CLAUSE 21.—(Graduation of Tax on Unearned Income in Case of Incomes not Exceeding £2,000.) (Hansard, 3 June 1918)

§ Sir R. ADKINS
I beg to move, to leave out the words "Three shillings," and to insert instead thereof the words "Two shillings and sixpence."
I move this not only for the purpose of asking the Chancellor of the Exchequer to accept the Amendment, but because I want to raise the issue that lies behind the proposal. We are now dealing with unearned income. The rate of tax on unearned income is naturally higher in this Bill than the rate on earned income. It so happens that the new scale in this Bill raises the tax on unearned incomes 1298 more steeply than it does on other incomes, and when you are dealing with the lower limit of unearned income, under £500, you are dealing with a certain class of the community that is perhaps of all classes the most helpless financially in view of the increased cost of nearly everything these people have to buy. You are dealing with persons who have small incomes which they are not earning. The bulk of them are persons whose capacity of earning is very little. They are living on the thrift either of their ancestors or of themselves, and they are placed by the conditions of a war like this in a position of peculiar hardship and difficulty. Where income is earned it is possible by various means that the rate of pay may be and ought to be increased to meet the possible increase in the cost of livelihood. But where you are dealing with small unearned incomes, there is no such method by which to relieve the acute pressure caused by the economic conditions of a war like this. You are dealing with a number of people who are particularly helpless and who cannot get back in any other way the additional burden which is put upon them. While I fully admit that yon ought to tax unearned incomes, small as well as great, on a higher rate than earned incomes, to keep up that important distinction, I do think the Government should take some notice of the extreme pressure under which this class of the community now lives, and that so long as they are preserving that distinction, and so long as they are increasing somewhat the burden which this class bears, they might see their way not to make the increase so stiff as they have done. In regard to this class of persons whose income does not exceed £500 a year, perhaps only £250 or £300, 2s. 6d. in, the£ is surely adequate to make them feel their full proportion of financial burden which every member of the community ought in war time to bear. If the right hon. Gentleman will compare the scale he will find that this increase comes most steeply upon this class than upon any other class in the community, and it is because of their special economic helplessness that I make this appeal.

§ Mr. BONAR LAW
My hon. and learned Friend has moved this Amendment to draw the attention of the Committee to the matter rather than having any hope that it will be possible to do anything at the present time. As a matter of fact, 1299 up to £500 we are leaving the taxation exactly where it was before, and to make the alteration which he proposes at a time like this, when we are imposing £114,000,000 of additional taxation, would be actually to make a reduction in this case. I do not think that he can expect us to do that. I recognise very fully the appeal which he has put forward in favour of people with small incomes which are called unearned. They do represent, as he has truly said, either the thrift of friends who have left it to them or the thrift of husbands who have left the incomes to their widows, or in some cases it is the thrift of the people themselves. At a time like this, when, as we all know, the high cost of living presses in actual result quite as severely, so far as my experience goes, on many people above the £500 scale as it does upon those below that limit, because people cannot really change their habits. I admit when we take all into account there is a strong case for the proposal which he has made, but for the reason I have given, that we are imposing an immense sum of new taxation, we cannot forego it in this case, and so far as this year is concerned, I can hold out no hope of doing so.

§ Mr. LOUGH
I suppose my hon. and learned Friend will not be entirely disappointed with the answer he has received. If he is, I can sympathise with him. There is one further point in regard to this matter which I will tack on to this discussion rather than move an Amendment about it. At the very high rate which Income Tax has now reached those whose incomes are over £500 a year are hit very hard. If the Chancellor of the Exchequer will agree to consider the grades scale from £500 to £1,000 he might say that those from £500 a year to £750 should be at a lower rate, and those from £750 to £1,000 at a higher rate. By a little adjustment the matter might be dealt with satisfactorily. By the present rate of Income Tax those in receipt of small incomes, £300, £400, or £450 a year must feel the tax a terrible reduction at a time when the cost of living is so great. If my right hon. Friend will agree to look into this question, if not now, at any rate in the next Bill, and meantime consider between, now and the Report stage whether, on this matter of the £500 step, which might have been reasonable enough formerly, a change 1300 is required now, he would confer great benefit on great numbers of the community.

§ Sir R. ADKINS
I hope that between now and the Report stage the Chancellor of the Exchequer will consider the steepness of the steps. I ask leave to withdraw my Amendment.