CLAUSE 10.—(Income Tax for 1917–18.) (Hansard, 2 July 1917)

§ The CHAIRMAN
With regard to this Clause, I wish to draw the attention of the Committee to a point of some importance. In the drafting of this Clause, as it appears in the Bill, Sub-section (3) seems to me to constitute a new departure. In last year's Finance Bill and for a number of years previously—how far back it goes I do not know—the Clause proposing the | Income Tax for the year was confined to that matter, and all matters involving relief or abatement in particular cases were put in separate Clauses. It seems to me that from the point of view of drafting, and from the point of view of precedent, it would be very desirable if that method were continued. I just wish to mention that at the beginning. There are many reasons, but I need only point out one. If we once begin introducing reliefs 850 and abatements into the first operative Clause of the Income Tax private Members as well as the Government must have the full scope which has hitherto been customary when these reliefs were brought up in the form of new Clauses. I understand that the hon. Member for Yarmouth (Mr. Fell) is not moving at this stage his Amendment, but will put it down when the question is put that the Clause stand part of the Bill.

§ Mr. FELL
That is so.

§ Mr. BALDWIN
We are quite willing to postpone consideration of Sub-section (3) and to act in accordance with your suggestion, and put it down in the shape of a Clause in the Bill. That I take it will postpone any discussion which would have taken place now.

§ The CHAIRMAN
That is exactly the point; you cannot postpone Sub-section (3); you may leave it out here, and bring the substance of it up in the form of a new Clause. That will follow all the precedents, but if Sub-section (3) is going to be moved here, then, of course, these other Amendments will be in order on this Clause, whereas, according to precedents of previous years, these matters would have been brought up in the form of new Clauses.

§ Mr. BONAR LAW
Of course, I should not dream of pressing this if your objection to it is very serious, but, especially in view of the pledge I have given my right hon. Friend (Mr. McKenna), that we will not go beyond this Clause, it would be exceedingly awkward if we cannot discuss this matter now. I should hope for that reason your objections are not strong enough to make us desire that we should not proceed with this Sub-section.

§ Mr. McKENNA
I would not have asked my right hon. Friend to give a pledge not to go beyond Clause 16 if I had not anticipated there would be a considerable Debate on this Clause.

§ Mr. POLLOCK
Is it not quite possible to meet your point and yet allow the discussion to proceed, because if an undertaking was given by the Chancellor of the Exchequer that in the Report stage he would deal with Sub-clause (3) by splitting it into several Clauses, you could still have discussion upon the Amendments which are at present put down and yet at the same time the Clause would be separately introduced upon Report? That would meet your point—a very important 851 and valuable point, and one which I think the Chancellor of the Exchequer will accept. At the game time it would make it quite possible to have a discussion in the light of the Amendments which have been put down.

§ Mr. PETO
On that point I understood the course you indicated from the Chair was going to be pursued by the Government, and with regard to the Amendments I have on the Paper I communicated with the Members who are supporting me, saying it was impossible the Amendments could come on to-day. Members, therefore, have left the precincts under the impression that the course you have indicated is going to be pursued.

§ Mr. BRYCE
May I say that exactly the same thing has happened with regard to the Amendment I proposed to move? A great number of the Genelemen who were going to support my Amendment have left the House understanding that the Government are going to take the course suggested y you. In these circumstances it would not be fair to take a vote upon either of the proposals mentioned in this Sub-section.

§ The CHAIRMAN
Of course, that is not a matter within my jurisdiction. I would only remark that I did not say that Sub-section (3) was out of order as drafted by the Government. I thought it my duty to call attention to the precedent in the matter, and. in view of future convenience, to point out that a new departure appeared in the Clause this year which will have considerable consequences in the future conduct of debate on Finance Bills. It is, of course, entirely within the Government's right to proceed with the Clause as it stands.

§ Mr. PETO
On the point of Order. If you rule in that way, Mr. Whitley, might I ask whether, as Members have been led to suppose that another course was going to be followed, the right hon. Gentleman (Mr. McKenna) would withdraw his request to the Chancellor of the Exchequer not to go beyond this part of the Bill, so that the Excess Profits Tax, which it was anticipated everywhere would be discussed this evening, can be taken?

§ Mr. BONAR LAW
I am sure my right hon. Friend (Mr. McKenna) will agree that we must take one or the other. It is 852 simply a question of which is fairest. I was not aware of any such undertaking as the hon. Member opposite (Mr. Peto) suggested.

§ Mr. PETO
I did not say undertaking.

§ Mr. BONAR LAW
No; I was not aware of such an undertaking. It is simply a question of which is most convenient, and I shall be glad to fall in with the views of the House.

§ Mr. McKENNA
I did not ask on my own behalf, but because I understood that a number of hon. Members wanted to know whether they would be able to discuss Excess Profits Duty now. I should have said myself that there are far more hon. Members interested in the Excess Profits Duty than there are in this Clause, and outside in the country I am quite sure that the interest taken in certain aspects of the Excess Profits Duty is much greater. For my own part, I should be quite willing to withdraw the request which I made of the Chancellor of the Exchequer, and to leave it for him to decide which of the two he would rather take.

§ Mr. BONAR LAW
It is really very awkward, because I wish to do entirely what is fair and what the House desires. But I am bound to say from all the indications that have reached me that whereas Income Tax is nothing new Excess Profits Duty means a change, and it would seem to be unfair to take the matter at an awkward time. I would suggest that there is an opportunity for further consideration. It can be taken now, and if hon. Members feel that it has not been sufficiently debated—I hope they will not take that course—they will have another opportunity on the Report stage.

§ Mr. PETO
I beg to move, at the end of Sub-section (3), to add the words "but Section 30 of the Finance Act, 1916, is hereby amended to provide that all statutory abatements to which any persons are entitled shall, in the case of soldiers and sailors, be made primarily from income other than pay." I must ask the indulgence of the House, as I have neither friends nor supporters in the House for the Amendment, while I am left quite without papers or records of any sort or kind. At the same time, in submitting the Amendment I can say that it is not a new one. I will not say that we fought it out, but I attempted to show last year that by the insertion of these comparatively harmless looking words, that the 853 statutory abatement to which the soldiers and sailors who were given special concessions in 1915, which were extended in last year's Finance Act, are entitled, are to be deducted primarily from their pay, in effect rendered, I think I should not be exaggerating in saying, absolutely nugatory the whole of the concessions to those who hare the smallest income, the non-commissioned officer with £70 or £80 a year, and with an additional income from other sources which raises him to just under the £300 total limit, who is entitled, under the Act passed in 1915, to pay Income Tax on his pay only at the rate of 9d. in the pound. What happens is this: lie is entitled, as every civilian is entitled, to an abatement of £120. The old pre-war abatement, of £160 was continued in respect of sailors and soldiers as a separate concession, and therefore the abatement of £160 more than covers the whole of his pay and Income Tax is charged at precisely the same rate on the remainder of the pay as if he had never joined His Majesty's forces at all, as if the whole £300 a year were derived from civilian sources, and as if he were safely at home with his wife and family. That is not what the Committee which discussed this matter in 1915 intended. On the contrary, I was pressing for a much more extended scale of rebates, which was ultimately conceded last year up to a total income of £2,500 a year, which, I think, from memory, pays an Income Tax of 3s. 6d. instead of 5s., extended as it was last year.
I was told when I first advocated that that it would be doing too much for people who had quite large incomes. That was what the right lion. Gentleman the Member for Monmouth (Mr. McKenna) told me when he was Chancellor of the Exchequer, that I was wrong in asking for these rebates on such large pay as that received by brigadier-generals, and the like, because a great many people had incomes which rendered them quite independent of any remission of Income Tax by the Government. I remember he went so far as to say that he was not at all sure they would be grateful to me or any other Member who advocated such a course. There was a great deal in those arguments, but ultimately they did not prevail because last year we had an allowance which now exists right up to £2,500. The point we argued was that we wanted to give a rebate which would really assist people 854 with quite small incomes of less than £300 a year. The subaltern and noncommissioned officer were the people we were thinking of, and the man raised to commissioned rank from the non-commissioned ranks, the man with a wife and family to support, who finds himself much worse off than he was before as regimental sergeant-major or whatever rank he held. That being so, is there a, particle of justification for drawing a parallel between that case and our action when we differentiated between earned and unearned income in 1907, that if there was a composite income part of it should be charged at one rate and another part at another rate, that the abatement should be taken off the portion of the income that was paying the lower rate of Income Tax. That was a very natural provision to make when we were merely dealing with earned and unearned income, but what has that really to do with this special concession granted to our soldiers and sailors of Income Tax at a very much lower rate on the portion of their income received from pay? There is no parallel between that and the action of 1907. In actual working it amounts to this—that wherever the pay is less than the amount of the abatement you give no concession whatever because everybody is entitled to the same abatement. The abatement washe3 out the pay and the Income Tax is charged at the same rate as that which any civilian would pay on the remainder of the income.
I have had actual cases worked out, and I have given them to the Joint Financial Secretary to the Treasury, and I know the Chancellor of the Exchequer has had them. It is only necessary just to refer to them. I show that an officer of the rank of major, with £400 a year pay and £400 a year income from other sources, a total income of £800 a year, is above the abatement limit. He is not entitled to claim the abatement of £120, and, therefore, you have a perfectly simple income—£400 from pay, £400 from other sources—the whole of which pays Income Tax. Under the concession of last year with an income of £800 he benefits to the extent of £35. Another man who is only a sergeant-major, with a pay of just under £80 a year and a total under £300 does not benefit by last year's concession by a single halfpenny, because the whole of his pay is washed out as being below the abatement to which he is entitled, and therefore he pays at exactly 855 the same rate of Income Tax as everybody else. I do not think that is what the Committee intended, and therefore I hope to hear from the right hon. Gentleman that the Government are prepared to accept this very simple Amendment, which really means that we are going to give to the soldiers and sailors in the matter of Income Tax the concession which we have always advertised to the world in general, and to them in particular, that we intended to give them. When they have come to claim it they could not get it, and now I want them to get what the House intended in the case of all incomes up to £2,500 a year.

§ Mr. POLLOCK
I desire to support this Amendment. The question one always has to ask oneself from the point of view of the Chancellor of the Exchequer is how much money he is going to lose if he grants this Amendment. There are figures we had given to us last year, which I am sorry I have not available now, but which I think show that what he would lose is something infinitesimally email compared with the amount of relief which he would give. The next question is, Can this relief be given? May I remind the Chancellor of the Exchequer that we proceeded by steps. In the Finance Bill which was passed in the autumn of 1914 we gave—

§ Mr. BONAR LAW
I do not wish to interrupt my hon. and learned Friend, but, as a matter of fact, we had decided to accept the Amendment, and my hon. Friend the Joint Financial Secretary to the Treasury will state how we propose to deal with it.

§ Mr. POLLOCK
I gladly sit down.

§ Mr. BALDWIN
We did propose, in order to give effect to our desire to meet this case, to move to omit the word "thirty" at the beginning of Sub-section (3), but we thought it better that discussion should take place on this Amendment, and what we propose to do is on the Report stage to remove this Subsection (3) altogether, as the Chairman has desired, and to split it up into such portions as will be necessary in the shape of new Clauses dealing with exemptions, either granted this year or in continuation of exemptions granted last year. I think the Chairman's objection is one of very great 856 substance, and that we should keep the taxing part of the Bill in and reserve the exemptions for a later part of the Bill. Under the procedure we are now adopting we get our discussion now, and the result of that discussion would be embodied in the splitting of the Sub-section into certain new Clauses on the Report stage. We entirely meet the case which the hon. Member (Mr. Peto) has put.

§ Mr. PETO
May I have it made quite clear? Do I understand that the Chancellor of the Exchequer says that he accepts this Amendment, but that what is really going to happen is that he will accept a new Clause which has been put on the Paper in my name on page 1272 of the Amendment Paper (Right of Soldiers and Sailors to Pay Reduced Rates of Income Tax in Respect of their Pay)?

§ Mr. BONAR LAW
As regards the Amendment of my hon. Friend, we are accepting it entirely so far as the principle is concerned, but the words are not considered most suitable by the draftsman. I will give him the words as we propose them:
"Provided that for the words from 'and in calculating' to the end of Subsection (2) of the said Section thirty there shall be substituted the words ' and in calculating the earned income on which relief is to be given under this Section the deductions required to be made from earned income under Subsection (2) of Section nineteen of the Finance Act, 1907, as amended by any other Act, shall not be made from the pay unless and except in so far as the amount of those deductions exceed the aggregate amount of the earned income other than the pay and of the unearned income."
In other words, it meets entirely the point of my hon. Friend. He had spoken to me about this at an earlier stage of our proceedings, and it seemed to me from the point of view of strict justice, admitting the principle of the deduction, that the fair way would be to take half and half from the earned and unearned income, but on looking into it I found that the effect on the Treasury would not be very great, and as the concession was given on the ground of a feeling shared by the Government and the House that something exceptional ought to be done during the War, I thought it was far better to accept in principle the Amendment now proposed.

§ Colonel YATE
May I, on behalf of the soldiers and sailors, offer my thanks to the right hon. Gentleman for the exemption he has so kindly given them by accepting this Amendment.

§ Mr. POLLOCK
I am quite sure that this is a better way of dealing with the matter, rather than by putting in the Amendment which has been moved, because, on looking at Section 30, it is quite clear that something will have to be done in order to deal with the question beyond merely inserting the Amendment of the hon. Member for Devizes (Mr. Peto). In view of the terms in which Section 30 of the Act of last year was drawn, it is clearly necessary that Sub-section (2) shall be dealt with as well as Sub-section (1). Therefore, the new Amendment which the Chancellor of the Exchequer has suggested really meets the case, and I am very grateful to him for it.

§ The CHAIRMAN
May I say that I think this very much confirms the caution which I entered in approaching this Clause. First I should say this: If it is a matter which is in order as an Amendment to a Clause, ipso facto it is out of order as a new Clause. That is a simple rule of our procedure, because you cannot have it both ways. Secondly, if the Amendment of the hon. Member for Devizes is inserted here in the Committee stage and it should turn out that the new Clause in some small matter is less favourable to quite a small proportion of His Majesty's subjects, it would be out of order on the Report stage, the House would not be able to put it in, in the form in which it really desires it without recommitting the Bill. It adds more strength to my view that these matters should be brought up in separate Clauses and not annexed or attempted to be annexed to the operative taxing Clause in the Bill.

§ Mr. BONAR LAW
I wish to understand the position. I hope we are doing exactly what you, Sir, think is best in the circumstances, and that what we have done does not interfere with the view you have just expressed. We propose to put this in as a new Clause on Report, leaving this Sub-section out altogether. In other words, what I propose is—I do not know whether you think it advisable—that just as we have had this discussion on this Sub-section, we should have a discussion on the double Income Tax and then leave-out the Sub-section altogether, to be dealt with otherwise on Report.

§ The CHAIRMAN
I do not know what Mr. Speaker will think, and it is not for me to trench on his functions, but you will then have in this Bill the words:
"the provisions of Sections twenty-nine, thirty, and forty-three of the Finance Act, 1916…shall have effffect as if herein re-enacted and in terms made applicable to the Income Tax year beginning on the sixth day of April, nineteen hundred and seventeen."

§ Mr. BONAR LAW
We propose to withdraw the whole Sub-section after discussion.

§ Mr. POLLOCK
Is it not a fact that after we have dealt with all these matters and when the question "That the Clause stand part of the Bill" is put, the Chancellor of the Exchequer could accept the negative, and then all these various undertakings we have secured can be brought up in their proper form. I would remind you, Sir, of another discussion on this question we had a few years ago. The Finance Bill of 1907 proposes that certain Clauses in the Finance Act, 1804, should be deemed to have been reinserted in every Finance Act passed subsequently. Some of us pointed out that it was very difficult to have recurring Clauses which ca-me into every Finance Act, although it had not been inserted at that time, and it was ultimately withdrawn because of the very difficulty which you now point out. If we get a discussion and the undertaking from the Government it is quite unnecessary at the present time for the Committee to affirm that the Clause should stand part of the Bill. It could be negatived or withdrawn on the undertaking of the Government to bring it up in its amended form, or as a new Clause embodying the same principle.

§ Sir J. D. REES
On a point of Order, I understand the Chancellor of the Exchequer to say that it is proposed to discuss the double Income Tax Amendment now and then to withdraw Sub-section (3). In that case will it not be subject to a second discussion when it is put down as a new Clause?

§ The CHAIRMAN
Not if it is brought up as an Amendment to this Clause, as I have already ruled. The same thing cannot be in order, in two places. It cannot be in order on a new Clause if it is in order as an Amendment to an existing Clause. I understand the suggestion now made to be that after the discussion 859 of the six proposals on the Amendment Paper down to the end of the Sub-section we should go back and leave out Subsection (3) altogether.

§ Mr. BONAR LAW
That is my idea.

§ Mr. POLLOCK
Why not leave out the Clause altogether?

§ The CHAIRMAN
If Clause 10 were negatived there would be no Income Tax.

§ Mr. POLLOCK
Surely not! The mere fact that while this has been going through we have decided to bring it up in a different form, provided that when the Bill is passed the Income Tax Clause stands good, does not interfere with the proposed Act.

§ The CHAIRMAN
I could not accept that view, that the Committee should first of all negative the whole of the 5s. Income Tax and then bring it up afresh. That decision would stand.

§ Mr. PETO
When shall we see the Chancellor's words on the Paper? If we omit Sub-section (3), I suppose there will be nothing whatever on the Paper about any portion of the other six Amendments to which you have alluded, which he may accept, until we get to the Report stage. Will that be a very convenient procedure? Will he put them down as new Clauses for the Committee stage, so that we can see them on the Paper?

§ Colonel Sir C. SEELY
If the Subsection is left out the Government can put down a new Clause.

§ Mr. BONAR LAW
That is my idea— to put down the new Clauses on the understanding that there is no Debate and they are accepted right off. Whether it is feasible or not, I must leave to you.

§ The CHAIRMAN
I could not entertain that, because it would be a complete breach with our procedure, and it would establish a precedent for a thing being in order as a new Clause which had been moved, debated, and may be withdrawn and negatived as an Amendment to an existing Clause. If it is desired to have a discussion, would not the better way be to move to leave out Sub-section (3) here, and on that Motion to take this discussion, the Government announcing what it is prepared to do? Then it would be in order to bring up thy particular matters in the form of new Clauses at the end of the Committee stage.

§ Brigadier-General CROFT
Would it not be in order, and would it not assist the matter in connection with double Income Tax, if the Amendment was withdrawn and a new Clause put down to that effect? All those who are keenly interested in the question have left the House. If the right hon. Gentleman could meet us to that extent it would make a great deal of difference.

§ The CHAIRMAN
On that point I can only say again that if an Amendment is moved to a Clause, whether it be withdrawn or negatived, it cannot be brought up again in the same stage of the Bill in the form of a new Clause.

§ Mr. BRYCE
If the Government pursues the course it now indicates and brings Sub-section (3) as a new Clause and puts it down, can we then move Amendments to it on the Report stage?

§ The CHAIRMAN
Yes.

§ Mr. BRYCE
Because it would not do, as the hon. and gallant Gentleman (General Croft) suggests, to move a new Clause which really amounted to an Amendment of the Government Clause. That would be out of order. It would be out of order, therefore, to put down the Amendment which stands in the name of myself and my hon. and gallant Frined as a new Clause, or really an Amendment to what is going to be a Government Clause.

§ The CHAIRMAN
I do not quite follow.

§ Mr. POLLOCK
Supposing the Government accepted this Amendment of my hon. and learned Friend and added at the end these words about Section 30, and then the Clause was allowed to stand part with these additional words on the Clause, would it be in order for the Government to amend that Clause, splitting it up into more. Sub-sections—it would be rather a complex Amendment but it would not make it a new Clause—and entirely redrafting the Clause as amended on the Report stage? Is not the simplest course to accept the words of my hon. and learned Friend, and as a matter of drafting put it in order on Report?

§ The CHAIRMAN
I do not say it would be impossible to do that, but the Committee is the chief authority on matters of taxation. Things of that importance should not be left to the Report stage. There is the danger I have indi- 861 cated, that if in some small particular it increased the taxation of the subject it would be liable to be ruled out of order.

§ Mr. BUTCHER
I think it very clear from your ruling that if we want these new Clauses brought up in Committee, as they ought to be, instead of being brought up on Report, it will be necessary to get rid of Sub-section (3) of the Clause now. I think everyone is agreed upon that. There is no other way of doing it if you want to discuss this matter on the new Clauses in Committee. If that be so is not the only way in which we can get rid of Sub-section (3) for the Government now to move that it be omitted from the Clause, because if we have a discussion on the Clause and certain Amendments are moved, would it not be impossible for the Government, when Subsection (3) has been passed, possibly with Amendments, as a matter of order, to move to leave it out? If I am right in saying that the Government could not after discussion move to leave it out, should we not be in this difficulty, that we should not be able to discuss the matter in Committee at all on the new Clauses. Therefore, I would suggest that my right hon. Friend should now move to leave out Sub-section (3). It is quite true that that would prevent a discussion taking place upon the double Income Tax and so on, but there is really no alternative. I suppose we can talk about it but not very effectively, because we could not move direct and specific Amendments as to double Income Tax. We might talk at large about double Income Tax, but we could not have any discussion because there would "be no Amendment before the House.

§ Mr. BONAR LAW
That is obviously the difficulty, and we have every desire to make an arrangement which would be satisfactory to everyone, but we have found it impossible. It is obvious that we must move to leave out this Subsection; otherwise we shall not be acting in the spirit of what you think is proper drafting of the Finance Bill, so I propose to do that. On the other hand, by this arrangement, unless we carry out the understanding which was come to that we should have a discussion on double Income Tax now, the whole of this evening is to a large extent lost. What I propose, therefore, is that we should have that discussion on the Motion that the Clause stand part of the Bill. That will be perfectly 862 in order. Of course, under the circumstances, I do not ask lion. Members to undertake not to discuss it at all when it conies up later as a new Clause, but I would ask them to bear in mind the circumstances in which we have got and to make the subsequent discussion as brief as possible.

§ Mr. BONAR LAW
I beg to move to leave out Sub-section (3).

§ Mr. PETO
The Chancellor of the Exchequer has only mentioned the question of double Income Tax, but there are four definite small matters which stand on the Paper in my name and in the name of other hon. Members. These have not been discussed at all, and I propose to move them as new Clauses, quite unfettered by any discussion which has taken place this afternoon.

§ Mr. BRYCE
On a point of Order. Is it not the case that when the new Clauses are put down representing the breaking up of this Sub-section (3) that those Clauses must have a Committee discussion upon them? Will not that be the proper time for us to move our Amendments to Sub-section (3) as put down by the Government?

§ The CHAIRMAN
The Government, I understand, are accepting the substance of the proposal of the hon. Member for Devizes (Mr, Peto). Presumably, they will have their new Clause on the Paper in Committee dealing with that point. With regard to the proposal of the hon. Member for Inverness (Mr. Bryce), if the Government has not a new Clause standing in its own name, he will, of course, move the new Clause in his name in Committee. Is that clear?

§ Mr. BRYCE
Yes. The Government Clauses which represent the fragment of Sub-section (3), must come to Committee for discussion.

§ The CHAIRMAN
That is so.

§ Mr. BRYCE
Then when we see them we can move our Amendments as Amendments to the Government Clause?

§ The CHAIRMAN
Yes. If they are relevant to the Government Clause; if not, as separate new Clauses. Of course, the preliminary discussion on this subject of reliefs will be in order on the Question, that this Clause stand part of the Bill.

§ Mr. BONAR LAW
May I make this clear? I hope there will be an understanding that the time now will not be altogether lost, and that the extent to which we have discussed these subjects now will be taken into account when we come to the later stages in Committee on the Bill. I hope my hon. Friends will bear that in mind and make the later discussion as brief as possible

§ The CHAIRMAN
That deals with all the Amendments on the Paper relating to this Clause, except the one in the name of the hon. Member for Tamworth (Mr. Wilson-Fox), which is out of Order. That, like another proposal I had to refer to this afternoon, proposes some other taxing authority than the Committee of Ways and Means, and cannot be allowed.
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

§ Mr. J. M. HENDERSON
I want to ask a question in regard to paragraph (a) of Sub-section (4), which says:
"So far as respects the duty on inhabited houses in Scotland, shall be construed with the substitution of the twenty-fourth day of May for the fifth day of April."
I should like the Chancellor of the Exchequer to look into this matter. This is a concession made for the purpose of collecting rents in Scotland, and I believe on inquiry that the only place in Scotland where the trouble is felt is in Glasgow, and that the other towns in Scotland would much prefer that the financial year ended on the same day as in England. Perhaps between now and the Report stage he may look into this matter. There is a great difference between the 5th of April and the 24th May, and, for the purpose of material taxation, I think it would be worth while to adhere to the same day as in England, particularly as other towns in Scotland do not want this change.

§ Sir J. D. REES
I do not understand at present how the matter stands to which the Chancellor of the Exchequer has been referring. The right hon. Gentleman says that if we discuss this matter now we are expected to discuss it briefly on the new Clause. We are not inclined to discuss it now, because on the understanding that 864 we were not to discuss it now, many of those interested have left the Committee. Shall we be prejudiced on a future occasion if we do not discuss it now?

§ Mr. BONAR LAW
I cannot press my hon. Friends to give a promise that they will not discuss this at the later stage, but I ask them to try to make the discussion when the time comes as brief as possible.

§ Mr. POLLOCK
I understand the right hon. Gentleman's view to be this, that he covered all the Amendments which are down to Clause 10. At any rate, I understood he might be ready to accept some or unable to accept some. On the Question, that the Clause stand part of the Bill, I think that the Treasury might explain their views so that we might have a discussion on some of these points, like double Income Tax, in order that an expression of opinion might be given from all quarters of the House. If so, further discussion later on might be unnecessary. Perhaps the Chancellor of the Exchequer would be able to indicate his views upon some of these Amendments.

§ Mr. PETO
Can the right hon. Gentleman tell us whether he would put down in his new Clauses a Clause to meet any of the points raised by the various Amendments to Clause 10, and whether we are to assume that if in respect to any of these specific points that are raised we see no new Clause in his name we shall take the discussion on the Clauses which already stand in the names of private Members, and take as an indication that he does not see his way to accept the principle or the. actual details? I should like to know when we see the Paper in the morning, if we leave out Sub-section (3), whether we shall see all the proposals of the Chancellor of the Exchequer dealing with the points raised by the Amendments, so that we shall know exactly where we stand?

§ Mr. BONAR LAW
I quite appreciate the spirit of my hon. and learned Friend's (Mr. Pollock) suggestion, but I do not think I can meet him there. We are going to accept the substance of the proposal made by my hoi,. Friend (Mr. Peto). The main discussion will naturally take place on the double Income Tax. As at present advised, I am not inclined to make any concession in regard to that, so that there is nothing I can say to facilitate discussion. In regard to the proposal of the hon. Member (Mr. Peto) for 865 putting merchant seamen on the same footing as soldiers and sailors in regard to concessions on the payment of Income Tax, I am going to meet that. The hon. Member has also an Amendment down for an abatement in regard to the cost of officers' uniform. I am looking into that. I think there is something to be said for it, and perhaps by the time we come to it I shall be able to say definitely what our action is in regard to it. I think those are the only ways in which I am prepared to meet the Amendments of my hon. Friends.

§ Mr. PETO
There is the Amendment exempting pensions or gratuities.

§ Mr. BONAR LAW
I am not prepared to meet that.

§ Mr. BRYCE
I think the Chancellor of the Exchequer is trying to meet us Very fairly. We all recognise that. Therefore we are quite willing to agree, so far as we are concerned—of course we cannot speak for others—to keep the discussion later on as short as possible. Can the right hon. Gentleman tells us when the new Clauses, which represent the fragments of Sub-section (3), are likely to be on the Paper, and when he proposes to take them in Committee, so that we may have time to draft the necessary Amendments or draw out necessary new Clauses?

§ Mr. FELL
I had an Amendment at the beginning of the Clause which I did not move because I was advised that the few remarks which I had to make had better come at the end. I wish to point out to the Chancellor of the Exchequer that under the present plan of levying Income Tax very great loss of capital is being incurred which I believe by other methods might possibly be saved. The plan of assessing upon bonds and securities, in the way in which it is done at the present time, is causing such a loss to the Treasury in the capital value of securities that the Estate Duties must inevitably suffer in a short time, and the country generally, through the great loss of capital involved. Income Tax at the rate of 5s. in the £ is a thing which, of course, has never been known before in England, or in any other country. About 8d. in the £ used to be the average rate, and, had it remained at 8d., many anomalies which now claim attention would not have been noticed. Income Tax payers do not protest against this Section. Never since the War began have they banded themselves together, as 866 many other taxpayers have done. They have without the slightest murmur submitted to this tax. In fact, in many cases they have not even got back from the Government what they were entitled to get back under the Act. So great has been their patriotism that they said they would not make any such claim until the War is over. If you touch a man's income, even to the extent of one-fourth, it does not affect the man's capital. It only affects the money which he is enabled to spend. But if you tax not the income which a man is receiving, but the bonds or securities from which he receives it, then you must necessarily reduce the value of those securities by the proportion which the tax bears to the total interest of the bonds. In the present ease about 25 per cent, has been knocked off the capital value of the ordinary securities of the country. That is to say, a 4 per cent, bond which stood at £100, and returned £4, now returns only £3 and stands at £75. There is a direct loss of £25 upon the bond. If you add together all the securities of the country, I believe that the amount of loss would be over £1,000,000,000 owing to reduction in the value of bonds and securities caused by the high rate of Income Tax as at present levied. If you took the amount from the financial capital it would be taking only £l from the total, whereas by taking £l off the £4 interest you reduce the capital value by £25, which it would take twenty-five years to do by taking1 off £l a year.
Another point: There is on the London market a very large amount of bonds from the Argentine, Brazil, Chile, and other countries which have coupons in London, Paris, Berlin, and probably New York. If bonds of that kind are cashed in London the coupon only realises £3, in Paris it would realise £4 in francs, in New York £4 in dollars, and in Berlin £4 in marks. This is the only country where they have put this tax on the actual capital, the value of which has decreased by 25 per cent. It will be impossible to keep London the financial market of the world and to have the issue of these further bonds here if the tax is levied in the form in which it is at the present time, so that a bond issued in London carries only £3 while the same bond issued in Paris carries £4. Naturally this must result in the transfer from London to Paris of a large part, if not the whole, of the bonds which give a much higher return in France. I do not Service, publicly stated that the National 867 on this, but the bonds will be worth £75 in London against £100 in Paris. Of course, many people do not believe that the Income Tax will remain at 25 per cent. and we do not know what it will be in Paris, but we have made it very profitable—of course, it cannot be done during the War—to transfer securities to other countries because the tax is on the bonds themselves and not on the income which they produce. If you are to tax the £4 received from this source the bond would remain at par value £100, and the man would have to pay this £l. This is a point which is certain to arise in financial circles very shortly, if it has not done so already, and which after the War will become acute, and the Government in considering the effect of all these taxes, and how we may raise the money which may be necessary, should have some regard to this point and see whether it is not possible to tax the individual on the money which he receives instead of taxing certain securities which depreciate in capital value to such an enormous extent. I call the attention of the Chancellor of the Exchequer to these points in the hope that they will be considered in future in dealing with such taxation as may be necessary.

§ Sir J. D. REES
I understand that Clause 10 is to be passed without Sub-Clause (3). My hon. Friends and I had put down an Amendment with which we are to deal elsewhere and on another occasion. If some such concession is not carried the Government would be at a great loss, because the movement which is already in force for removing the headquarters of companies doing business in Australia and India from England, in order to evade the double war Income Tax, will be largely increased, and therefore you will defeat the object you have in view. As regards the Income Tax generally, I suggest that the Chancellor of the Exchequer should abolish the present system of collecting in two half-yearly instalments. The Income Tax is like tooth drawing, a kind of process to which every man once submitted himself necessarily once a year, but with the present system of levying the tax twice in the year and insisting upon the payment of Super-tax, the effect is that the Income Tax payer is practically subjected to continual warries, on this score, from the beginning to the end of the year. It would be very much better to levy the Income Tax once and 868 for all, and I believe that almost all Income Tax payers would welcome that as a very happy release from the perpetual worries to which they are at present subjected. It amounts almost to having a business clerk or secretary to be perpetually correlating, or co-ordinating, or whatever may be the proper word, all the documents and accounts for the year in connection with this tax. I shall be extremely obliged to the Chancellor of the Exchequer if he will give his attention to this point. The only further observation I have to make is—and I beg the Chancellor of the Exchequer to consider this carefully—the patent and gross injustice of adding to a man's receipts for the purpose of assessing him to Super-tax an income which ho has never received. According to law the man's actual receipts for the year before are totalled up, and he is liable to Super-tax on that amount; but, as a fact, what is done is to add to the total what the man has not received, namely, the Income Tax, but, on the contrary, has paid away, and upon that gross total he is assessed for Super-tax There can be no reason in adding to a man's receipts that which he has never had and thus inflicting upon him a total beyond the actual sum on which he ought to be taxed, and that, I maintain, is not in accordance with equity or the spirit of the law. I hope the Chancellor of the Exchequer will consider this point also.

§ Mr. NIELD
Clause 10 is the most important taxing Clause in the Bill, in view of the Excess Profits Duty, and it seems to me that it is time we entered our protest, however mildly, against the present state of the Income Tax laws. In spite of Amendments made from time to time, there is opportunity for doing considerable injustice under Schedule A and Schedule B. I would point out that the present condition of Income Tax law in connection with assessments inflicts over and over again very considerable hardship in consequence of the methods which are adopted, and which materially detract from the value of the property which is taxed, and the result of which is that allowances shall not exceed one-sixth. The business man has to meet many additional charges in these times. He has to insure against air raids and to pay a considerable premium. He has also to insure against damage by fire, besides having to discharge other requirements; yet the Inland Revenue do not give any greater 869 allowance than one-sixth. In modern times a number of additional obligations on the taxpayer crop up, and there is put upon tenants very special obligations with reference to property. It is all very well to say that this is taken into consideration in assessing to the tax, but unfortunately that is not so. Over and over again, in regard to special conditions, allowances are not made, and therefore I sincerely hope, now that we are taking a great step in relation to the electoral law, that time may also be found by the Government to deal with the question of Income Tax. Notwithstanding the War, I would suggest that the Government should endeavour to appoint a commission of experts in order that the Income Tax law may be completely overhauled, and that we may have something like order restored out of chaos. No doubt we shall have to pay a high Income Tax for many years to come, and therefore it is all the more necessary that the matter should be taken in hand, because at present there is a very substantial grievance on the part of a great many people.

§ Sir ROBERT PEARCE
Many suggestions have been made in connection with the Income Tax, and they have assumed various forms. The suggestion which I have to make is one which I think the House will welcome, and it has reference to a fund to which there has not yet been recourse for the purpose of Income Tax—I refer to the incomes of the charities of the Kingdom. They amount, I believe, to something like £12,000,000 or £13,000,000 a year, and they are by law wholly exempt from any Income Tax. There, I suggest, is a fund of which the Chancellor of the Exchequer might avail himself to rectify many of the little defects which creep into the administration of the Income Tax. The source would yield something between £2,000,000 and £3,000,000 a year if the charities had to pay Income Tax.