a maximum of 3s. in the £ will be allowed.
Super-tax for the purpose of deduction from premium is treated as Income Tax. Therefore, at the present moment, a wealthy man paying Income Tax of 5s. in the £ and Super—Tax of 3s. in the £ is entitled to deduct 3s. 6d. in the £ from his premium, whereas a poorer man can only deduct 2s. 6d. in the £. We propose that the limitation for all persons shall be 3s. That is the proposal. I should have thought the language in which it is expressed in the Resolution is absolutely clear, and I am surprised that so acute an intellect as that of the right hon. Baronet did not at once see its full meaning. This Resolution will appear in ordinary course upon the records of the House to-morrow morning. We propose to take the Report stage to-morrow. The House will have a much better opportunity of debating the merits of the proposal on the Clause than on the Resolution. In these circumstances I would ask the Committee to allow me to have the Committee stage Resolution now, and I hope to take the Report stage to-morrow, when we can discuss the Clause as a new Clause in substitution for the existing Clause in the Bill. I am sure, on the whole, that is much the most convenient, rapid, and satisfactory proceeding.

§ Mr. J. MASON
Assuming the Committee now passes the Resolution, the right hon. Gentleman, I understand, will have it on the Paper to-morrow morning. Will the Clause be on the Paper also I Am I right in assuming that this is part of the existing Finance Bill, because that Bill is going through Report stage to-morrow, and the Third Reading has been announced by the Prime Minister to take place on Thursday. In that case, are we to settle not only the Resolution, but the 222 whole wording of the Clause to-morrow at one sitting? If so, I assume we may anticipate seeing it on the Paper to-morrow morning; otherwise the whole-thing, having to be finished for Third Reading on Thursday, will have to be very hurried.

§ Mr. McKENNA
I quite agree with my hon. Friend that it is very inconvenient, for the Report stage to-morrow that it cannot be, in the ordinary case, circulated with the Papers as a New Clause to the Bill until the Resolution has been Reported, but I thought I could get out of the difficulty if I included—and, if practicable, I shall do so—in a White Paper the proposed Clause. If I get the Committee stage now, I will circulate as a White Paper to-morrow morning, if I can do so with the Papers, a draft of the? proposed Clause which we shall introduce after the Report stage has been taken. Let me tell the Committee quite frankly what the object is in pressing on this matter. Our borrowing powers are running out, and, unless I can get the Finance Bill through all stages and the Royal Assent, I shall have to introduce a hurried single-Clause Bill to give me new borrowing powers. I have the powers in the Finance Bill, and, therefore, I am rather pressing it forward, which I would not otherwise dream of doing.

§ The CHAIRMAN
I must point out to the right hon. Gentleman that a new Clause on the Report stage of the Finance Bill, or, indeed, any other Bill, must be given notice of, whether by a private Member or by the Government.

§ Mr. LOUGH
I do hope my right hon. Friend will consider whether all this hurry is necessary in this instance. I do think it is a case in which the House might very well press-although I will not go further on this occasion than state it for the reform of getting this Resolution on the Paper, but, as that has been touched on already, I will not say more about it. The Committee is seized with the fact that this is a very wide Clause, and I would remind the Committee that on Thursday the Bill is to be passed into law, and that this is a Bill which cannot be reviewed in another place, so that all this legislation is going through with lightning speed, though it embodies a very big principle. The principle is that of modifying the relief which has been given 223 with regard to Income Tax on life premiums. It may be right that this should be done, but the principle on which that relief is given ought to be examined by the Committee before the change is sanctioned. I believe the principle on which "the relief rests is that the life premiums are taxed afterwards for Death Duties, and it is not fair that it should be taxed twice. That is the reason why an allowance was made on the amount of the premium hitherto. My right hon. Friend suddenly gives notice of a change by which only a partial allowance should be given. If it is 5s., it is only to be on three-fifths of the tax. It may be only two-fifths, or one-fifth, to-morrow. This principle has been sanctioned by many years of usage. Now the right hon. Gentleman has extended the 4.0 P.M. Clause in the Finance Bill. The original Clause was one to which much objection could not be taken, but now he proposes a change giving relief to life insurance. This is a very large matter, and we ought to have full time to consider it before it is passed into law.

§ Sir F. BANBURY
I wish to ask your ruling, Mr. Chairman, on one point. On the Report stage is it not a fact that a Clause imposing a charge cannot be moved even by the Government, and even if we pass this Resolution in Committee to-day and get the Report to-morrow, we shall have to recommit the Bill? The suggestion is that if we allow the Committee stage to be taken to-day and the Report stage to-morrow, the rest of the Finance Bill should be taken next week.

§ Mr. McKENNA
If the view of the right hon. Baronet opposite is right, would it be possible to take the Committee stage to-day of this Resolution, the Report to-morrow, and the Report of the rest of the Bill to-morrow, and then recommit the Bill in respect of this Clause subsequently?

§ The CHAIRMAN
With regard to the first point put by the right hon. Baronet, of course if the Clause is set down on the Order Paper for the Report stage, the matter is for Mr. Speaker to deal with, and therefore I have some little hesitation in answering that question. It certainly appears to me that it will be necessary to introduce this proposal in Ways and Means, therefore I am extremely 224 doubtful whether it is possible to introduce such a proposal on the Report stage of the Bill, whether by the Government or any other Member of the House. It seems to me that it will be necessary to recommit the Bill. With regard to the point raised by the Chancellor of the Exchequer, a recommittal of the Bill can take place either at the beginning of the Report stage or at the end, and then, of course, it would be possible to take the Report of the Bill as amended on recommittal on a subsequent day, but the Third Reading could not be taken on the same day except by a special Order of the House.

§ Sir GEORGE YOUNGER
May I remind the Chancellor of the Exchequer that during the Committee stage of this Bill, when he withdrew the Insurance Clause, I specifically asked him whether when he brought up his new Clause he would recommit the Bill, and he agreed to do so?

§ Mr. McKENNA
I said if necessary.

§ Sir G. YOUNGER
I think it is necessary.

§ Mr. McKENNA
If I get the Resolution now and the Report stage to-morrow, and the rest of the Report stage of the Bill to-morrow, and then recommit the Bill on a subsequent day, we can then take the Third Reading.

§ Sir ERNEST LAMB
The point we are not agreed upon is the question whether the alteration should be retrospective. That point affects infinitely more than insurance companies; in fact, it affects tens of thousands of policy holders. Therefore I think the country should have a longer opportunity of considering the position, because it does affect tens of thousands of policy holders who have entered into those contracts believing they were going to have this relief. We have not had an opportunity of examining this Resolution. I do not know to what extent insurance companies have been represented upon the deputation referred to, but I am associated with one company, and I do not know that we have been consulted. Are we to understand that this new Clause supersedes the old arrangement?

§ Mr. McKENNA
This would be a new Clause in substitution of the existing Clause. The insurance companies object 225 to the existing Clause, and that is the view of the Insurance Committee which represents them all.

§ Mr. BOOTH
It does not represent them all.

§ Mr. McKENNA
Substantially I think it does. They objected to the existing Clause, and I thought the House accepted the view that I should come to an arrangement with them in respect to the new Clause. Of course the House represents not only the views of insurance companies, but the nation as a whole, including the policy holders. We want to get our new Clause on the Paper, so that it can be discussed, and we want to get rid of the old Clause. We cannot do anything until we pass this Resolution, and then we can get the new Clause placed on the Paper.

§ Sir J. D. REES
May I ask if the Resolution in terms is retrospective in effect? If so, is it not an extremely large order?

§ Mr. McKENNA
It is retrospective.

§ Sir J. D. REES
Then it is a very large order.

§ Mr. McKENNA
Unless we take it in that form we cannot discuss it. The Clause cannot be wider than the Resolution, and I have to introduce it in this form in order to give the House an opportunity of discussing it. I have an open mind upon it.

§ Sir J. D. REES
Is it to be understood that if this Resolution is got to-day that the question is in no way decided?

§ Mr. McKENNA
I have just said so.

§ Mr. PRINGLE
The Chancellor of the Exchequer, in one of his earlier speeches, said that the procedure which he was adopting was rapid, convenient, and satisfactory. I think the subsequent Debate has shown that he was wrong, and it is obvious now that the procedure he suggested is neither convenient nor satisfactory, and it is certainly not rapid. The right hon Gentleman must be aware that he will lose a day in getting his Bill as a result of the mistake made by the Government in dealing with the matter in this way. I think the right hon. Gentleman might have put this Resolution on the Paper to-day, and had he done so he would have saved this long discussion. In regard to the merits of this proposal, it is extremely difficult to discuss them now. May I point out, however, that there are more parties concerned than the insurance 226 companies. There are all the policy holders, whose interests are affected by this Resolution. They cannot by any stretch of the imagination be held to be represented by this committee of insurance companies, and in view of that fact I think it is obvious that they should receive the protecton of the usual procedure of the House, namely, the Committee stage and the Re-port stage of this Resolution. The Chancellor of the Exchequer says he is going to put the Report stage of the Resolution and the remaining stages of this Clause into a single day, which seems to me to be quite inadequate for the consideration of an important question of this kind.

§ The CHAIRMAN
I have ruled that that cannot be done, and the Government cannot do it. They must have for this Resolution all the stages of any taxing Resolution.

§ Mr. PRINGLE
Am I to understand that they can take the Second Report stage and the Third Reading on the same day? [HON MEMBEES: "NO!"] AS a matter of fact they cannot get the Third Reading until next week. [HON. MEMBERS: "No!"] Then it is satisfactory that the forms of the House are to be observed. I understand that we shall have both to-morrow and Thursday for the consideration of this question.

§ Mr. CURRIE
The reason given by the Chancellor of the Exchequer for hastening this matter is a perfectly good one, but I wish to remind him that he gave an undertaking a week ago, when he persuaded the House to pass his Clause as it stood, that existing contracts would be saved. If there is any possibility of that undertaking not being adhered to or being modified, I think the policy holders have rather been lulled to sleep under a misapprehension. It is not enough for the Chancellor of the Exchequer to say that he has come to terms with insurance companies, and I hope his new proposal will not upset old contracts.

§ Sir COURTENAY WARNER
I understand that we are to have the Committee stage to-morrow?

§ Mr. McKENNA
No; the Committee stage to-day and the Report of the Resolution to-morrow.

§ Sir C. WARNER
Then there is to be a Committee stage of this Clause. That is an important point, because it is an extension of taxation whatever arrangement has 227 been made between the Chancellor of the Exchequer and the insurance companies, and that does not concern the agreement we have to come to between the people of this country, or at any rate that portion of them who are policy holders. I do hot think any arrangement with the insurance companies can possibly protect the policy holder. We must have that question discussed in the House, and what I am asking for is that we should have an assurance that we shall have a Committee stage of this particular Clause.

§ Mr. McKENNA
We have agreed to that.

§ Mr. BOOTH
I should like to know whether the mutual societies have been consulted. A number of these are very large institutions and they have not got shares or directors, but mutual societies are governed by the policy holders. I will not name any of them, because I might be considered to be advertising them, but they are well-known institutions which are governed by the policy holders and they have no shareholders at all. I would like to know if those institutions have been seen?

§ Mr. McKENNA
I think they were represented on the Committee. Question put, and agreed to.