§ A rebate of all Income Tax in excess of one shilling and threepence in the pound shall be granted on the income arising from investments made prior to the fourth day of August, nineteen hundred and fourteen, for the behoof of superannuation funds.—[Mr. E. Harvey.]
§ Clause brought up, and read the first time.
Mr. E. HARVEYI beg to move, "That this Clause be read a second time."
I hope that the Treasury will accept the principle of this Clause, which is to protect the position of a number of provident funds in different parts of the country which have been built up out of the income of working people who mostly are not subject in any way to Income Tax, and if the Bill goes through in the form in which it is, without any allowance whatever for the position of these funds, the result will be that a large number of working people, when they come to get their pensions out of these funds, will have reduced pensions. They would not in any case have to pay Income Tax, and they will be penalised in a way which I am sure the Government do not contemplate. The position is 437 made especially difficult because investments have depreciated in consequence of the War, and what I propose is a very modest attempt to meet the difficulty in which these funds will be placed by allowing them to pay simply the old rate of Income Tax on the investments that have been made previous to the War. I am speaking on behalf of a number of these funds whose managers have placed their case before the Treasury, and the new Clause which I propose would meet substantially the grievance which they feel. Funds like that of the Railway Clearing House Superannuation Fund, the Oceanic Steam Navigation Company's Fund, the Royal Mail Steam Packet Fund, and a number of others, representing a very large number of employés, are affected.
I do not want to labour the question at all, but I will just give the figures of one of these funds which I think will make the point quite clear. I take, as a typical instance, the case of the Bourneville Works Pension Fund. That fund now consists of investments of the value of upwards of £270,000, and that represents contributions by the company and by the employés. The net interest revenue from those investments last year was over £8,000. A result of the War has been, as in other cases to reduce the value of the investments, and if, in addition, the full Income Tax of 5s. in the £ has to be paid on the income from the funds, the result must be a considerable reduction in the pensions. This is all the more inequitable because by far the greater part of the employés to whom the fund belongs, are either exempt altogether from Income Tax, or are allowed to pay the tax on a much reduced rate in respect of a small part of their income. That affects a small proportion of the contributors, and this saving by employés will be discouraged by being subjected to the tax at the maximum rate. This effect on one of the large pension funds is typical of a large number of other works, and I hope the Government can see their way to meet this very modest demand. It will not make a great demand on the Treasury, but will have a very marked effect on the position of a large number of the working people whose hard-earned savings are their right, and whose position I am sure the Government do not wish to make worse in consequence of this legislation.
§ Mr. WARDLEI beg to second the Motion.
438 I do so in order to get some idea of what the Treasury think about this Clause. I know many cases of this kind where the superannuation funds rely upon investments, and it would be a very great hardship in many of these cases if the interest, which is part of the funds from which the employés have to draw their pension, is reduced in consequence of the very high Income Tax.
Mr. McKINNON WOODI am sorry that I cannot accept this new Clause. Of course, there are innumerable cases in which, on general grounds, one would desire to benefit such funds, but I cannot see any ground on which it can be proposed that the investments of these funds are only to pay Income Tax at the prewar rate. My hon. Friend who moved this Clause said that it was a very small thing; on the contrary, I think it is an enormous thing, and it is quite impossible to say where it would end, and you might as well say that educational superannuation funds should not pay the tax. What the hon. Member has alluded to in regard to the effect of the tax upon the fund to which he referred is only one of the consequences of the War. There are other institutions of a desirable character whose funds have fallen in value in consequence of the War; and it might also be asked that relief should be given in consequence of the fall of the price of shares through the War. I am afraid to admit the principle of this new Clause would be to admit something which would undermine the whole basis of taxation. I am afraid I cannot encourage my hon. Friends to think that this proposal could be accepted. We could not possibly accept it.
§ Question, "That the Clause be read a second time," put, and negatived.