§ The debit balance of capital account of any trade or business referred to in Section fifty of the Finance Act of 1916 shall be construed as the amount of lost capital at the end of the last pre-war trade yea and shall not be limited to a deficiency of assets as against liabilities as defined by Part III., Fourth Schedule, of the principal Act.—[Mr. A. Strauss.]
§ Brought up, and read the first time.
§ Mr. A. STRAUSS
I beg to move, "That the Clause be read a second time."
This new Clause deals with the difficult and complicated question of debit balances of capital, and I trust the Financial Secretary to the Treasury will give us some definition of the Section of the Act of 1916, which will be sufficient to make the Clause which I move unnecessary.
§ Mr. BALDWIN (Joint Financial Secretary to the Treasury)
I think my hon. Friend has been under a misapprehension in thinking a new Clause is necessary to give effect to what he desires. He seems to be under the impression that in some way there is a collision between Section 50 of the Finance Act, 1916, and paragraph (7) of Schedule 4 of the 2nd Finance Act, 1915, but I think I can make the point quite clear if I give him an instance, and I think I can show him that the law as it stands meets the case which I believe to be in his mind. Let him imagine a business with a capital of £5,000 and which in the pre-war year's trading, which comes to be calculated for the purposes of the Excess Profits Tax, has made a loss of £8,000. That would lead to what some people call a capital of minus £3,000, and I think what the hon. Member wants to know is this, namely, how much may be allowed before the Excess Profits Duty begins to operate? The answer is the whole £8,000; that is, the whole of the loss, and that is the effect of the law as it stands. Although it is a complicated question, what I understand the hon. Member desires by his new Clause is to give effect to that which I have shown him already exists. I trust my explanation may be satisfactory to him and that he will see his way to withdraw his Amendment.
§ Question put, and negatived.2430
§ NEW CLAUSE.—(Assessment of Manses.)
§ Where a clergyman or minister of any religious denomination is in occupation of a manse vested in trustees for the benefit of the congregation over which the minister has charge and where such house or manse is occupied by him as part of his stipend and emoluments the valuation of such house or manse shall be assesed as earned income and shall not be assessed under Schedule A.—[Mr. Coote.]
§ Brought up, and read the first time.
I beg to move,That the Clause be read a second time.I am speaking on behalf of the Presbyterian Church in Ireland, in regard to the large number of manses which they hold there. The Minister in connection with the Presbyterian Church in Ireland whose income exceeds £120 per year is liable to Income Tax on his earned income, and is also chargeable for his manse under Schedule A, simply because he occupies it, and, inasmuch as it is held by trustees for the benefit of the congregation, the Commissioners say the Minister must, in the first instance, pay Income Tax under Schedule A, and then apply to the trustees by way of having it deducted from his rent. In most of these manses the Minister does not pay any rent, and therefore he cannot get a refund of this tax from the trustees, so that he is obliged to pay Income Tax on earned income and also under Schedule A. These trustees simply hold the trust for the benefit of the congregation. They are in many cases men without very large means, and they themselves are not liable to Income Tax, and if they were an individual they would not be charge-able nor would the house which they hold in trust, if it were their own, be charge-able under Schedule A. This is a position, therefore, which is really intolerable in face of the fact that the tax is now increased to such an extent, and may continue at this and probably a, larger amount for some years to come. It has been represented, I believe, from the General Assembly of the Presbyterian Church to the Chancellor of the Exchequer that if he would look upon the valuation of the manse as the earned income of the clergyman and tax the clergy man as such, in so far as the amount of the valuation of the manse is concerned, it might meet the case. When a minister takes charge of a congregation he is offered a certain stipend by that congregation, plus a manse free of rent, so that I submit that the occupation 2431 of this house should be taken as part of his earned income, and, if it were, it would simplify the whole matter and avoid a great deal of friction which is going on at the present time in connection with manses in Ireland.
§ General McCALMONT
I beg to second the Motion.
Even if, as I fear, my hon. Friend is a little late in making his appeal, and if it ought to have been done at an earlier stage, I hope, not as being a member of the Presbyterian Church but as representing a constituency which very largely consists of Presbyterians, the Chancellor of the Exchequer will give this matter his very sympathetic consideration. I think it is a very genuine grievance, and one which could be removed without a very great loss.
§ Mr. BALDWIN
We have given very careful consideration to the Clause which has just been moved by the hon. Member for South Tyrone, and there is a very strong ease to be made for the amendment in the law that he desires. This is not specially an Irish grievance. The same difficulty is found in the Free Church of Scotland, but my hon. and gallant Friend who spoke last touched the point when he said he was afraid it was too late for us to do anything this year. I am advised that if we were to make the necessary change we should be increasing the charge on some of the subjects, and we should require a Resolution to do that. In these circumstances we very much regret that we are unable to meet him on this occasion, but we do feel that this is a matter which requires amendment, and we shall be quite prepared, if we happen to occupy the positions we do now another year, to give it favourable consideration when the right time arises.
§ Colonel GRETTON
May I say that this is not an exclusively Scottish or Irish case. The case also exists in England, and of course it would not be right that the Irish and Scottish cases should be dealt with unless the English case were considered also. I only want to make the appeal that the English case should not be left out.
§ Question put, and negatived.
§ Clause 11.—(Reduction in Certain Cases of Entertainment Tax.)
§ On and after the first day of October, nineteen hundred and eighteen, Section one of the 2432 Finance (New Duties) Act, 1916, as amended by Section three of the Finance Act, 1917, shall have effect as if for the words—
|"does not exceed 2d.||½d.|
|exceeds 2d. and does not exceed||4d.||1d.|
|exceedsc 4d. and does not exceed||6d.||2d.|
|exceeds 6d. and does not exceed||1s.||0d.||3d.,"|
|there were substituted the words—|
|"does not exceed 2½d.||½d.|
|exceeds 2½d. and does not exceed||4d||1d.|
|exceeds 4d. and does not exceed||7d.||2d|
|exceeds 7d. and does not exceed||Is.||0d.||3d."|
§ Mr. BONAR LAW
I beg to move to leave out the word "October," and to insert instead thereof the word "August,"
§ Sir J. D. REES
my Amendment which follows—[to insert the word "July"]— was only put down as a counsel of perfection, and those interested in the Entertainments Duty not only are consenting to the Chancellor's Amendment, but are really very grateful to him for the courtesy and consideration he has given to their case.The action he now takes meets with their complete approval, and gives them complete satisfaction. This is the more gratifying, for it is not in all quarters that the merits of places of amusement are recognised. There are some who only criticise them, and that fact makes it the more acceptable to them that they should have received such courtesy and complete consideration as they have at the hands of the Chancellor of the Exchequer.
§ Amendment agreed to.
§ CLAUSE 21.—(Charge of Schedule B Tax.)
§ Sections twenty-six and twenty-seven of the Finance Act, 1896 (which relate respectively to the application of the Income Tax Acts and to annual value for the purpose of exemption from or abatement of Income Tax under Schedule B), shall, as respects Income Tax under Schedule B, have effect as if for the references to one-third of the annual value there were substituted references to an amount equal to twice the annual value:
§ Provided that where it is proved to the satisfaction of the Income Tax Commissioners concerned that any person occupying any lands and assessed to Income Tax in respect thereof under Schedule B is not occupying those lands for the purposes of husbandry only. or mainly for those purposes, the above provision shall. unless the board of Agriculture and Fisheries, on a reference to the Board by the Commissioners of Inland Revenue, certify that the use of the lands by that person for purposes other than purposes of husbandry is unreasonable, apply in relation to those lands as if for the reference to an amount equal to twice the annual value there were substituted a reference to an amount equal to the annual value.2433
§ The expression "Board of Agriculture and Fisheries" means in the application of this Section to Scotland the Board of Agriculture for Scotland, and in the application of this Section to Ireland the Department of Agriculture and Technical Instruction for Ireland.
§ Sir J. BOYTON
I beg to move, at the end of the first paragraph, to insert the words,and as if in Section twenty-seven, after the words husbandry only,' the following words were inserted: 'or used for charitable purposes or hond fide for purposes of games or recreation without any view to the payment of any dividend or profit out of the revenue thereof.I put down an Amendment in similar terms on the Committee stage of the Bill, and I was induced to put it down again now by the sympathetic reply which the Chancellor of the Exchequer gave on that occasion. The point is raised in connection with many of the playing fields of London and elsewhere, and particularly in connection with the London Playing fields Society. They have many playing fields, although they are not so numerous as they were before the War, owing to the fact that many of their previous players are now engaged in a much more serious business. But while some of the fields have had to be given up, others remain, and are made a certain amount of use of. The proposed taxation assessing them for Income Tax not only on Schedule A, but also on Schedule B, even though reduced, as the Chancellor of the Exchequer has agreed to reduce it, to one year only, because the land is not used solely for husbandry, will be very oppressive. The farmer, under the original Act of 1896, paid tax on his occupied land for one-third of the annual value. It was pointed out that he might be getting unduly rich, and that it was difficult at all times to assess his Income Tax, and it was decided that he should pay his occupation tax under Schedule B, on one year's annual value; and that has now been increased to two years. But whether it is one year or two years, r-o far as the playing fields are concerned, is immaterial, because one year is quite sufficient to kill charitable organisations of this kind. They cannot pay under Schedule A property tax, and under Schedule B occupation tax.
I will explain to the House the position of the playing fields of this society, generously given by the Goldsmiths Company. At the instance of the late Lord Alverstone, they purchased the property at £3,000, and only charged this 2434 society 10s. a year. That particular piece of land is assessed under Schedule A at 6s. in the £ on the net annual value. That comes to £20 7s. 6d., and, under Schedule B, it is assessed on the full annual value, namely, at £23 8s.; making together £43 15s. 6d. taxation on a piece of land assessed at £78 by the local authorities. That is equal to 11s. 3d. in the £, so that it is practically impossible for societies of this kind to carry on. Whilst the people they formerly helped, the youth of the land are away, yet there are many munition workers who still remain and youths under eighteen who are still able to enjoy the facilities which the society affords. But their utility must be ruled entirely out, and the playing fields given up, unless the Chancellor of the Exchequer can sympathetically consider placing them in the same position as he did the farmers. This particular society lost £961\ last year, and had it not been for the City Parochial Charity coming forward with the magnificent gift of £1,000 it would have had to shut up shop, but you cannot constantly appeal to people to put their hands in their pockets to help you to pay Income Tax, and it would be a thousand pities if many of these playing fields were closed. I do hope, therefore, that the Chancellor of the Exchequer will see his way to give some very material relief. We used to rub along by paying property tax on the annual value and on one-third of Schedule B, and if we could go back to that state of affairs it would be a very great help.
§ 5.0 P.M.
§ Mr. BONAR LAW
I am sure everyone will sympathise with the object which my hon. Friend has in view. But I do not see how it is possible for me to accept this Amendment or anything like it. Probably some Members of the House think that what is proposed in this Budget adds to the burdens of such a society as that to which my hon. Friend has referred. But that is not the case. The Amendment which I have made in the Bill leaves these societies in precisely the same position as they were in two or three years ago. What my hon. Friend really wishes is to get preferential conditions for bodies like the Playing Fields Association. Everyone likes to see such institutions flourish, but I do not think that relieving them from taxation is the right way to help them. 2435 Let me point out why that must be so. The suggestion is that they should come under Schedule D. The basis of the claim is that they are not out to make incomes, and should not be assessed upon income which it is part of their constitution they should not make. Already under the law playing fields, public parks, or recreation grounds kept solely for the purposes of charity, and held under public trustees for that purpose, are exempt from taxation altogether. If they are in that position they do not pay taxation. From many points of view one would like to see the Playing Fields Association in the same position. But that cannot be done for this reason, that everybody is not put on the same footing. The fields are let out to clubs and are not available for the general public. May I point out to the House what the effect of this Amendment would be? It would enable the richest golf club, if it chose to take a farm in any part of the Kingdom, to run it on a mutual basis, not proprietorial, and to escape taxation altogether. Obviously that is not a reasonable thing. I have discussed this matter with my advisers, and even supposing one may consider that taxation is not the proper method of dealing with these things, I do not think—when I remind my hon. Friend that this year we are adding £11 4,000,000 to the taxation of the country—we should be justified in accepting his proposal. I hope, under the circumstances, he will not press it.
§ Amendment, by leave, withdrawn.
§ Sir R. NEWMAN
I beg to move, at the end of the first paragraph, to insert the words,Provided, nevertheless, that this Section shall not apply to a small holding as defined by Section 61 of the Small Holdings Act, 1908, unless such holding shall be of the annual value of not less than sixty-five pounds.I am afraid I must crave the indulgence of the House in moving this Amendment. I am extremely sorry the hon. and gallant Member for the Wilton Division (Captain Sir C. Bathurst) is not here to bring this matter forward, because he could speak with much greater authority than I, a young Member of the House, can hope to do. If I put my case very badly I am quite sure the Chancellor of the Exchequer will not let those whose cause I am advocating suffer for that reason. I quite realise the difficult position in which the Chancellor of the Exchequer is placed by having to budget for an enormous sum 2436 of money, and I have far too high an opinion of the right hon. Gentleman's sympathies with the small holders to press this proposal to a Division against his wish. But I would be glad if he can possibly see his way to help these very small and deserving men in the position of great difficulty in which they will be placed by the proposals of the Budget. I was not a Member of the House when the right hon. Gentleman introduced his Budget, but I understand that he then laid it down that this was an experimental proposal and that the basis of rent was not a satisfactory basis, because some of these holdings are much more highly rented than others, but he took the basis of rent as a rough and tumble way of getting at the value. The right hon. Gentleman pointed out that the farmers themselves would have it in their power to appeal to be assessed under Schedule D. But the particular agriculturists for whom I am speaking—smallholders—are a class who I am sure hon. Members will agree are entitled to the greatest sympathy and consideration. They are very hard-worked, they are not men who, as a rule, have had university education, they are small men in every sense of the word, but they put their earnings into the land and they try to produce as much food as possible. I understand that under the Bill any smallholder who pays the rent of £65 a year will become liable to Income Tax. I think hon. Members will agree with me that as a rule the smallholder holds the most highly rented land in the whole agricultural industry. I know of cases in which land has been let to large farmers at 25s. per acre, while for exactly similar land the smallholder is called upon to pay over £2 or more per acre. That is by no means an uncommon occurrence. If a small holder has to pay a rent of £2 per acre it will only need that he should hold 32½ acres in order to render him liable to be assessed for Income Tax, it being assumed that he is making a profit of over £4 per acre. But in many cases these men are not doing anything of the kind.
The right hon. Gentleman will tell me that they can claim to be assessed under Schedue D, but I think he will agree that there is no class of the community that would have greater difficulty in getting relief under ScheduleD\ than these small men. When we have secured the advantages of the educational reforms now being promoted by the right hon. Gentle- 2437 man the President of the Board of Education, and when those reforms are bearing fruit, as we hope they will, then perhaps a smallholder, like everybody else, will be in a position to claim to be assessed under Schedule D. But I do not think that the average smallholder to-day is capable of producing accounts and returns in a way which is likely to secure him full justice when the Income Tax is being assessed. I have had a good deal of experience in connection with smallholders, and I know how extremely difficult it is for them to produce such returns as would convince the Commissioners of Income Tax as to their real income. I agree with the Chancellor of the Exchequer that the bigger farmer may be able to get assessed under Schedule D, but a great number of these small men, although they are paying very high rents, are not sufficiently educated to do that. The right hon. Gentleman admitted that this is really a rough-and-tumble way of getting at the profit on the land. We know that the smallholder in nine cases out of ten is highly rented. Would it be possible for the right hon. Gentleman to try his experiment in the first place on the bigger farmer, say for the first year, and see how the principle works out, before putting this additional burden on the smallholder? I am glad to see that the hon. and gallant Member for the Wilton Division has now arrived, and I am sure I may leave it to him to put further arguments in support of the case for these men.
Captain S. WILSON
I beg to second the Amendment.
The House will readily admit that the smallholder is a most deserving man. Invariably he pays a much higher rent than the larger farmer, and I think that, on this ground alone, the Chancellor of the Exchequer might be persuaded to give favourable consideration to this Amendment.
§ Mr. RENDALL
In rising to ask the Chancellor of the Exchequer not to accept the Amendment, I think I ought to say why I do so. We listened with great pleasure to the speech of the hon. Member who moved it, and I am sure he carried with him the sympathy of the House. But it is only fair that members who have, from time to time, year after year, pressed the Chancellor of the Exchequer to make the proposal which is actually embodied in this Budget, should admit that they 2438 have taken that course and should congratulate him on having given way to their invitation. Most of us have been moving Amendments either to reduce taxation or to relieve certain persons from it altogether, but it is very unfair to the Chancellor of the Exchequer when members of the House, who from time to time have pressed him to introduce reforms of one kind or another in order to make taxation fairer over the country generally, abstain from saying that they have done so when he is urged to go back upon those reforms. I have risen to admit my own guilt in the matter of pressing this particular reform on the Chancellor of the Exchequer, and, therefore, I feel bound to defend the Clause as it stands in the Bill. But I would like to point out to my hon. Friend who moved this Amendment that the smallholder, whose rent is £60, and who is to pay Income Tax on an assessment of over £130, will get the ordinary abatement before being called upon to pay any Income Tax at all. He will, therefore, if I may say so, have to be a very large smallholder before he becomes liable to Income Tax, and a far more considerable person than one who is only farming 32½ acres of land. I think too much has been made of the point that farmers find it impossible to keep books, and therefore cannot be expected to ask to be assessed under Schedule D. It is perfectly well known that a large number of farmers do keep accounts, although they may not want to show them to the Income Tax Commissioners; indeed, they would be very unhappy if they were called upon to produce them. They will be content to pay on that double rent, but that most farmers can and do keep accounts I have no doubt whatever. There is another very good reason why they should keep accounts, because if they should be so unfortunate as to fail to pay 20s. in the £1 and be made bankrupts under the Bankruptcy Law it is a criminal offence not to keep accounts.
§ Mr. RENDALL
As regards the small tenant, he is, as a rule, a very enterprising person. He is not at all lethargic, but gets on by reason of his industry and capacity for keeping the accounts of the small allotment, of poultry, pigs, market gardens. and the various other small kinds of agricultural work, in order to 2439 show whether the different varieties of work which the smallholder does really pay. Therefore, I think he will have no difficulty at all in keeping accounts, and if this is going to help and encourage him to do so it will have a twofold advantage for the smallholder. I think it is most desirable, if it will have that effect, that it should remain as it is. The smallholder who is carrying on a business and taking from day to day or week to week his produce into the market town must, or ought, to keep books, or, if he does not, he will very soon get into difficulties. He will be able to keep books and to show the Revenue officials that he has not made an income under Schedule D on which he can be made to pay Income Tax. If he is not able or willing to do that he must pay on his double rent, and that is so small and the abatements to which he is entitled are so great that he will pay practically nothing at all. On the whole, therefore, I trust that this Amendment will not be accepted.
§ Colonel GRETTON
I think the Chancellor of the Exchequer would have heard a great deal more of this matter if it had not been generally held that a man who rented at less than £65 should be free of Income Tax if it was his only source of income. I know that this is the view taken by a very great number of persons, and that it is the one which is generally held. It this be correct, as I understand that it is, the Amendment is of no effect in the case of the genuine smallholder. As regards the taxation of small holdings there are various classes. There are some very poor smallholders struggling with great difficulty and yielding no adequate profit for the labour involved. There may be an economical reason for taxing these out of existence, but I hope, as a matter of policy, that the Chancellor of the Exchequer will not do so, and that those who are struggling along on a small holding of a poor character will not be driven off by any action of the Government, but will be allowed to work out their own salvation and improve their holdings.
§ Captain Sir C. BATHURST
I desire to support the Amendment moved by my hon. Friend (Sir R. Newman), and I have to express my regret that I was not in the House to hear the arguments which he put before it in support of this proposal. I have never been happy about the arrangements under which the occupiers 2440 of agricultural land are in future, or at any rate under this Finance Bill, to be taxed upon what is alleged to be their income, and I have not hesitated to state my objections to the two alternatives which are presented to them, the first being—and I do not think that even my right hon. Friend the Chancellor of the Exchequer will contradict me when I say —quite illogical and calculated to operate most unevenly between one occupier of agricultural land and another. The alternative that we have presented to us is one that I am bound to say I have always found difficult to answer—that is, Schedule D. "If Schedule B operates unfairly, if it does create all these inequalities of treatment of which you complain, the answer is Schedule B. Let him choose to be taxed on his real income." I believe there is no answer to that in the case of the ordinary occupier of agricultural land, generally known as the farmer. Of course, I have always put forward in this House very strongly that if that is the case Schedule D is the basis upon which all persons in this country should be assessed, including the farmers. The Chancellor of the Exchequer, in answer to that argument, says, "Yes, but you must give them time because, on your own showing, they are not in the habit of keeping books." The answer to that is that in a very large number of instances they do not keep books. I have to admit it, but in most cases I have also to admit that they are quite capable of keeping books. They are sufficiently well educated, and, considering the large turnover of their businesses at the present time, it is very difficult to say with any conviction that books should not be kept. But that does not apply to these small men to whom this Amendment refers. The majority of these men—when I say the majority, at any rate those who have been created by the Smallholdings Acts—are agricultural labourers. They must be regarded not from the point of view of traders in agricultural produce, but from the point of view of agricultural labourers who have not been brought up to carry on an agricultural business on their own account, but who, as a result of their success as agricultural workers and their own thrift, do find themselves, late in life in most cases, in occupation of a small area of agricultural land.
Bearing that in mind, I ask the House to consider how these two alternatives will operate upon that small class. In the first place, the first alternative is six times 2441 the assessment of three years ago, or, putting it in a different way, twice the annual value, reckoned in rent, of the land which they occupy. It is admitted, to start with, that these are people who do pay per acre considerably more than the holders of large tracts of agricultural land. The men, in fact, who are making large profits as farmers during this War are, taken as a whole, men who are paying low rents, to be found very largely in the East of England, who are low rented as compared with the grass farmers of the West, and low rented as compared with the smallholders everywhere, particularly those who occupy grass land, which a very large proportion of them do. Surely it is impossible to argue on any basis of equity that these men can afford to pay on the basis of twice the high rent which they are paying for their land. What is the alternative? The alternative is Schedule B. The Chancellor of the Exchequer himself admits that there are a large number of people not only who do not keep books, but who are not qualified at present to keep books. They have a good deal to learn before they can present a fair balance sheet for the purposes of the Inland Revenue Commissioners. That is the very class which is least qualified to keep accounts, and which would naturally fall back on Schedule B, and in the case of Schedule B it will operate with such undue severity that it is obviously not a basis they should choose. These are men who ought not to be regarded as farmers, but as industrious labourers, and it is because they are industrious labourers that the majority of them find themselves in occupation of these small tracts of agricultural land. There is something else I want to say in this connection. It is said that farmers as a class are making large profits at the present time. Can anyone in this House get up and assure the House that that applies to the smallholders created by the Smallholdings Acts? I am perfectly confident that no man could with any truth suggest such a thing; and for this reason. All raw materials of farming have become exceedingly expensive and are going up steadily in price, and these men are just the people who because they have to buy their raw materials in small quantities have to pay for them at the top of the market, and who, because of their comparatively small output, are unable to sell their products, either on Government account or otherwise, at such a price as to enable them to 2442 make the profits which the larger farmers are able to realise. The figure put in this Bill as a limit is £65, in order that they may be placed, as in fact they would be if they were in any business, under the Income Tax limit. I venture to suggest to the Chancellor of the Exchequer that, this class, above all others in the country, is one upon whom you should not attempt to impose anything in the nature of an unfair burden. It is a class whose pluck, courage, and determination you want to keep up if they are to carry on the difficult and often thankless tasks they have to perform with any profit to themselves or the community at large. I hope the Chancellor of the Exchequer may make this concession, and if he does I am sure he will never regret having done so
§ Mr. BONAR LAW
The hon. Member for Exeter (Sir R. Newman) rather apologised for his inability to put this case with sufficient eloquence. I do not think that apology was necessary. The case was put extremely clearly, and if we add to what he has said the other speeches to which we have listened I think it has been put with much greater force than the magnitude of the evil which they are trying to remedy requires. Let me put to the House what it means. As the hon. Gentleman (Mr. Rendall) pointed out, if a man has no other income than the £65 he will not pay anything unless it is precisely £65. If his rent is £64 19s. 11½d. he will pay no taxation at all. Therefore, it has very little meaning from that point of view. I would like, also, to point this out. The number of smallholders in any real sense of the word which go up to £65 must be extremely small, and in their case I do not think there would be a hardship, assuming they had a small amount of Income Tax to pay in being put on the same footing as other people, and having to pay under Schedule D. I admit that. they may have difficulty in making their accounts, but, as I have pointed out, the President of the Board of Agriculture has undertaken, as the friend of the farmer, to assist in any case of that kind, and if there be any considerable number affected I am quite sure they will find there is no hardship in practice. This Amendment, if it has any real effect at all, is intended for another purpose, I presume. It means that, assuming somebody has other income, this is not to be added in bringing the money under Income Tax It really has no meaning otherwise, 2443 because it limits them to under £65. In addition to that, let me point out to my hon. Friends that the amount of the tax apart from any other income can only be infinitesimal, because if the income is only £130 a man will pay very little—if he has one wife he pays nothing, and if he has a wife and children he can pay a much bigger rental than this. It really, then, has no direct object unless it be to save a man from paying Income Tax where his total income comes above the limit on account of what he gets here. If that were the object—and I am glad my hon. Friend says it is not—what would be the effect? I think it would be very unfair that farmers not precisely coming under the definition of the Amendment, whose whole livelihood depends on farming, should pay a greater amount, say, than a shopkeeper, who, in addition to his shop, has a small holding. I wish my hon. Friends to realise that I, like every Member of the House, am most anxious to encourage small holdings, and if I thought anything we were doing would discourage them, I should not make such a proposal. I am sure it will not have that effect, and I would suggest to my hon. Friends that it is not worth while pressing the Amendment now, but that they should wait, and I am greatly mistaken if they do not find that in this particular case no hardship will be inflicted.
§ Amendment, by leave, withdrawn.
§ CLAUSE 22.—(Continuance of Certain Belief from Income Tax.)
§ The provisions of Section twenty-nine, Section thirty (as amended and extended by Section eleven of the Finance Act, 1917), and Section forty-three of the Finance Act, 1916 (which give relief from Income Tax in certain cases for the then current Income Tax year), shall have effect 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 eighteen:
§ Colonel ASHLEY
I beg to move, after the word "eighteen" ["April, nineteen hundred and eighteen"], to insert the wordsProvided that any sum paid to a chief petty officer or other naval officer in lieu of board, lodging, and victuals shall not be deemed to be income of such officer for the purposes of Income Tax.I think I can perhaps explain the provision better if I read a question which 2444 was asked by my hon. Friend (Mr. Holder) of the Chancellor of the Exchequer on 28th November last:Mr. Hohler asked the Chancellor of the Exchequer whether he is aware that chief petty officers and other officers or thy Navy are being assessed to Income Tax on the allowance made them for food and lodging in eases in which they are not victuailed on the Navy; whether there is anything to justify this in the Income Tax Acts; if so, will he take steps to alter the law; and, if not, will he direct the practice to cease and order a refund of the moneys improperly demanded?Mr. Bonar Law: The money allowances to which my hon. and learned Friend refers are chargeable to Income Tax equally with the rest of the emoluments of these officers. I would remind him of the general principle of the law that allowances in money are chargeable to Income Tax, whereas allowances in kind are not so chargeable, and I could not undertake to introduce legislation modifying this principle." [OFFICIAL REPORT, 28th November, 1917, cols. 2010 and 2011, Vol. 99.]I do not think anybody denies that it is the law that allowances in money are chargeable to Income Tax, but I would submit that in this case there is a real grievance on the part of officers and non-commissioned officers against the State. What is the position? Broadly, when an officer joins the Navy he knows, or his parents know, that he will receive certain pay, that he will be lodged, and that he will be fed on a certain scale. Therefore he knows exactly where he is, and that he will have to pay Income Tax upon his pay, and that food and lodging will be provided. It constantly happens that it is convenient to the State not to lodge or to feed him, and it gives an equivalent in money; it may be a guinea or 17s. 6d., according to the rank. The State having for its own convenience substituted payment in cash for payment in kind, it then proceeds to levy Income Tax upon the payment in cash, but it does not levy Income Tax when the payment is in kind. I maintain that is grossly unfair to the officer. If he gets 10d. for a pound of meat he is charged Income Tax on that, and therefore he does not get the value of the food which the State gave him in the past. Not being a lawyer, I do not know what the actual contract is, but I do submit that before the War, and I presume now, the recruiting placards in any naval port stated that there was so much pay for such-and-such a rank, with food and lodging provided. Everything is set out on the placard in order to entice recruits for the Navy. If that is not a contract on the part of the State, what is? If it is more convenient to the State to 2445 pay a man in cash than in kind, I submit that a man ought not to be taxed for that. We have here an opportunity of changing the law, or, if the Chancellor of the Exchequer is so fond of the Income Tax law as it stands, I do not want to change the Income Tax law or any other law. All I want is to get justice for the individual. If my right hon. Friend can suggest any other way in which the money can be made up to the officer and petty officer, I am perfectly willing to fall in with it. All I want to bring before the House is an injustice which is felt very keenly by the men in having this given with one hand and taken away with the other.
§ Mr. HOHLER
I desire to second the Amendment, and I appeal to the Chancellor of the Exchequer to give it his consideration and bring it into law. The point has been exceedingly well put. I think the rights of these men could be tested, but it is an expensive business, and you are dealing with men who are not overpaid, although they are promised emoluments which some have not got. However that may be, I would point out to the Chancellor that, owing to the pressure of these times, it is impossible to accommodate these men in barracks or ships and they have to be boarded out, and, instead of drawing their rations, they get these payments in lieu. Is it just that you should allow a man in lieu of food so much money and then deduct a proportion as Income Tax? I have endeavoured with the Parliamentary Secretary to the Admiralty to get this matter settled. I have appealed to him by question and privately to increase the allowance made to these men to meet this very point, and he has admitted that no increase has been made. I am sure it would appeal to the Chancellor, who desires to deal fairly with our men who are serving us, but the Treasury, to whom the Admiralty have to appeal to increase this ration allowance, refuse to sanction it. We appeal to the Chancellor to take off this trumpery tax, which breeds a sense of injustice amongst these men. I get letters from various ships and from men in barracks all complaining about it. It is a grievance they deeply feel, and it is a thing they cannot understand, and I do not understand. Give the man his pound of meat. That is intelligible, but if you give him a shilling in lieu you have no right to reduce that shilling by a farthing. You are dealing in this way with men who have served us 2446 magnificently, and for whom the Prime Minister called upon an audience to cheer again. Yet you are, by this petty taxation, creating a feeling of injustice and getting nothing for the State. If you will not increase their allowances to cover the cost, then make a provision to meet it so as to protect them. I appeal most earnestly to the Chancellor of the Exchequer to meet the Navy on this point. I feel assured he has really no conception of the good feeling it will create amongst the men, and they will feel that in the highest offices of State their interests are as well considered as we Members of this House appreciate the magnificent services they have rendered.
§ Colonel Sir H. GREENWOOD
As representing, I think, the greatest seaport on the North-East Coast, I claim to be vitally interested in this Amendment. I put it to the Chancellor that the paramount question for him and the Government is to maintain in the naval and military services of the Crown good order and discipline, which alone can be maintained, and are always based on a sense of justice and a feeling that those in authority, who command the movements. and therefore the lives of sailors and soldiers, are prepared to treat them fairly. Here is a case in which the sailors are treated unfairly. You tax a man if you pay him his allowances. You do not take a slice from his joint if you give it in beef. The amount involved must be trifling, but the irritating sense of injustice is infectious, and permeates the whole Service. I have received many letters from my own Constituents who have gallantly done their duty in this War, and I would urge the Chancellor to meet the House on this point. If so, it will be the first time on this Report stage he has met any Members who have raised Amendments or brought forward new Clauses, and yet he is able to get the Finance Bill in record time, so far as I know.
§ Mr. BONAR LAW
I agree with the observations of my hon. and gallant Friend (Sir Hamar Greenwood) as to the importance of the port he represents. My hon. and gallant Friend and my hon. and learned Friend can hardly expect me to accept an Amendment of this sort, which has not been brought forward in Committee, and of which I received no notice until to-day. It is impossible to accept it without consultation with my advisers. I will tell the House why. I cannot tell what 2447 may be the ramifications of the Amendment. If I said I would give the concession asked for to the particular class for whom it is asked, I might subsequently and that I have given it to any number of people of whom I know nothing. But I will say this:if the case is as I understand it—and probably I do not greatly understand it—that before the War people were paid in kind—
§ Mr. BONAR LAW
If it is really true that now, owing to the larger number of men and the inability of keeping them in barracks and feeding them, money is given to them in lieu of feeding, then that would appear to be a case which ought not in justice to be taxed. I will promise to look into it, and if I find there is a good case, which can be met, I will try to meet it in administration. If I cannot do so, I hope my hon. Friends will allow the grievance to remain for another year.
We appreciate the attitude of the Chancellor of the Exchequer in this matter. May I sugest that while he is making inquiries he will also bring under review the case of soldiers stationed in different part of the country who, like the sailors, get money in lieu of board and lodgings. The particular purpose for which I have risen is really to get an assurance from the right hon. Gentleman that in his survey of the situation he will take into consideration the claims of the soldiers as well as the claims of the sailors—that, in a word, the whole situation will be reviewed.
§ Colonel ASHLEY
In view of what the Chancellor of the Exchequer has said, I would ask leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ CLAUSE 24.—(Provision with Respect to Deductions for Wear and Tear of Plant, Etc.)
(1) Where the Commissioners of Inland Revenue are satisfied on an application made to them for the purpose that any considerable number of persons engaged in any class of trade or business are dissatisfied with the amount of any deductions for wear and tear, the Commissioners, unless they are of opinion that the application is frivolous or vexatious, shall refer the case to the Board of Referees, and that Board shall deal with the case and determine the deduction to be allowed.
In this Section.—
The expression "deduction for wear and tear" has the same meaning as in Section twenty-six of the Finance Act, 1907; and
The expression "class of trade or business" means a class of trade or business which may be determined to be such for the purposes of this Section by the Commissioners of Inland Revenue; and
The expression "Board of Referees" means any Board of Referees appointed for the purpose of Part III. of the Finance (No. 2) Act, 1915, or if there is no such Board, a Board of Referees to be appointed for the purpose of this Section by the Treasury.
§ Mr. BONAR LAW
I beg to move, in Sub-section (1), after the word "Where" ["Where the Commissioners of Inland Revenue"], to insert the words "an application is made to."
It will be perhaps convenient if I explain this in conjunction with the other following Amendments. These Amendments are intended to carry out what is our intention in the Finance Bill. We want to give the manufacturers a double appeal in case of depreciation. They had an appeal already to the Commissioners of Taxes. We propose to give them, by this Bill, an appeal to referees. In the Committee stage it was pointed out to us by the wording of our Bill that right of appeal might be prevented by the Commissioners of Inland Revenue. The right of the second appeal is to depend upon the Board of Referees, and not upon the Commissioners of Inland Revenue. This refers to all but the last Amendment. This latter Amendment is to carry out a promise which I gave that cases of machinery which were kept idle on account of the War should get an allowance during the time they were so kept idle.
§ Amendment agreed to.
Further Amendments made: Leave out the words
are satisfied on application made to them for the purpose that any considerable number of persons engaged in any class of trade or business are dissatisfied with,
and insert instead thereof the words "for the alteration of."
Leave out the words "deal with the case," and insert instead thereof the words
if they are satisfied that the application is made by or on behalf of any considerable number of persons engaged in any class of trade or business take the application into their consideration.
Leave out the words
the expression 'class of trade or business' means a class of trade or business which may be determined to be such for the purposes of this Section by the Commissioners of Inland Revenue; and."—[Mr. Bonar Law.]
After Sub-section (1), insert,
(2) Section twelve of the Customs and Inland Revenue Act, 1878, as amended by Section twenty-six of the Finance Act, 1907, shall have effect as if the references therein to diminished value by reason of wear and tear during the year of any machinery or plant included references to diminished value by reason of any machinery or plant having been temporarily out of use at any time during the year through circumstances attributable directly or indirectly to the present War."—[Mr. Honor Law.]
§ CLAUSE 25.—(No Deduction to be Allowed on Account of Annual Value of Premises Abroad.)
§ Where any lands, tenements, hereditaments or other premises of whatsoever description used for the purpose of any trade, manufacture, adventure, concern, profession, employment or vocation, are situated outside the United Kingdom, no deduction or set-off shall, in estimating the amount of annual profits or gains arising or accruing from that trade, manufacture, adventure, concern, profession, employment or vocation, in any manner be allowed on account or in respect of the annual value of those premises.
§ Sir J. D. REES
I beg to move, at the end of the Clause, to add the words,Provided that proviso (3) of Clause (24) shall be applicable to assessments made under Schedule D in respect of such lands, tenements, hereditaments, or other premises of whatsoever description as above described, outside the United Kingdom, so that no owner and occupier of real estate abroad shall by the. operation of this Clause be placed in a worse position it) respect of assessment to Income Tax than owners and occupiers of the like property in the United Kingdom.I submit that there has been an omission in the fact that Clause (25) is an entirely now Clause making a provision which had not found any place at all in previous Finance Acts, and is admittedly put in to restore what, it may be, was the practice opposition before the legal decision in the case known as the Boustead case, which, on appeal, has been confirmed by the Appeal Court, and which is not, I believe, being carried by the Government to the House of Lords. In the preceding Clause (24) it is provided that(3) Section 9 of the Finance Act, 1898…shall not apply in the case of any premises being mills, factories, or other similar premises.Section 9, in regard to estimating the amount of annual profits or gains chargeable under Schedule D, says when any sum is deducted on account of annual value of premises used for the purposes of such profession, and so on, the sum so deducted shall not exceed the amount of the assessment of the premises for the purposes of Income Tax under Schedule A of the said Act. The effect 2450 of Sub-section (3) of Clause (24) of the present Finance Bill is to allow in the case of mills, factories, and other similar premises another sixth to be deducted and so give the total relief. When Clause (25) was inserted, I think it must have been owing to an oversight that no similar Clause or provision to that of Sub-section (3) of Section 24 was provided in respect of lands, tenements, hereditaments, etc., outside the United Kingdom, similar to the relief given to such lands,tenements and hereditaments inside the United Kingdom. I do not know why it is not given. I think it is probably an oversight. My attention was only called to the matter yesterday. I believe a letter to the Chancellor of the Exchequer on the subject probably only reached him yesterday, too, and I shall not be surprised if he is not able to deal with the matter at once. I must apologise, too, to the House for having moved a manuscript Amendment, a course which is, I think, most inconvenient and should be avoided if possible. But I think a like relief should be given in this case as in the case of lands and buildings inside the United Kingdom. As a matter of fact, those concerned have to bear the taxation of the country in which their lands are situated, and I should, therefore, say they are entitled, perhaps with greater claim, to similar relief. I am not raising the question of the equity of taxation of income earned outside the United Kingdom at all, but am simply confining myself strictly to the technical requirements of the Section to which I have referred, and I urge that the similar relief of the extra sixth should be given in respect of lands, tenements and hereditaments outside the United Kingdom.
The matter is not a small one, as might perhaps appear,because under Clause (25) there are estates, and on these are bungalows and other premises used for manufacture. I do not know that I can do more than lay the case before the Chancellor of the Exchequer. I do not think he will deny that some similar relief is due, though he may think that it has been applied for at the eleventh hour—or perhaps at a quarter to twelve! In any case, I would recall to his recollection the arguments which were used by myself and the right hon. Baronet the Member for the City of London when the propriety of omitting Clause (25) was under consideration. I would ask him now, 2451 since it is decided to retain Clause (25), to make the proviso giving relief similar to that given to lands, tenements, and hereditaments situated in the United Kingdom.
§ 6.0 P.M.
§ Mr. BALDWIN
The point which my hon. Friend has brought before us in his manuscript Amendment is a very interesting point, and so far as I am able to judge, having only seen it for the first time about an hour ago, I think it is a point of substance. I hope, however, he will be content on this occasion on having ventilated the matter in the House, as it is impossible for us to accept the Amendment in the form in which he has handed it in. It will be necessary for us to give a good deal more examination to it, and to see what really the effect of the words is. We have not time to do that. If my hon. Friend had been fortunate enough to see this point, which I confess escaped me, during the Committee stage of the Finance Bill we might have had time to have gone into it and examine it, and If it had proved to be a good point, as it seems to be, then we could have dealt with it. We cannot, however, accept this Amendment as it stands, and if my hon. Friend will bring it up upon some other occasion, I feel sure it is a case which will be considered and examined.
§ Sir J. D. REES
In consequence of the reasonable way in which my hon. Friend has met this case, I ask leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ CLAUSE 26.—(Extension of Relief in Respect of Children and Grant of Relief in Respect of Wife and Dependent Relatives.)
§ (1)Section sixty-eight of the Finance (1909–10) Act, 1910 (which as amended by Section thirty- three of the Finance Act, 1916, gives to individuals whose total income does not exceed seven hundred pounds relief from Income Tax in respect of children), as amended by any subsequent enactments, and Section thirteen of the Finance Act, 1917, shall have effect as if eight hundred pounds were substituted as the limit of income for seven hundred pounds.
§ (2) If any individual, who has been assessed or charged to Income Tax or has paid Income Tax either by deduction or otherwise, claims and proves in manner prescribed by the Income Tax Acts that his total income from all sources, although it exceeds one hundred and thirty pounds, does not exceed eight hundred pounds, 2452 and that for the year for which the Income Tax is charged he has a wife living with him, or maintains at his own expense any person (other than a child in respect of whom relief is given under Section sixty-eight of the Finance (1909–10) Act, 1910, as amended by any other enactment or under Section thirteen of the Finance Act, 1917), being a relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself, and whose income from all sources does not exceed twenty-five pounds a year, he shall be entitled in respect of his wife and in respect of every such person as aforesaid whom he so maintains to relief from Income Tax equal to the amount of Income Tax on twenty-five pounds.
§ In this Section the expression "relative" includes any person of whom the individual in question had the custody and whom he maintained at his own expense while that person was under the age of sixteen years.
§ The provisions of Sub-sections (2) and (3) of Section sixty-eight of the Finance (1909–10) Act, 1910, as amended by any subsequent enactments, shall apply to the relief given by this Subsection, to the manner of claiming such relief, and to the proof to be given with respect thereto, as if they were herein re-enacted and in terms made applicable to this Sub-section.
I beg to move, at the end of Sub-section (1), to add the words,and shall be extended to apply in the case of a child over the age of sixteen years who is attending as a full-time scholar a school or university within the United Kingdom recognised as such by the Board of Education.I believe this matter was discussed last year. It is quite true to say that a great many people who would send their children to school after sixteen years of age are unable to pay Income Tax in addition to the expenses of sending their children to school. There is a very large and increasing number of people who feel the burden of sending their children to school full time after the age of sixteen, and this would get more heavy as time went on. In putting this point I will give the case of the burden which the new Education Bill will put upon these people through the rates, and they will have the further burden of their younger children attending the schools of a primary character under sixteen years of age. I believe if the Chancellor of the Exchequer could see his way to accept this Amendment he would relieve a great number of people who are very hardly hit in trying to give their children the best possible education, and he would encourage others to do a great deal more to emulate them.
§ Sir W. COLLINS
I beg to second the Amendment.
I have received representations asking me to support this or a somewhat similar 2453 proposal. When the House was in Committee on the Education Bill we had an interesting discussion relating to the responsibility of the State and the parent in the matter of education for young persons, and the Government resisted the Amendment that was proposed in favour of a maintenance Grant in respect of the higher education of young persons. I followed the President of the Board of Education into the Lobby because I felt that that principle, although it appealed to one's sympathy, was not entitled to one's support. The President of the Board of Education in that Debate said:In the case of a young person who, as the result of great sacrifices made by his parents is in full-time attendance at a secondary school, you have a much stronger ease for a maintenance allowance.If support is valid in that case it may well be urged in this case. The point referred to by the right hon. Gentleman was that of a young person in full-time attendance, as a result of the great sacrifices made by his parents, and while you may not ask the State for a maintenance allowance there may be a good reason why we should not in such a case mulct the wage-earning classes by way of Income Tax. The principle of remission of tax in respect of children has already been admitted. Where the self-sacrificing and far-seeing parents arc straining their resources to keep their children at school or a university, or at a higher technical school after sixteen years of age and up to twenty-one, I think that is a very reasonable ground for a remission of taxation. Unlike the burghers of Leyden in the XVIth century, our people are not invited to choose between the establishment of a university and the remission of taxation. Universities have been scattered over this nation, and technical schools and higher schools are at the disposal of those who are ready to make use of them. The great point is to encourage parents to see the advantage of those higher school and induce the young persons to continue their education therein. I think this is a legitimate case for remission of taxation, perhaps not in the form of this Amendment, but in some other form, and in view of the representations made to me by my Constituents I very gladly support this Amendment.
§ Colonel Sir C. SEELY
I do not think it is necessary to add much to what was said last year, and in the Committee stage in support of this Amendment. I think its 2454 reasonableness is recognised by the Government and by the Chancellor of the Exchequer. I only wish to press upon the right hon. Gentleman the fact that every year the War continues makes still greater the necessity for a demand of this kind. Although it may increase the burden on the public it also makes keener the loss that is felt by those who have suffered during the War, and who are the class more than any others to whom a good education is extremely valuable. I acknowledge that the Chancellor of the Exchequer this year has granted us a considerable number of concessions, and he may perhaps ask us not to press him too hardly to grant still further concessions in this respect. I ask him if he cannot give us this concession now, as he has given us further concessions in regard to children that he should give us this year a somewhat similar promise to that which he gave last year, and which he has now carried out. If he cannot make this concession now, perhaps he will give us some hope that he will be able to do it next year, when I hope he will bring in another Budget under happier circumstances.
§ Mr. BONAR LAW
I appeal to my hon. and gallant Friends not to press this Amendment. We have gone a long way in this Budget to meet such claims. We have given an allowance for the wife and for the children, and I think that is as far as we can reasonably be expected to go this year. There is another reason which I think hon. Members ought to bear in mind. I think we all desire to see as large a part of the population as possible kept at school as long as they are being usefully educated beyond the age of sixteen. I am quite sure that in the long run there will be a national gain to whatever extent that happens, but I am not at all sure that that encouragement ought not to be given rather by bursaries, or something of that kind, and all I can say is that that is an object which the State should encourage. Another reason I may put in this connection is that this question should not be pressed now above all times. The rule which I have laid down is that the more our children are kept at school beyond sixteen years of age the better, but that does not apply so much now, when we need the actual working help even of those who at ordinary times are better employed at school. For these reasons I hope the Amendment will not be pressed.
In view of a statement which has been made by the right hon. Gentleman, I ask leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
Amendment made: In Sub-section (2), leave out the words
in respect of whom relief is given under Section 68 of the Finance (1909–10) Act, 1910, as amended by any other enactment or under Section 13 of the Finance Act, 1917."—[Mr. Bonar Law.]
§ Mr. BONAR LAW
I beg to move, in Sub-section (2), at the end of the first paragraph, to insert the words,The provisions of this Sub-section which give relief to an individual in respect of a wife shall in the ease of any individual being a widower be extended so as to give relief in respect of a person, being a female relative of his or of his deceased wife, who is resident with him for the purpose of having the charge and care of any child of his.(3) If any individual who has been assessed or charged to Income Tax or has paid Income Tax by deduction or otherwise claims and proves in manner prescribed by the Income Tax Acts that his total income from all sources, although it exceeds eight hundred pounds does not exceed one thousand pounds, and that he would if his income did not exceed eight hundred pounds be entitled under Section sixty-eight of the Finance (1909–10) Act, 1910, as amended by any other enactment, or under Section thirteen of the Finance Act, 1917, to relief in respect of three or more children, he shall be entitled in respect of each of those children above the number of two to relief from Income Tax equal to the amount of Income Tax on twenty-five pounds.
I beg to move, as an Amendment to the proposed Amendment, after the word "widower," to insert the words "or living apart from his wife."
I stated, when the Amendment was put down on a former occasion, that it only meant the case where a man's wife had died. Since then a great number of communications have been received by myself and others on this point, and it is in consequence of those communications that I move this Amendment. A man's wife may be still living, and he has a housekeeper, and in the matter of fixing the Income Tax or any other tax these people stand relatively in the same position. Pressure has been brought to bear upon this point, and that is why I move the addition of these words.
§ Mr. BONAR LAW
I do not think that I could make so effective a speech against 'he Amendment as has been made by my hon. and gallant Friend himself, and I am 2456 not going to try. The fact is, as I mentioned in Committee, that there is a real grievance here. The case of a man who has lost his wife and has children ought to be met, but the difficulty in meeting it was the fear of something of this kind. My hon. and gallant friend's speech is sufficient proof that fear was reasonable, and I hope he will not press his Amendment. I am sure in his heart he does not approve of it.
§ Amendment to the proposed Amendment negatived.
I beg to move, as an Amendment to the proposed Amendment, to leave out the words "being a female relative of his or of his deceased wife."
There is real, substantial ground for this Amendment, and it raises a very real point. A man's wife dies, and he has no female relative to look after his children and his house. I know several cases myself, and since the Debate took place on the Committee stage I have had a large number of letters thanking me for raising this matter. A great number of men in middle-class and working-class life have housekeepers who cannot be said to be anything but of the highest respectability, and I really do think that the Chancellor of the Exchequer might stretch a point and include a woman who is a legitimate housekeeper and performs the duties of the wife, who has unfortunately died, as well as can be expected under the circumstances. I can assure the Chancellor of the Exchequer that this is a genuine Amendment intended to meet genuine cases.
§ Mr. BOOTH
I beg to second the Amendment to the proposed Amendment, chiefly with a view of giving the Leader of the House a chance of replying. It seems to me that we are getting near to the danger line. The case which suggests itself to me is that of an adopted daughter of the deceased wife, who from early life has been regarded as a member of the family, or that of a sister-in-law. There might be such a female connection, though not actually a relative, who might be the best person to come in and take charge of the children. There is the case of a child taken in by a foster mother during its tender years. The position of that person is almost that of a relative, although she is not a relative. It seems to me that some of those cases might be met, but I do see, and I dare say the hon. and gallant Member himself sees, a danger in going 2457 very far in this direction. I would like to hear what the Chancellor of the Exchequer has to say, and therefore I formally second the Amendment.
§ Mr. BONAR LAW
I admit that there is a stronger case here, but, as I pointed out in Committee, the reason I hesitated at all in making this concession was the fear that you would not be able to draw the line in a way which would prevent disagreeable things which nobody would desire to encourage. There would be distinctly more danger if anything of this kind were done. I suggest to my hon. and gallant Friend that I have really tried to meet the real hardship, and that I have gone as far as one can safely go. I hope he will at all events be content to wait and see how this new Amendment works before pressing me any further.
§ Mr. FRANCE
I quite appreciate the difficulties and sympathise entirely with the views expressed by the Chancellor of the Exchequer, but I wonder if he could give us a definition of what "female relative" includes.
§ Mr. BONAR LAW
No; I am afraid I could not, but I can say, from my experience of the way in which taxation of this kind is worked, that the object of the heads of the Inland Revenue is, so far as the law will allow them, to carry out the spirit of what is intended, and I am inclined to think that such a case as that which was put, like that of an adopted daughter, would be dealt with as though it were included.
§ Amendment to the proposed Amendment negatived.
§ Mr. SPEAKER
The manuscript Amendment handed in by the hon. Member for the Hexham Division (Mr. Holt) would impose a charge upon the subject by aggregating the incomes of the female, relative and the widower with whom she lives.
§ Mr. HOLT
May I submit to you that the object of this Amendment is to see that the female relative shall not enable the widower to get relief because she happens to be an inmate of his household if she has an independent and substantial income of her own. As this Clause is drafted, the widower would get relief, and I want to make sure that the widower shall get no relief if the addition of the income of the female relative counterbalances the relief which it is proposed to give.
§ Mr. SPEAKER
I think the House would be imposing a charge upon this person which we cannot do at this stage. It would require a separate Resolution.
§ Question again proposed, "That those words be there inserted in the Bill."
§ Mr. HOLT
I am afraid that there might be difficulty, and I want to have the point. raised, because I think it is one of some substance. A widower gets a female relative to come and live with him, and apparently, without any restriction whatever, he is then and there entitled to an abatement to the extent of £25. That, so far as I can understand it, is the meaning of the Clause proposed by the Chancellor of the Exchequer. I submit that is not right. If the female relative brings into the family a substantial income of her own, then the abatement ought not to no made. It is quite easy to imagine a person with £400 or £500 of his own and a sister with £200 a year of her own coming to live with him after his wife has died and them keeping joint house together. Very likely they would so so. I am sure it was never contemplated that in a case like that the widower should automatically get the relief. I raise the point, because I think the House ought to realise how far they are being carried by this concession. If you are going to give relief to the widower whose female relative lives with him precisely in the same manner as you give relief to the married man in respect of his wife, surely you ought to go the whole way and where 2459 the relative keeps house for him aggregate the two incomes. The House must make up their mind one way or the other. Either all the people who live in the house should be treated as having a common income for all purposes, or as having separate incomes for all purposes. I want to warn the Chancellor of the Exchequer against these piecemeal concessions, which are going to land him in endless confusion, and which will upset the whole basis upon which the Income Tax is conceived.
§ Sir W. ESSEX
I am afraid I do not quite grasp the meaning of my hon. Friend's Amendment, but, as far as I can see. it would penalise a sister or other relative who had money if she came in to help her nephews and nieces and their father by looking after the home. The little amount that might be saved to the Exchequer would be ill-purchased by the loss resulting from her not being called into the home. It would impose upon a man the duty of asking his sister whether she had an income which would bring him outside the limit, or whether she had not. It is one of those refined classifications -which would create more difficulties than it would afford relief.
§ Sir F. BANBURY
The matter is quite clear. At present, if a man and a wife have separate incomes, their incomes are aggregated. If their incomes are under £700 a year, and they have a certain number of children, they are made an allowance. The Chancellor of the Exchequer proposes, if a man is a widower, that the privilege should be attached to another person who maybe a female relative. The hon. Member for Hexham (Mr. Holt) says that if you are going to give that privilege which you have given to a wife to another female person, you must also put the burden which you put upon the wife upon that other person. That is the case quite simply, and there is a great deal to be said for it. Personally, I am in rather a difficult position. I have always held that the aggregation of the incomes of the husband and wife as wrong, and on several occasions, in company with my hon. and learned Friend the Member for Cambridge University (Mr Rawlinson), I have endeavoured to induce various Chancellors of the Exchequer to regard the incomes of husband and wife as being separate, and not to aggregate them 2460 There are many reasons why that should be done. Therefore, I am in this difficulty, that, while I have always held that there should not be this aggregation, I am now rather inclined to support the hon. Gentleman and to say that as long as this aggregation is insisted upon, if you introduce someone in the place of the wife, and you confer upon that person the advantages given to the wife, you must also confer upon that person the disabilities imposed upon the wife. I do not know whether I have made it clear, but that is the way that it suggests itself to me, and I think it is only fair. If we desire to maintain the marriage tie, there should not be my advantage in being a widower or in having a female relative in your house to whom you are not married.
§ Mr. BONAR LAW
I think there is something, or that there might be something, in the case put by the hon. Member for Hexham (Mr. Holt), but I cannot feel that his case has been strengthened by the last observations of the right hon. Gentleman (Sir F. Banbury), who suggests that the person referred to in the Amendment I have put down and who has come to help the widower in looking after his children is getting all the advantages of a wife. That would hardly be regarded as a reasonable proposition probably in most families.
§ Mr. BONAR LAW
Really, it is not the case at all. In most cases what happens is that the sister or the sister-in-law comes, probably at great inconvenience to herself, to fulfil what she thinks is a duty. The number of cases where this would arise would be very few indeed. If the Amendment had been possible and were adopted the effect would not be to touch such cases as my right hon. Friend has in mind. Take the case of a father who has a sister who is working for her living and comes to help him. It is quite obvious that they are not in the same position as husband and wife, and that ought to be taken into account, I hope that after what I have said the change will not be considered desirable, and that the Amendment I have proposed will be now agreed to.
Further Amendments made: In Subsection (2), after the word "years" ["while that person was under the age of sixteen years"], insert the words
and the expression 'child' means a child in respect of whom relief is given under Section thirty-eight of The Finance (1909–10) Act, 1910, as amended by any other enactment or under Section thirteen of The Finance Act, 1917.
§ Leave out the word "Sub-section" ["given by this Sub-section"], and insert instead thereof the word "Section."
§ Leave out the word "Sub-section" ["made applicable to this Sub-section"], and insert instead thereof the word "Section."—[Mr. Bonar Law.]
§ CLAUSE 34.—(Increase of Stamp Duty on Certain Bills of Exchange.)
§ (1) Twopence shall be substituted for one penny as the Stamp Duty on all bills of exchange and promissory notes chargeable under the First Schedule to the Stamp Act, 1891, with duty at the rate of one penny and drawn on or after the first day of September, nineteen hundred and eighteen, and twopence shall accordingly be substituted for one penny in Sections thirty-four and thirty-eight of the Stamp Act, 1891.
§ Colonel COLLINS
I beg to move, at the end of Sub-section (1), to add the wordsProvided that cheques for an amount under five pounds shall be liable only to the Stamp Duty of one penny.The House has decided that the Stamp Duty on cheques shall in future be 2d. instead of 1d. I have no desire to argue the main question again. I can well understand that this Amendment, which stands in the name of my hon. Friend the Member for the Tradeston Division (Mr. Dundas White), is not an ideal Amendment, and that it will place some extra work on banks and their staffs. But after a short space of time the public would become accustomed to drawing cheques with a 1d. stamp for amounts under £5, and with a 2d. stamp for cheques over £5. The Amendment is a supplement to the new Clause, and is not moved as a substitution for the law as we understood it in the past. The main objection to the alteration in the law is that it will create hardship to the small trader, and that it will stop the small tradesman and others adopting the banking system. This Amendment is moved to avoid that difficulty in future. The limit suggested in the Amendment is £5. It may be that the Chancellor of the Exchequer will consider that if that figure were inserted in the Bill he would lose a large amount of 2462 revenue, but if he is willing to accept the spirit of the Amendment, the figure of £5 might be reduced to £2, in which case the loss of revenue would be much smaller and the provision would still have the effect of meeting the case of the small trader. The Clause as it stands in the Bill will, I am afraid, have the effect of discouraging those traders to keep banking accounts and impose hardship on the individuals concerned.
§ Mr. D. MASON
I beg to second the Amendment. This subject was thoroughly discussed on the Committee stage. I am sure the Chancellor of the Exchequer agrees that there should not be any diminution in use of cheques. I do not know whether the right hon. Gentleman is open to argument. He said on the Committee stage:After all, I have a responsibility. I have got to be convinced either that it is not a proper source of raising revenue or I have got to ask the House of Commons to support me in this proposal."—[OFFICIAL REPORT, 4th June, 1918. col. 1467.]Also in the course of that speech he made what he thought was a very convincing quotation from Professor Pigou, which had a considerable effect upon the Committee and induced it to support him in adhering to his tax. It was a most amazing quotation. It said:In current discussion, the probable effect of an increased duty on cheques has led to a good deal of contention. The main point in practice is whether the use of cheques is not likely to be diminished to any appreciable extent, as it is asked what kind of effect would follow if the use of cheques was seriously discouraged. The correct answer is perfectly simple; if the use of cheques is discouraged, it means in the first instance that more currency notes will be drawn out into circulation to take the place of cheques. This means that the notes held in the tills and in reserve in the banks as a whole will be diminished. The normal result of this would be to force up the rate of discount and thereby directly to lessen bank loans and indirectly to lower prices.The Chancellor of the Exchequer proceeded to say:He goes on to say that of course the normal effect would be prevented by the artificial means which the Government take of keeping rates down, and that the effect on inflation would be absolutely nil "—[OFFICIAL REPORT, 4th June, 1918, col. 1465.]The argument contained in that quotation, to anyone who gives it any thought, is, on the face of it, quite unsound, because if the result of this tax is to diminish the use of cheques and increase the issue of currency notes, how can it raise the rates of discount? It is quite 2463 true that the quotation says it will only do so in normal times, but it is because we are not living in normal times that we cannot raise the rate of discount, for the very good reason that the Government, by continually borrowing and increasing credits, and thereby giving the banks the right to increase their issues of currency notes, make it impossible to raise the rates of discount. It is most absurd to try to convey to this House that if this tax has the effect of diminishing the use of cheques—nobody will argue that by increasing taxation you are likely to stimulate the use of cheques, particularly of small amounts, because people rather than send cheques through the post will find ways and means of reducing their cheques remittances, and thereby increase the number of currency notes—you can raise the rates of discount. If the Treasury are continually adding to the currency by their remissions every week, it is absurd to bring forward that quotation as an argument in favour of going on with this Stamp Duty. In the ordinary course of events, if you were to reduce the amount of reserves at the banks and to raise the rate of discount, that would affect the supply of money, but the Bank of England under the present system has no control over the money market at all, although it has the right to raise the rates of discount. The Chancellor of the Exchequer is always courteous, therefore one persists in the hope that he will see that this proposal is a retrograde step.
§ Mr. MASON
It is on the use of smaller cheques that the increased tax will have the greatest effect, because it will not affect the larger cheques so much. It is a very curious thing that now, when we have an enormous increase in paper money, we should have this proposal. In Germany the increase in paper money is something like £1,000,000,000. I have actually in my hands a quotation from a German newspaper expressing concern at this enormous increase in paper money there, and saying that they are doing all they can to stimulate the use of cheques. Yet at the same time we, who have the finest cheque system in the world, are actually going out of our way to penalise the use of cheques. My right hon. Friend the Member for Cleveland (Mr. H. Samuel) said on the Committee stage that he would 2464 like to see the Cheque Duty entirely abolished. This Amendment is a good step towards that end. If you were to abolish this duty altogether, you would stimulate the use of cheques and be. doing something to ease the position of this country. I admit that we have not gone in for inflation to the same extent as Germany, but they have arrived at a position of stimulating the use of cheques while we are doing all we can to diminish it.
§ Mr. SPEAKER
The hon. Member is wandering off into the general topic Under the guise of discussing the Amendment he is really discussing the Clause. He must confine himself to the Amendment.
§ Mr. MASON
I bow to your ruling, Sir; but I submit that it is on the small sums under this very Amendment that the diminution will take place. To those who draw cheques for large amounts, probably this increased duty will not make much difference. The man who is going to draw a cheque for £10,000 or £50,000. or oven for £15 or £30, is not going to consider the increased tax, but it is the small people and small shop-keepers who will be hit. I hope that the Chancellor of the Exchequer, even at this eleventh hour, will get rid of the danger inherent in this most retrograde proposal. If the Chancellor could now make this concession he might do something towards lessening the evil effect of bringing about possibly a diminution in the use of cheques and an increase in the use of currency notes.
Mr. D. WHITE
The detrimental effect of fining people an extra penny on the use of every cheque will be principally felt in the case of the smaller cheques. It cannot be suggested that cheques for £50 or £60 would make very much real difference. The real difference would be in cheques under £10 or £5. I had an Amendment to the extent of £10 in Committee, but that was not moved in view of the general attitude, and I have now reduced it to £5,because I am sure it is the cheques under £5 which will be most seriously affected If they are seriously interfered with there will be a much increased need, not only of Treasury notes, but also of small change. That is in itself a disadvantage and cheques have this advantage over and above currency notes, that they can be made out for the exact amount, so that instead of requiring a currency note plus small change, a. cheque may be made out 2465 in such a way as not to require to be supplemented by either. Even if the right hon. Gentleman feels unable to make it £5, an even smaller amount would be something, but I plead that at least the smaller cheques ought to bear the same stamp as they do now in view of the special interests of the time. I know that certain practical difficulties may occur if the larger cheques are to be subject to a duty of 2d., and the smaller to a duty of 1d., but that very differentiation was embodied in the proposal which such an able financier as Sir Michael Hicks-Beach made when he proposed this in 1902, and, subject to the change in the amount, I have followed the exact words of Sir Michael Hicks-Beach's Bill. Though there may be some slight inconvenience, it will be more than counterbalanced by enabling smaller cheques to perform the office which they have so usefully performed. As regards the question of paying the 2d. duty, provision is made in the Bill itself for the extra 1d. being put on cheques requiring 3d., so that will have to be the case in any event, and I suggest that matters should continue on that basis so that the smaller cheques should still be chargeable only with the duty of 1d. I do not think there would be any serious inconvenience in that, and it would certainly be detrimental to the use of cheques if, however small they might be, people had to pay double.
Mr. H. SAMUEL
I regard this Clause in its present form as the one blot upon the Budget. Fortunately, it is a very small blot on a very big Budget, but if the right hon. Gentleman would accept the Amendment he would remove what some of us think is a blemish upon his proposals of this year, because our objections to the Cheque Tax relate mainly to the additional Stamp Duty upon cheques for small amounts. If this were accepted it would remove practically the whole of cur objections, or at least to a very large extent. We object to the extra Cheque Duty because it will tend to prevent the large growth in the use of the cheque system for the payment of salaries and small shopkeepers' accounts, and later on, we hope, for the payment of wages to considerable sections of the working class. There is no reason whatever why the number of banking accounts, which already runs to many hundreds of thousands, possibly even to millions, should not be immensely extended. The additional duty upon cheques will undoubtedly 2466 tend to prevent their development, but if you exempt from this additional duty the small cheque below £5, that objection would be largely removed. Secondly, we objected to it because it would tend to increase the use of Treasury Notes. But that, again, applies chiefly to payment in small amounts. People who were paying £5, £10, or more, would not mind whether it was a 1d. or a 2d. stamp, but when it comes to a man paying 5s., 10s., or £1, persons of small means doing their trade or business on a small scale will look at these additional charges. If the Amendment were accepted, that objection also would be to a great extent met. It may be said it will be inconvenient to have two rates of Stamp Duty on cheques, and that persons doing business will find that troublesome. But persons accustomed to drawing considerable numbers of cheques would have two cheque books, one with 1d. and one with 2d. stamps. Others might be allowed to add a postage-stamp, as is proposed temporarily in the Bill, and cancel it, and that would bring in revenue in exactly the same way as the 1d. receipt stamp does now. I feel sure that the public would soon get accustomed to the differentiation of amount above and below £5, or it might be £2, if that figure were chosen, just as they are perfectly accustomed now to put a receipt stamp on any bill of or over and not to do it on any bill below £2. In any case, I feel sure that small traders would much prefer to take that extra trouble, whatever form it may take, than to pay an extra 1d. on every cheque which they draw for any amount, no matter how small.
§ Mr. BONAR LAW
I am obliged to the right hon. Gentleman for what he said about the support he has given to the Budget as a whole, and also for saying this blot is no a very big one. I sincerely hope that is so. I am sure he and the two hon. Members who moved and seconded the Amendment will not be surprised when I say I could not possibly accept it. I am sure they will understand the reasons. In the first place, the revenue would be very largely diminished. In this case, as in others, it is the big number of people who deal in small amounts who give us the revenue. If the Amendment were adopted it would not be worth while taking the tax. On the other hand, I am quite sure, whatever fault there is in my proposal, which has now been adopted by the House, it does not go beyond inconveni- 2467 ence. I have discussed this question of possible differentiation with a good many people before I made this proposal, and everyone with whom I discussed it, without exception, said the idea of having two different cheques would be absolutely intolerable to the banks and would mean inconvenience and irritation. There is, therefore, no alternative between the proposal which the House adopted in Committee and abolishing the tax altogether. There is no half-way house. If the evils which the right hon. Gentleman anticipates do happen, after all this is a war tax and it may be put right after the War, as many other taxes can. But I still remain quite unconvinced, in spite of all the evidence, and I am satisfied that the only thing which could cause any diminution in the use of cheques would be a feeling of grievance and irritation on the part of people due to their saying, "This is a silly tax, and I will try to find some way of avoiding it." It is not out of malice that the Chancellor has done it, but because he is hunting in every direction for money, and this small additional expense is going to help in financing the War. If they look at it in that spirit I am certain this will be found to be a very harmless tax.
§ Amendment negatived.
§ CLAUSE 40.—(Provision for Enabling the Post Office to Exercise Powers in Relation to Insurance Stamps.)
§ Section twenty of the Finance Act, 1911 (which enables His Majesty by Order in Council to provide for the exercise and performance by the Postmaster-General of any powers and duties of the Commissioners of Inland Revenue with reference to certain stamps) shall have effect as though the reference therein to any stamps used to denote duties other than duties of postage included a reference to stamps required for the purposes of the National Insurance Act, 1911.
§ Amendment made: At the end of the Clause add the words "and any Orders made under that Section may be varied or revoked by any subsequent Orders so made."—[Mr. Bonar Law.]
§ Bill to be read the third time upon Monday next.