§ (1) Where any person who, during the current Income Tax year, has served or is serving as a member of any of the naval or military forces of the Crown, or in service of a naval or military character in connection with the present war for which payment is made out of money provided 270 by Parliament, or in any work abroad of the British Red Cross Society or the St. John Ambulance Association, or any other body with similar objects, proves that he is assessed or charged to Income Tax, or has paid Income Tax either by way of deduction or otherwise on his pay in connection with any such service, he shall be entitled to claim such relief from Income Tax as will reduce the amount of Income Tax on that pay to the amount which would have been payable if the tax were charged on that pay at the rate of—
- 9d. if his total income from all sources does not exceed three hundred pounds;
- 2s. 1d. if his total income exceeds three hundred pounds and does not exceed one thousand pounds;
- 2s. 5d. if his total income exceeds one thousand pounds and does not exceed one thousand five hundred pounds;
- 2s. 9d. if his total income exceeds one thousand five hundred pounds and does not exceed two thousand pounds;
- 3s. 3d. if his total income exceeds two thousand pounds and does not exceed two thousand five hundred pounds;
- 3s. 6d. if his total income exceeds two thousand five hundred pounds.
§ (2) The relief given under this Section shall be in addition to and not in derogation of any exemption or other relief or abatement under the Income Tax Acts and in cases where the total income does not exceed three hundred pounds shall not be subject to the reduction of exemption and abatements for which provision is made under the Finance (No. 2) Act, 1915; but relief in respect of earned income shall be given in respect of the pay by reference to the rates under this Section; and in calculating any earned income on which relief is to be given, any deductions from earned income made under Sub-section (2) of Section nineteen of the Finance Act, 1907, shall be made primarily from the pay.
§ (3) All the provisions of the Income Tax Acts which relate to claims for exemption or relief, or the proof to be given with respect to those claims, shall apply to claims for relief under this Section and the proof to be given with respect to those claims.
§ Mr. PETO
Before moving my first Amendment, I should like to ask the Chancellor of the Exchequer if he will not allow this Clause to stand over until to-morrow. Hon. Members expected that 271 the discussion on Clause 15 would last very much longer. The question of Income Tax chargeable to officers has been discussed before, and it is now the subject of a special Clause giving what some of us think is a very inadequate abatement. On Clause 28, too, there is a very important Amendment dealing with Colonial Income Tax. I would ask the Chancellor of the Exchequer whether, in' justice to the adequate discussion of these very important question, he would allow the Committee to adjourn now and take these other important Clauses tomorrow?
§ Mr. McKENNA
I have not the slightest desire to press the members of the Committee to go beyond what they desire; but I should like to get up to the end of Clause 27. I agree it would be undesirable to go on to Clause 28. Down to Clause 27 I do not think there is anything really outstanding which has not been fully discussed, except, of course, the Clause with which we are now dealing. That, I quite admit, is a very important Clause.
§ Mr. McKENNA
I am sure that it will be understood that there was no agreement on that point. As to the Amendment, in a material way, of this Clause—
§ Mr. McKENNA
I do not really think I ought to ask the Committee to come to a stop just at this moment. Perhaps I may say at once what it is I propose to do. There is no difference of view, I take it, between us as to the first item, where the income does not exceed £300.
§ Mr. McKENNA
Yes. After the 9d., if the total income from all sources does 272 not exceed £300, our scale in the Bill jumps up at once to 2s. 1d. where the total income exceeds £300 and does not exceed £1,000. We propose to substitute for that that between £300 and £500 the tax shall be 1s. 3d.; between £500 and £1,000 it shall be Is. 9d.; between £1,000 and £1,500 it shall be 2s. 3d.; and between £1,500 and £2,000 it shall be 2s. 9d., the same as in the Bill at present. Then we get the 3s. 3d. and the 3s. 6d. for the larger incomes as in the Bill. This is a very material reduction, and it will cost the country £200,000. I noted on the last occasion the very serious reduction which was made. I will not say that when that reduction was made that it was understood to be final. I can say that it was made under circumstances which gave us every hope that it would be final. I think, then, in making this further offer now I am going a very long way. I hope that those who take a great interest in this subject will feel that the Treasury, in asking the Committee to accept this new scale, have really done all that they could be expected to do.
§ Mr. PETO
I should like to say, although I thank the Chancellor of the Exchequer for the consideration he has given to the scale, that the scale as it stood quite obviously could never have been accepted in any part of the House. The sudden jump from 9d. to 2s. 1d. is really an impossible scale altogether. I agree that the scale which the right hon. Gentleman proposes is a very important concession, and very important from the point of view of what we might regard as equality of burdens for the payment of the War; but I cannot agree with him that the burden of the pre-war standard of Income Tax of 9d. in the £ on incomes up to £300 was accepted with any understanding that it was final. On the contrary, we were out, at any rate, especially for the remission of war taxation in the form of Income Tax up to incomes of £400. It is with incomes between £300 and £400 that a great many of the hardest cases come, where officers with wives and families to support, with no separation allowance or anything of that kind, find themselves— particularly I may refer to naval officers whose pay comes to between £300 and £400—in the position when the time comes to pay Income Tax of having positively to reduce their allowance to their wives. Therefore, I cannot agree with the right hon. Gentleman that there was any idea that the concession only up 273 to £300 had any finality in it whatever. I understand the scale he now proposes puts in a fresh step in the ladder, and that from £300 to £500 it is 1s. 3d., and then from £500 to £1,000 it is 1s. 9d. If I must abandon my proposal—and it is under duress, because, as I have already stated, I am not supported by my Friends who have taken a very great interest in this— I must say that I think the Chancellor of the Exchequer is now in a very illogical position. He gave us the concession last time that in the case of incomes up to £300 the tax should be payable at the pre-war rate. There we had the admission up to a certain scale of pay of a definite principle. It is not fair to ask a man to fight and to ask him to pay for fighting. We maintain that it is for the civil population, who are debarred from taking an active part in defence of their country and for all the principles for which we are fighting, to pay for the War, and that the Income Tax of the men actually fighting should be at the pre-war rates. There we had a definite principle admitted up to a point. Then the Chancellor of the Exchequer proposed in this Bill that it is not quite fair to charge the increase from 3s. 6d. to 5s. on officers' pay, and so he made his maximum under this Clause as it stood 3s. 6d. There is no principle of any sort or kind in that. If it was just to charge 3s. 6d., there is no reason why he should not charge 5s. The tax of 3s. 6d. as a war rate was considered adequate to meet the needs of the Exchequer in the last Finance Bill. Five shillings is now considered adequate. Now the Chancellor of the Exchequer in his concession proposes something which is neither fish, flesh, fowl nor good red herring. It is not a pre-war rate; it is not the last Finance Bill, but it is just a toning off of one thing into the other which we might argue all night about. I rest myself upon the terms of the Amendment which I have put down to omit from the word "objects" preparatory to the main Amendment which no doubt you, Mr. Chairman, have noticed, to the end of the Sub-section, and to insert the words "the rate of duty chargeable, whether by way of deduction or otherwise, in respect of the pay of such person in connection with such service shall be the rates prescribed by Sub-section (1) of Section 4 of the Finance Act, 1914." My proposal means that it is not reasonable, equitable or just to attempt to deduct from the pay 274 of officers in the Army and Navy and the other Services referred to, who are doing their part actively in successfully waging this War, and charge them the special rate or any part of it which is being imposed for the purpose of paying for this War. There we have a definite principle, and for myself I will stand on the terms of the Amendment I have put down which I know has support outside the House, and which I believe would be acceptable to the civilian population generally. I believe it was perfectly clear from the Chancellor of the Exchequer's Second Reading speech that he felt in imposing a 5s. Income Tax and an increase of 10 per cent. in the Excess Profits Duty that he was going to a liberal limit, leaving a little margin in hand. That being so there was no justification for any inequity in the matter of raising the tax.
When the right hon. Gentleman tells us that this means a concession on the part of the Treasury of £200,000, I say that he has got an ample margin up his sleeve to go the whole length. I ask him to proceed on a definite matter of principle instead of merely toning off an injustice and trying to make something a little less inequitable and less acceptable to the civilian community, who would rather take it upon themselves than see it charged upon the officers who are doing our fighting at the front. I think it is very unfortunate that the right hon. Gentleman did not shorten this Debate more than he has done by accepting the Amendment standing in my name and saving the time of other hon. Members who have also taken an active interest in this matter. I press the right hon. Gentleman even now to reconsider the matter. I believe, even from the figures he has given me as to the exact cost, that for another £300,000 he could do the whole thing and stand upon a definite principle, leaving the civilians to pay what is necessary for the maintenance of our naval and military forces, and not ask the officers to pay more than was settled in peace time from the pay fixed by the Army Council and the War Office, and which was considered adequate when the Income Tax was only 1s. oils. 3d. in the £. I entirely demur from the view put forward from the Treasury Bench that I am really asking for an increase of pay, because I am doing nothing of the kind. I am merely asking that the Treasury shall not take away a large part of the pay which the War Office has 275 settled as adequate for each rank in the form of what they call Income Tax. By passing this Bill and this Clause even with the modifications the Chancellor of the Exchequer now proposes you say in effect that now, in time of war, officers and other ranks whose income rises to the level where Income Tax is payable should pay more than what the country agreed was adequate in times of peace.
I beg to move, in Sub-section (1), after the word "War" ["or in service of a naval or military character in connection with the present War"], to insert the words "or is a prisoner of war." I am not sure that prisoners of war are included as serving during the current year.
§ Question, "That the words proposed be there inserted," put, and negatived.
§ Mr. PETO
I beg to move, in Sub-section (1), to leave out the words "for which payment is made out of the moneys provided by Parliament."
If the concession is limited to the pay of officers, the payment of which is made out of money provided by Parliament, the Clause draws a very arbitrary and impossible line of distinction between officers who are serving in various capacities in 276 the merchant service as auxiliaries to the Fleet. Some ships chartered by the Admiralty have their crews paid out of money provided directly by Parliament, and others engaged in service quite as dangerous and absolutely as much a part of the military defence of the country cannot be said to have the pay of their crews provided directly by Parliament. If performing service of a naval character in connection with the present War—such as mine-sweeping or the transport of vessels taken over by the Admiralty—they are performing services of a naval character, and I do not see why it is necessary to put in these words, "for which payment 13 made out of moneys provided by Parliament." In the broader sense I believe all these people would come in, because it is quite clear the Admiralty cannot charter vessels and pay shipowners the charter money unless the cash is provided by Parliament. At the same time the pay would not appear on the Admiralty pay sheet, and therefore in that narrow sense it may not he said to come strictly out of moneys provided by Parliament. What is the particular merit of leaving in these words, which undoubtedly do make possible a very arbitrary distinction? It will be felt to be a great injustice by the people who are left out and who are doing exactly similar and equally dangerous work. Because he happens to be on a vessel where the pay is on the Admiralty pay list one man is called upon to pay an Income Tax of 1s. 3d. in the £, whereas another man doing just the same service pays a tax of 2s. 6d. because he is paid by the shipowner. I hope the right hon. Gentleman will see that these words are not an improvement on the Clause. The omission of them, far from raising difficulties, will save him striking on rocks which will produce a good deal of friction, and it would be far better to make the concession now than to find that the provision is so inequitable in its operation that he will be obliged to amend it in another Finance Bill.
§ Mr. McKENNA
What is proposed is that every person in the service of the Crown engaged on service of a naval or military character shall be granted this concession. The term is very wide indeed, and we had, therefore, to put in a limitation that the person must be paid out of moneys provided by Parliament—that is to say, they must be in the direct employment of the State. Service of a naval or military character does not necessarily 277 mean a soldier or a sailor, and therefore it was necessary to put in the provision that the person must be in the service of the State. Anything wider in one sense than that or with less limitation than that I cannot conceive Parliament accepting. If you strike out these words, as suggested by the hon. Member, there would be no limitation to the number of persons to whom the Clause might possibly apply— persons whom nobody wishes to benefit On the other hand, every person to whom Parliament intends it to apply is included.
§ 11.0 p.m.
§ Sir COURTENAY WARNER
The Chancellor of the Exchequer has failed to grasp my hon. Friend's (Mr. Peto) point. It is that there are men employed by the State who are not directly paid by the State. The State charters a trawler or a ship of any sort. The owners pay the men, so that the money is not found directly by the State, although it is found indirectly by Parliament. The point is that these men are actually doing service for the State but are paid by the owners. I understood my hon. Friend to say that he was afraid these men would not come under the Clause.
§ Mr. McKENNA
They are not at all in the same position. The people whom he describes can make their own bargain for their own rates of pay for the service in which they are engaged. If these men make their own bargain they have to take the accepted rates.
§ Mr. LOUGH
I do not think it would be possible for me to support an extension of the concession made by this Clause. It is one of those cases in which, if you begin to allow exemptions, a good many other suggestions will be made to widen the Clause. I say that because there is a sentiment that the Clause is drawn too widely as it is. I should like to take the opportunity on this Amendment to ask the right hon. Gentleman whether he has considered the case to which his attention was called by the Comptroller and Auditor-General, in which double salaries are being paid to some of the military officers who do not go at all to the front. They are now here. They are men of over seventy years of age receiving, first, retired pay, and then their salaries. Now they are being re- 278 lieved of Income Tax. They ought, I think, to be excluded from the benefits of the Clause rather than that the terms of the Clause should be widened any further. I did not like to put down an Amendment in regard to the matter, but the attention of the right hon. Gentleman has been called to it, and I hope he will consider it.
§ Mr. LAURENCE HARDY
The argument of the Chancellor of the Exchequer did not quite appeal to me. He said it was necessary to use limiting words to define the naval and military character of the service, but in the Clause itself, immediately following these words, he goes outside State employment altogether and refers toany work abroad of the British Red Cross Society or the St. John Ambulance Association or any other body with similar objects.Those words are extremely wide, and the right hon. Gentleman does not introduce any qualifying words with regard to them. It seems rather hard that any other body with objects similar to that of the St. John Ambulance Associaion should have the relief, while those actually doing naval and military duties should not have it. There is ground for my hon. Friend's contention that these words ought to be taken out in regard to those actually serving or doing work of a naval or military character.
§ Mr. PETO
I had intended to point out exactly how the Clause would work. It will mean that men who are serving and1 who have in many cases lost their vessels, if not their lives, in the operations at Gallipoli will be charged with full Income Tax, while other people, doing any kind of work claimed to be with a similar object to that of the Red Cross Society—possibly a conscientious objector who is not prepared to do any kind of work at all—if they receive pay for what they say has a, similar object, namely, the relief of suffering and the saving of life, will be entitled to all the benefits of this Clause. I am perfectly satisfied that the Chancellor of the Exchequer will find that this is not the last occasion upon which this question will come up, and he will save himself a good deal of trouble if he will omit these words which draw a hard and fast but absolutely indefensible distinction between absolutely analogous services to the-auxiliary services of the Navy.
§ Amendment made:
§ Leave out
- "2s. 1d. if his total income exceeds three hundred pounds and does not exceed one thousand pounds;
- 2s. 5d. if his total income exceeds one thousand pounds and does not exceed one thousand five hundred pounds,"
- "1s. 3d. if his total income exceeds three hundred pounds and does not exceed five hundred pounds;
- 1s. 9d. if his total income exceeds five hundred pounds and does not exceed one thousand pounds;
- 2s. 3d. if his total income exceeds one thousand pounds and does not exceed one thousand five hundred pounds."—[Mr. McKenna.]
§ Question proposed, "That the Clause, as amended, stand part of the Bill."
§ Mr. LOUGH
I think the case of these allowances ought to be dealt with, or we shall have the Comptroller and Auditor-General calling attention to it again if people are taking double salaries in particular cases and are being relieved of Income Tax which everyone else has to pay. The Financial Secretary to the Treasury, at an earlier stage this afternoon, charged me with making inroads on the revenue, and I should like to make that up a little now.
§ Mr. McKENNA
It is only on their pay that the allowance is made. If they are serving the State a case has been made out for relief being given. When the case was first raised it was urged that officers of the Red Cross Society and the St. John Ambulance Association ought to be included. We have done our best to meet the views which were then expressed.
How do you propose to deal with those officers who are receiving pay from this House as well? Will they be relieved to the extent of their £400?