HC Deb 03 June 1918 vol 106 cc1291-7

(1) The following Sub-section shall be substituted for Sub-section (1) of Section nineteen of the Finance Act, 1907 (which provides for the reduction of the Income Tax payable in respect of earned income), in lieu of that substituted by Section twenty-five of the Finance Act, 1916, namely: (1) Any individual who claims and proves in manner provided by this Section that his total income from all sources does not exceed two thousand five hundred pounds, and that any part of that income is earned income shall be entitled, subject to the provisions of this Section, to such relief from Income Tax as will reduce the amount payable on the earned income to the amount which would be payable if the tax were charged on that income at the rate of— Two shillings and threepence if the total income does not exceed five hundred pounds; Three shillings if the total income exceeds five hundred pounds and does not exceed one thousand pounds; Three shillings and ninepence if the total income exceeds one thousand pounds and does not exceed one thousand five hundred pounds; Four shillings and sixpence if the total income exceeds one thousand five hundred pounds and does not exceed two thousand pounds; Five shillings and threepence if the total income exceeds two thousand pounds and does not exceed two thousand five hundred pounds. (2) Paragraph (a) of Sub-section (7) of Section nineteen of the Finance Act, 1907, shall have effect as though there were inserted therein after the words "in any office or employment of profit" the words "or given to the individual in respect of the past services of any deceased person.


I beg to move, in Subsection (1), after the word "of" ["if the tax were charged on that income at the rate of"] to insert the words "One shiling if the total income does not exceed two hundred pounds; one shilling and sixpence if the total income exceeds two hundred pounds and does not exceed two hundred and fifty pounds; one shilling and ninepence if the total income exceeds two hundred and fifty pounds and does not exceed three hundred and fifty pounds."

My object in moving this Amendment is, as far as possible, to adjust the incidence of taxation upon all sections of our people. When the Income Tax limit was reduced in 1915 from £160 per annum to £130 per annum we were then informed from all sides of the House that the working classes of the country would be very willing indeed to bear their share of the cost of the War. Accordingly, the Income Tax limit was reduced, in order to rope them in. Since then the cost of living has increased enormously, and these people with low incomes, who for the first time were then roped in, are now finding that the strain that has been put upon them is an excessive one. I am perfectly safe in saying that the cost of living has risen by at least 80 per cent. It is no doubt true that there have been certain advances in wages. Certain advances in wages have been secured by most sections of the industrial classes of this country. There are some people who have had no advance, but, generally speaking, advances in wages have been secured. These advances in wages may be said to range from 15 per cent. to 65 per cent. but in no case, as far as I know, has it equalled the increase that has taken place in the cost of living. Consequently, persons with small incomes who, for the first time, have been roped in by the lowering of the Income Tax limit from £150 to £130 are feeling the strain much more severely now than they felt it when the tax was imposed in 1915. I know that to give effect to my suggestion would mean a considerable loss to the Revenue, but there are other directions in which the right hon. Gentleman could recoup himself, even if the principle embodied in the Amendment were carried to a much larger extent than I propose. Taxation should be imposed on that section of people who are best able to bear it. The parties covered by my Amendment are those less able to bear it. They should have some relief and the amount payable by those with larger incomes should be increased as their income increases. I hope that in the interests of fair play to all sections of our people the Chancellor of the Exchequer will be prepared to give serious consideration to the Amendment.


It may perhaps appear inconsistent for me to support the Amendment when I have so often argued in favour of developing and extending the Income Tax downwards, and the effect of taxation upon wages. But I have always been careful when arguing in favour of extending the Income Tax right down the scale to couple it with the abolition of food taxes. When I have addressed my own constituency, which is an industrial constituency, they have expressed themselves as preferring that there should be, as promised, a Commission to consider the development and extension of the Income Tax—that would be much more popular among the working classes and those in receipt of small incomes—and that we should abolish all food taxes. But, inasmuch as we have not got that, and we have to deal with things as they are, and, remembering that the largely increased cost of living presses very hard upon those leastable to bear it, the same arguments which I submitted in favour of the abolition of the sugar increase would be equally applicable to this proposal. It is particularly civil servants, old age pensioners, and those in receipt of fixed incomes and separation allowances who feel this terrible impress of the continual increase in the cost of living, and, therefore, they deserve some consideration. I hope the right hon. Gentleman will meet my right hon. Friend by some such reduction as is embodied in the Amendment. It is this class of people, who have very little political organisation, and very few representatives to speak for them, and yet who feel unquestionably this ever-increasing cost of living who ought to have some redress. We have denied them the remedy which might have been accorded if we had not voted for an increase in the Sugar Duty. They felt these increases on tea, sugar and so forth, and therefore as we have not given them any satisfaction on those lines, we ought to support the Amendment.

Colonel Sir C. SEELY

I have great diffidence in pressing the right hon. Gentleman for any concession on account of Income Tax, because he has made us the concession, for which we have pressed for a long time, of including dependents in the children's allowance. But I should like to ask him whether he will consider this Amendment carefully, not with a view to accepting it exactly in the form in which it stands, but of making some rather larger concession than he does in the present Bill to small incomes. I have never much liked the imposing of Income Tax upon wage-earners, and have always doubted whether it was a very wise arrangement, and whether it was sufficiently productive to make it worth the trouble and difficulty of collecting. I am aware that there has been very great dissatisfaction with it, and considerable difficulty with regard to it. Taxes are never really productive unless they are paid more or less willingly. It may be said that no tax is paid willingly, but I think English taxes on the whole are not resisted. They are not regarded in such a manner as to make any real resistance to their payment, and I feel that, with regard to this lowering of the amount of assessment there has arisen a difficulty with regard to its collection and a feeling against it which is rather new, and which it would be a very good thing if we could remedy. If something like the present suggestion were adopted, and if the graduation were continued so as to give a still lower graduation for a very small increase, it would be more willingly paid, and you might really not lose as much by your action as would appear to be the case on the face of the proposal.

Persons who have been recently put into the class of Income Tax payers should not be called upon to pay 2s. 3d. in the £l, which, after all, to the old Income Tax payers, would have been considered perfectly horrible, although now we have got accustomed to much larger amounts. Therefore if the right hon. Gentleman would consider, not necessarily adopting the suggestion in its entirety, but some further continuation of this system of graduation, he would not only be making a very great concession, which would be very much appreciated, but would make the whole principle of imposing Income Tax upon wage earners more generally accepted, and if it is to be done and to be continued, and if it is to be a productive tax, he may make up his mind that he will not do it unless he makes them satisfied with it. If he makes them satisfied with it, it may become a permanent source of revenue. If they go on in their present frame of mind with regard to it, it will be purely a temporary measure, and certain money will be collected with a great deal of friction and a considerable amount of loss, because there has been definite loss to the country. There are not many cases, but I have known of people who attended their work rather less in order to keep themselves out of the Income Tax level. There has been a sort of understanding that so many days' work would mean so much money, and therefore if you do only a small amount of days' work you would not be on the list. If the right hon. Gentleman had adopted a suggestion of this kind and made these people a little further concession, and said, "Although we are obliged to put Income Tax upon you, we will graduate it to the best of our ability, and make it relative to the amount that you can afford," he might have put an end to that ill-feeling with regard to it which has, I think, been unfortunate and to a certain extent disadvantageous to the country. May I thank the right hon. Gentleman for what he has done with regard to his abatement of Income Tax?

6.0 p.m.

Colonel THORNE

The Chancellor of the Exchequer knows the views of the organised workers quite well, because deputations have waited upon him on one or two occasions with regard to the Income Tax which is now charged upon wage earners. I belong to an economic organisation which for thirty-five years has advocated that no one should be taxed who is receiving less than £300 per annum. I believe no direct taxation should be imposed upon anyone unless he has sufficient to provide wife and children with the necessaries of life. There are a good many wage earners earning perhaps £150 or £200 who have to pay Income Tax. No one will make me believe that a man receiving less than £200 per annum, with the present price of commodities, not only food, but clothing, fruit, and everything you can think of, can provide for a family. This is a very reasonable concession that we are asking. There are a number of workmen who are called upon to pay Income Tax simply because they work overtime and on Sundays. That is a great hardship. They are doing extra work for the benefit of the country, and I do not think they should be called upon to pay this tax. I am not in a position to say, and I do not know whether the Chancellor of the Exhequer is in a position to say, what would be the exact cost to the Treasury assuming this Amendment was agreed to. He indicates that it may amount to a very considerable sum. I recognise, on the other hand, that if concessions are made in this direction it means a loss to the Treasury which some of us will have to make up. If it means a few hundred thousand pounds of cost to the nation, some other way must be found to make up the money, seeing that the Chancellor of the Exchequer has budgeted for a certain amount. I am hoping he will have a surplus. At any rate, there are any number of people in this country who could well afford to pay a great deal more money than they are doing to-day, considering the huge incomes that some people are receiving. A few thousands from some people would not hurt them so much as the burden would hurt the wage earners who are only getting £200 a year. In all these matters of taxation I think the burden should be put on the shoulders of those who are well able to bear it. I am afraid that our pleading will be of no avail, because the Chancellor of the Exchequer has made up his mind that he cannot make any concession because of the diminution of revenue that would occur if this concession was granted. He knows the feeling of the organised workers upon this matter, because the Trade Union Congress on several occasions has passed resolutions which say that so far as the total amount of income is concerned it should either be raised or the tax should be reduced. I would urge the Chancellor of the Exchequer to give us some concession if he cannot give us all we ask for.


I do not know whether my right hon. Friend expects us to substitute this scale for the existing one, but I am afraid that this year it will be impossible for us to make the change he desires. Though I do not propose to speak at length on this matter, I think it is only fair that the Committee should realise that the Government have taken steps to ease the working of the Income Tax year after year, and have done something to make the incidence of it less burdensome than it might have been. My hon. Friend the Member for West Ham (Colonel Thorne) spoke quite naturally when he said it seems very hard that a man with a family should pay Income Tax if he had only from £150 to £200 a year. There will be very general sympathy with that, but there is very often in dealing with this matter much more sympathy than there is accurate knowledge of what the incidence of the Income Tax really is to-day. While the income has been increased this year by a Is., it has been left at the old rate of 2s. 3d. on incomes of less than £500 a year. In addition, there is an allowance now of £25 a year for a wife, and also an allowance for each child under sixteen years of age. There is also an allowance—a subject in which the hon. Baronet (Sir C. Seely) is interested—in respect of dependent relatives. These are real and substantial concessions, and in effect it means that a married man with his wife living does not become subject to Income Tax until his income is more than £145 a year. If a married man has two small children, he goes up to within £5 of £200 a year before he pays Income Tax. Therefore, it is quite true to say, broadly, that any working man with a small family is exempt from Income Tax until his income is over £200 a year. That is not taking into account the possibility of dependent relatives living with him. There is also a small allowance for tools, working clothes, and death benefits. I admit quite frankly that our schedules of Income Tax as yet are not perfect. I do not suppose they ever will be, but I maintain that we are trying to improve them. I must take my stand now and say that as far as this year goes we have done all that we can see our way to do at a time like this, and I cannot hold out any hope of meeting the right hon. Gentleman and his Friends.

Amendment negatived.

Clause ordered to stand part of the Bill.