§ Two hundred and fifty pounds shall be substituted for one hundred and thirty pounds as the limit of exemption in Section ten of the Income Tax Act, 1918. — [Mr. Arnold.]
§ Brought up, and read the first time.
§ Mr. ARNOLDI beg to move,
That the Clause be read a second time.The effect of this new Clause is to raise the exemption limit for Income Tax from £130 to £250, and I will argue the case for this new Clause on two grounds—first, on the ground of principle, and, secondly, as a business proposition. First, on the ground of principle, I cannot be accused of exaggeration when I say that£250 today is not, in view of the increase in the cost of living, worth more than about£125 in pre-war values, and, of course, the rate of Income Tax is now very much higher than it was in pre-war days. Not only so, but other taxation on the poorer classes, particularly in respect of tea and sugar, has been greatly increased during the War, and, in my view, the burdens on the poorer classes are now much too heavy. The present Income Tax exemption limit is£130 a year, and£130 is, in view of the increase in the cost of living, not worth more than about£65 in pre-war values. In effect, this Budget levies Income Tax on incomes of£65 a year in pre-war values, and that is quite opposed to the sound principle of taxation. We are living in a period of reconstruction. Everybody is thinking and talking about reconstruction, and I urge that we ought to try to reconstruct our tax system in accordance with sound principles. But that is not being done. In these days very little 420 attention is being paid to principles of taxation or anything else, and principles of taxation are being flouted at every turn, particularly in regard to the burdens imposed on the poorest classes. The simple truth is that in a great many cases Income Tax at the present time, owing to this low exemption limit of£130 a year, is being taken from money which is required to buy the necessaries of life, and to buy nutritious food for a man, his wife, and children. That is the point.This proceeding is not only a great hardship on those who have to pay the tax, but it is also most unwise from the point of view of the State. To take Income Tax from the wage earners and others with these very small incomes is going counter to what ought to be the post-war policy of the Government, and that is, to build up the health and physique of the people who have suffered so much during the last four years. During the War every care was taken—and most wisely and properly taken—to promote to the highest possible point the physical efficiency of the troops, and I submit that it would be well that the physical efficiency of the workers should also receive some consideration from the Government. It was in the interest of the State to promote the physical efficiency of the soldier, and it is equally in the interest of the State to promote the physical efficiency of the worker; but to take Income Tax from people with small incomes is going counter to that principle. It is reducing physical efficiency, and thus tending to decrease output, though the Government is constantly asking for increased output, and the whole proceeding is having a bad effect on the health and welfare of the people. If I might be allowed to adapt a phrase of the Prime Minister I would say this: You cannot build up an A 1 nation on C 3 finance. That is really what the Chancellor of the Exchequer seems to think he can do, but it cannot be done. It is always a bad principle to levy Income Tax on those who are below a decent standard of living, and it is particularly unwise at the present time, especially in view of the high prices that are prevailing. I submit it would pay the State well—to say nothing of the relief to individuals—to raise the exemption limit for Income Tax to£250 a year.
4.0 p.m.
Let me look at the matter from the point of view of a business proposition. I say that it really is not worth while, from the point of view of revenue, to levy 421 Income Tax on those whose incomes are less than£250 a year. It is not a business proposition. How much revenue is got from people with these small incomes? The White Paper on Income Tax and Super-tax, published a few days ago, contains some most valuable statistics, and it is there seen that the gross amount of revenue got from Income Tax on incomes below£250 a year is only£7,886,000. That is the gross amount. From that you have to deduct the cost of collection. A short time ago I put a question on the Paper to the Chancellor of the Exchequer, asking him what was the cost of collecting this Income Tax on incomes below£250 a year, and he replied that, so far as could be estimated, the cost of collection was£600,000 a year. Therefore, this gross revenue of£7,886,000 is reduced, after you deduct the cost of collection, to a net revenue of£7,286,000. The cost of collecting the Income Tax on these small incomes is about 7.½ per cent. of the revenue obtained. Whereas the cost of collecting the Income Tax on incomes above£250 a year is only about 1 per cent. of the revenue obtained. As regards incomes below£250 a year, not only is the cost of collection enormous, but the collecting of it from workers and others causes a great amount of irritation, friction, and inconvenience. It tends to increase the industrial unrest which is at present such a serious feature of our national life. The whole process means an enormous amount of irritation and expense. I cannot do better than quote some words which the Chancellor of the Exchequer used during the Second Beading of the Finance Bill. It is true that he was not speaking about the Income Tax, but his remarks are entirely applicable to the point that I am now urging. These are the words which he used on that occasion:
If you have got a tax which is admittedly very difficult to assess fairly and very difficult to adjust to our complicated social conditions, if it is resented, and if it is considered unjust by a large part of your population, you will create a great social evil which may lead to resistance to the law. I do not mean violent open resistance, but you do not carry their good will, and it is one of the first canons of taxation that as far as may be you should do everything that you can to carry the good will of the taxpayer with you."—[OFFICIAL REPORT, 20th May,1919. col. 271, Vol. 116.]Can it be said that in levying the Income Tax on these people with small incomes that the Chancellor of the Exchequer is carrying the good will of the taxpayer with him? He knows perfectly well that he is 422 not. It is causing the greatest unrest in the country, and if, unhappily, he should decide to continue this process, he will be going counter to that which he says is one of the first canons of taxation—that as far as may be you should do everything that you can to carry the good will of the taxpayer with you.I do not think that human ingenuity could have devised a system which causes more friction, more inconvenience, more labour, and more upset for a smaller result in revenue. I know that it is argued that there are numerous abatements and that these tend to diminish the burden, and, as far as that goes, it is quite true, but that really is an argument for this new Clause. These abatements which have been most wisely given all reduce the yield of the tax, and they enormously increase the cost of collection. The whole process leads to a great waste of time both on the part of the taxpayer and on the part of the Inland Revenue officials. In nearly 2,000,000 cases forms have to be filled up, carefully scrutinised and examined by revenue officials, and then in the end owing to the abatements not one penny piece of revenue is obtained. This White Paper issued a few days ago reveals some astounding figures which bear very directly on the case that I am putting before the Committee. It shows that last year there were 5,346,000 persons liable for Income Tax, and of these no leas than 4,093,000, or about 75 per cent., had incomes of less than£250 a year. Of these 4,093,000 persons, 1,930,000, or nearly one half of them, are in the end exempt from the tax altogether owing to the abatements. Is this business? Is it worth while worrying 4,093,000 people in order to get£7,866,000 of revenue gross or£7,286,000 net after deducting the enormous cost of collection, more especially when nearly half of them, 1,930,000, are in the end exempt from the tax altogether] I can scarcely imagine anything more wasteful, more unbusiness like and more uneconomic. It would be much better to have done with all these laborious, and, I had almost said, absurd processes, and to make a clean cut and to exempt all those with incomes below£250.Yesterday the Chancellor of the Exchequer intimated that he is prepared to accept the Clause which I hope to move shortly to increase the abatement in respect of a wife from £25 to£50. So far, so good, but when that is done the number of those who will fall out of this tax will be enormously increased. It would be 423 much better to make a clean cut of the whole business, and to exempt everybody with incomes below£250. It is frequently argued that although abatements are wisely and properly made in the case of a man's wife, and in the case of children, yet single men with incomes between£130 and£250 a year ought to pay Income Tax. After all, who are these single men Obviously, for the most part, they are young men, and young men who have fought in the War. They have lost two or three of the best business years of their lives. Their careers have been gravely prejudiced. We can never restore to them the same chance that they would have had before the War. Nothing can possibly do that, but to exempt them from Income Tax if their incomes are below£250 will do something to enable them to save a little money with a view to improving their position or with a view to marriage.
There is another important consideration, and it has relation to the Insurance Act limit. Under the Insurance Act of 1911 the general limit was fixed at£160 a year. That was the Income Tax limit then, and it was done because it was felt that those with incomes less than£160 a year could not afford by their own unaided efforts to make provision for the contingencies of illness, sickness, and so forth. The Government themselves in the last fortnight have brought in a Bill to raise the Insurance Act limit for manual workers from£160 to£250 a year. What does it mean? It means that those with incomes below£250 a year will be subsidised by the State in order to make provision for illness and sickness. That is quite right, but it proves conclusively that these persons cannot afford to pay Income Tax. If they cannot afford, of their own unaided efforts, to make provision against illness, sickness, and so forth, they cannot afford to pay Income Tax. I submit that in raising the Insurance Act limit to£250 a year the Government have admitted the whole case for this new Clause. The Insurance Act limit was originally fixed at£160 because that was the Income Tax limit. Now that the Government have themselves spontaneously come forward and raised the Insurance Act limit to£250, they ought to raise the Income Tax limit to £250 also. That, really, is the only consistent course.
424 Let us look a little more closely at the finance involved in this new Clause. As I have pointed out, the gross loss to the revenue by the acceptance of it is£ 7,866,000, and the net loss is£7,286,000 after deducting the cost of collection. I have no doubt that the Chancellor of the Exchequer will say that this new Clause cannot stand alone, and that if he accepts it a change will have to be made in the scale above£250. For instance, the present abatement of£120 in respect: of incomes of£400 will have to be increased; otherwise, if all incomes below £250 per year are exempt and the present abatement of£120 on incomes from£130 to£400 still obtains, the graduation will be too steep and too sudden. That is perfectly true. I do not know whether I should be in order in arguing this point at great length, but the arguments that I have been advancing do apply to a considerable extent to incomes between£250 and£400, because the present rate of tax, in my view, is too heavy on these incomes, which in many cases are very heavily burdened. I ask the Chancellor of the Exchequer to intimate that he will accept this new Clause, and that he will. also alter the scale so as to give much needed relief to those with incomes from£250 to £400.
In a previous Debate on this question, he indicated that, if a Clause such as I am moving were accepted, and if consequential changes were made above that limit, the loss might be increased from£7,886,000 to£16,000,000 or even £20,000,000. In these days, £16,000,000 or£20,000,000 is not really a large item for the Exchequer, but it is a very great burden on these poor people who have to find it. It is, in fact, only about l£ per cent. of the total revenue which the Chancellor of the Exchequer expects to raise by his Budget this year. It really will not do for the Chancellor of the Exchequer to say that he cannot make good an amount like that. When the claims of the poorer classes of the community are being urged from this side of the House, he stands up at that box and says, "We cannot do it." It really would be much more in accordance with the fact if he said, "We will not do it." He can do it perfectly well. I have said before that when he wanted to institute his Preference duties£3,000,000 of revenue went without hesitation, and, when it was a question of giving relief to those who make big profits, half of the Excess 425 Profits Duty, amounting to a loss of from£50,000,000 to£100,000,000, was sacrificed. If the Chancellor of the Exchequer would exercise a little more courage and bold ness and face the position as he will have to do sooner than later, and if he had a capital levy—
§ The CHAIRMANThe hon. Member in his previous speeches on other Amendments went into all these matters, and it is not quite fair to repeat his speech on succeeding Amendments.
§ Mr. ARNOLDI bow to your ruling. It is only my anxiety that the Chancellor of the Exchequer should not get up and say, "I am not sure that I can get the money elsewhere." Should I be in order in making a specific proposal which I have not made before, namely, that the rate of Income Tax on bigger incomes, over£1,000, should be increased by 3d. or 4d.? If that were done, this money could be found. The Chancellor of the Exchequer ought to have done that this year. The -wealthier classes were expecting an increase in Income Tax, and the fact that it did not come was a pleasant surprise. They have been lulled into a sense of fake security by this Budget. The fact that the Income Tax has not been increased on larger incomes is a direct incentive to extravagant living, which the Chancellor of the Exchequer has. strongly deprecated. If he would make this change, he would do something to adjust these matters and bring the wealthier classes up against the facts. I do submit that it would be far better all round to stop this bad system of levying Income Tax on people with these very small incomes—a system which violates every principle of sound finance, and causes great hardship—and to make up the money in the way I have suggested, which would cause no real hardship at all, namely, by simply making an increase in the Income Tax of the wealthier classes less than they were expecting before the Budget was brought in. On all grounds of justice, sound fiscal policy, and wise State policy, there is an overwhelming case for this new Clause.
§ Mr. ADAMSONI take it, Mr. Whitley, from the intimation you have already made, that you desire that the Clause which has just been moved by the hon. Member for Penistone and the one standing further down on the Paper in the names of my hon. Friends and myself, should be taken at one and the same time. 426 In view of that, I propose to say what I have to say in the discussion on the new Clause which has just been moved.
The question of Income Tax is one that is causing a large amount of dissatisfaction at the present time, particularly among persons with small incomes. The party with which I am associated are sometimes blamed for trying to find relief for what are commonly described as the working classes, without any regard to the interests of another section of our people, namely, the lower middle class, whose incomes may be on a somewhat similar scale to the earnings of the working classes. I want to assure the Chancellor of the Exchequer and the Committee that, so far as the Labour party is concerned, they have no such intention. The Clause standing in the name of my hon. Friends and myself is designed to deal with all persons with small incomes. The difficulty of the one section is just as great as that of the other, in view of the smallness of their incomes. I want to impress on the Chancellor of the Exchequer that the dissatisfaction in the ranks of those salaried persons who are sometimes described as forming the lower middle class, is just as great as the dissatisfaction that exists in the ranks of the working classes regarding this question. I do not think that the reasons for that dissatisfaction are difficult to find; one does not require to search very long for very good reasons why you find such a great amount of dissatisfaction regarding this matter. Firstly, you have the fact that the Income Tax exemption limit was lowered from£160 per year to£130 per year, and that, when once a person's income had exceeded£130, he was taxed on£120. Alongside of this fact you have also the fact that the standard of living has risen enormously. The standard of living is, roughly, 100 per cent. over the pre-war standard. With the Income Tax limit lowered and the standard of living raised, a very large number of our people to-day are placed in a great difficulty. The lowering of the Income Tax limit has roped in a very large number of persons who have been unaccustomed to paying Income Tax until quite recently. The raising of the cost of living coming on top of that places them, as 1 have said, in a very difficult financial position. It may be said in reply by the Chancellor of the Exchequer, and others who may take-part in this Debate, that as against that there have been considerable increases in 427 wages so far as the working classes are concerned. I think that can only be said with reference to certain sections of the working classes. A considerable number of them have only had their wages increased to a small extent; and when one looks at the position of the lower middle classes, I think that, generally speaking, their earnings have been increased only to a very small extent indeed, and in some cases there has been no increase at all. This places many of our people in a much worse position financially than they were in before the War. Not only have we had the direct taxation of those with small incomes increased, but their financial difficulties have been added to by increases that have been made in indirect taxation. If I may cite as an example the position of those with incomes under£3 per week prior to the War, according to the Budget of 1913/1914 the amount they were paying in direct and indirect taxation amounted, roughly, to£54,000,000. I do not pretend to give an exact figure, but I estimate that the amount that these same classes wall require to pay during the first year of peace will be no less a sum, in direct and indirect taxes, than£116,000,000. The pre-war tax on the section of our people that I am citing as an example amounted, roughly, to£6 per family per annum. The direct and indirect taxation on that same class during the first year of peace will, I estimate, amount to no less than£13 per family per annum. That is a very serious increase in taxation so far as persons with small incomes are concerned, and there is little wonder that there is a great amount of dissatisfaction regarding this matter. During the course of a former discussion on this subject, as has already been pointed out, the Chancellor of the Exchequer said that if he were to give effect to the terms of this new Clause it would mean a loss on the current year, roughly speaking, of no less than £8,000,000; and that, when the revision of the abatement came in on incomes above£250, it would amount possibly to£20,000,000. He pointed out that that was a shortage that he. could ill afford to bear.
I want to submit to him for his consideration even yet that there are other places where he could find those£20.000,000, with less hardship on the parties from whom he would get the money. For instance, during the course of this Debate a great deal has been said about the 428 desirability of taking steps to secure a share of the enormous war profits that have been made. There I think the Chancellor of the Exchequer, if he were to take the proper steps, could find not only the£20,000,000 which would relieve him of the necessity of taxing those with incomes under£250 a year, but a very much larger sum. One of my hon. Friends in an earlier Debate stated his opinion that, roughly, £1,000,000,000 were made by the war profiteers in the course of the last five years. There the Chancellor of the Exchequer has a fruitful field, if he will take the necessary steps, for securing a much larger sum of money than he is obtaining from the tax now under discussion. May I suggest to him another place from which he could possibly draw the£20,000,000 without imposing any hardship upon those from whom he would find the money'? It is stated that there are at the present moment no less than 148 persons in this country who are drawing incomes of over£100,000 a year. It is also stated that there are 31,765 persons with incomes of over£3,000 a year. Their total income, after meeting the taxation imposed by the Chancellor of the Exchequer, comes to something like£163,000,000. I suggest to him very humbly that either from the one section or the other it would be possible for him to find those£20,000,000, without imposing hardships that will cut into the standard of living of the people from whom the money is found; whereas, if he insists on continuing to tax persons with incomes amounting to less than£250 per year, he is really cutting into the standard of living of those people. That is too serious a state of matters to continue without causing great dissatisfaction, and the right hon. Gentleman can take it from me that not only is there an undercurrent of dissatisfaction, but that dissatisfaction is beginning to express itself in quite a different form. In various parts of the country there is a very strong agitation amongst those whose incomes are under£250 per year in favour of becoming passive resisters; to refuse to pay taxes with a view of forcing the hands of the Government. It would not be a very desirable state of matters if we had a large section of our people passive re-sisters against taxation. In conclusion, I would strongly urge upon the right hon. Gentleman rather to give this matter his serious consideration with a view to ensuring the necessary relief to that section of our people for whom we are pleading— 429 that section which cannot afford to pay Income Tax without cutting into their standard of life. As my hon. Friend who moved this new Clause has stated, and as I myself have pointed out, there are many sources open to the right hon. Gentleman if he will only turn his attention to them. He could there find, I think, a much larger sum than is required to bring about the abolition of the tax with which this Clause deals. I hope, before the discussion ends, that we shall have the Chancellor agreeing to our proposal.
§ The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)The right hon. Gentleman has suggested in passing, without arguing—as he was entitled to do —the various places in which he thinks I might look to make good any deficiency caused in the Budget by the alteration he has supported. It would not be in order on the Amendment before us for me to enter into any detailed explanation of the reasons why i do not follow the course pointed out to me by my right hon. Friend. I have dealt with the capital levy on several occasions. Yesterday I dealt with the question of the taxation of profits made during the War. If I were to repeat myself I should be out of order; also if I attempted to develop these arguments. But I trust it will be some satisfaction to the right hon. Gentleman to reflect that those fortunate, or not always fortunate, people, the possessors of immense wealth, do, at any rate, contribute more than 10s. out of every£1 they receive during their lifetime, and that we propose to take£4 out of every£10 they leave at their death. They do not escape quite scot-free even at the present time. I do not know to what limit the right hon. Gentleman would think it fair, equitable, or expedient to carry the appropriation by taxation of incomes which he and I, at any rate, will never enjoy, and which we should not know what to do with if we had them. The hon. Gentleman who moved, and the right hon. Gentleman who himself supported this Amendment, argued largely from the fall in the present value of money as measured by its capacity for purchasing commodities. The fall in the value of money is an argument which is freely used by each Member to support that particular thesis which he is sustaining at the moment. But I observe that the same hon. Members treat with some impatience any attempt to apply the argument to incomes beyond their range of vision or to circum- 430 stances not within their immediate purview. At any rate, may I suggest to the hon. Member that if£250 is only equivalent to£125 now, an Income Tax of 2s. 3d., which is a standard rate for incomes under£500, is only equivalent to Is. l½d., and that he must adjust both sides of his argument under the hypothesis upon which he proceeds? The hon. Member drew a further argument from the Bill which was introduced and read a second time to alter the limit under the Insurance Act. He stated that that was done in consequence of the cost of living having risen. He is mistaken.
What was the reason that actuated the Government? The reason was that the rise in wages would automatically remove a very large number of people from the purview of the former Act, and therefore deprive them of advantages for which they had insured. Therefore the reason for which the Government introduced that Bill do not support the thesis sustained by the hon. Gentleman to-day. Then the hon. Member, in his capacity of severe economist, wishes the Chancellor of the Exchequer to exercise a strict scrutiny over all public expenditure, and to husband the national resources, and says, "After all, the Chancellor of the Exchequer is exaggerating in putting in his figure at£20,000,000. Even so, it is merely a trifle in our Budget. What is£20,000,000?" That is just the kind of criticism which I am accustomed to receive from hon. Members who on other occasions are only too ready to denounce the Government for its extravagance.
The Committee, I am quite sure, will not expect, after what I have said at earlier stages of our Debate, that I shall be able to accept this Amendment. I did yesterday indicate my readiness to accept, or myself to move, a couple of Amendments. One of them, suggested by my right hon. Friend, opposite, extends the age-limit at which children's allowances can be granted in abatement of Income Tax, provided the child is continuing in whole-time education—if I may use such a phrase, I also indicated my readiness— and I think it met with the general approval of the House—to double the wife's allowance under the present Budget. I think that is as far as I should be pressed to go on the present occasion. I see that there is an Amendment down to double the wife's allowance, which we shall come 431 to presently, and which I shall accept, so that I do not need to put down an Amendment of my own. Taking my stand upon that, may I remind the House what is the effective Income Tax charge, and what are the allowances, and how they compare with the pre-war position in respect of these small incomes.
Before the War there was no wife's allowance. Before the War for children there was an allowance of£10; it is now£25. The one allowance is new; the other allowance has been more than doubled. In addition to those allowances a working man is entitled to deduct, and claim as an allowance, the sums paid for insurance on his life, or on that of his wife. He may claim an allowance for so much of any contribution to his trade union which is allocated for superannuation or death, and for similar contributions made by him to a friendly society. He may claim an allowance for any payment on account of tools, and so forth, and for the cost of clothing used exclusively or practically for working in—that is, his working suit. These are special allowances flowing from the general principles of the law. Assume that a man in respect of his tools, clothes, and life insurance to be entitled to an allowance of£10—which is a very reasonable sum—let me tell the Committee what the result is, compared with what it was before the War, when the Income Tax was charged at 9d. A single man with no dependants is worse off. In consequence of these allowances the married man with no children pays less than he ought to have paid before the War until his income exceeds£3 10s. per week. The married man with one child pays less than he would have done before the War until his income exceeds£4. The married man with two children pays less until his income is over£4 10s. per week. The married man with three children till over£5 per week; and the married man with four children until it is over£6 per week. Of course, if he has dependants the same allowance as is given to the child is given in the case of one parent or other dependant.
Let me put the position in another way. I shall take£4 10s. per week, and see what is paid. The bachelor pays 4s. 6d. per week out of his£4 10s. The married man with no child, now having the£50 allowance—I have estimated upon that basis, the Committee will understand— 432 pays 2s. 4d. a week. The married man with one child pays Is. 3d per week. The married man with two children pays 2d. a week—less than he would have paid before the War. If you come to the man with£5 a week, or£250 per year—a little more than is suggested by my hon. Friend—the bachelor out of his£5 pays 5s. 7d. per week; the married man with no children pays 3s. 6d.; the married man with one child pays 2s. 5d.; the married man with two children pays Is. 4d.; the married man with three children pays 3d.; and the married man with four children pays nothing. Put it in another way, and let us endeavour to see exactly what the figures mean. With the new wife's allowance, and the allowance of £25 for each child or other dependant, the effective limit of exemption is: for the person with one allowance—that is, the wife only— £170; with two allowances—the wife and child or dependant— £195; with three, £220; with four, £245; with five, £270; and so on, with six, £295. It will be seen that the effect of the allowance is very material, that the relief which they give is very large, and that it is given, I think, where it is most needed and in cases where the obligations are greatest. There is another case which is not provided for, and it is that of a widower for whom someone acts as guardian of his children, and gets an allowance. There is the case of the eldest son of a young family whose father died, and he is left as the breadwinner, but he does not get an allowance for the woman who takes charge of the younger children. The same, I think, would apply if the daughter went out to work and had to pay someone to look after the younger children. That, of course, is a casus omissus, and I am ready to extend the provision to such cases.
§ Mr. ADAMSONThat was just one of the points upon which I was going to hand the Chancellor of the Exchequer a manuscript new Clause, when I found that he was unwilling to raise the amount to£250.
§ Mr. CHAMBERLAINI am glad that I have anticipated the right hon. Gentleman, because I think that is a case where relief ought to be given, and if he will let me see the manuscript Clause which he refers to I will see whether we can agree to its terms and then insert it on Report. Of course, that is on the lines of relief already given, and it is an omitted case which we might very properly provide 433 for. As I was the first to mention it, perhaps I might propose it, and accept the right hon. Gentleman's co-operation in carrying it out. Seeing what the effect of the existing relief is, and what the taxation involves in respect of these cases, I cannot really consent to a proposal to fix the minimum at£250 with the natural consequences of having to extend the scale of relief is above that point in accordance with that large exemption. There are Gentlemen who think that people with£250a year ought to pay no taxation, but I am not one of them. After all, there ought to be some connection between taxation and representation. As we extend our system of representation there are people who would restrict our system of taxation. I think those who have power to vote the money and spend it ought to contribute to the raising of it—not, of course, in an unfair or unjust proportion, but I think it would be a bad day for everybody, for those exempted as well as others, if you do deliberately frame your taxation, which is the avowed object of hon. Gentlemen opposite, so that the mass of those who exercise political power have no personal responsibility for the financial consequences which their policy entails.
I do not want to dwell upon this occasion on the extent to which the money raised by the State is already spent largely for the benefit of the small taxpayers and the poorer classes. I do not grudge it in the nature of our capacity to find it. I am not questioning the policy, but when you are looking at the obligation of these people you must look also at the other side of the account. It is not quite fair to consider only what they put into the National Exchequer, and you must consider what they get out of it in respect of education, insurance, old age pensions, advantages which no individual or party in the House would be willing to reverse, and say that in regard to them each individual must provide for himself and his children. Without these advantages perhaps there would be good ground for revising your whole system of taxation and giving them a larger measure of relief in regard to the burdens at present borne on their behalf by the State. Having regard, however, to the immense expenditure in which we are involved, which specially inures to the benefit of the poorer classes to the extent of the relief given since the War, and already increased in 434 this Budget, I cannot see my way to go any further in this direction at the present time.
Major NEWMANThis Debate has been largely academic with the exception of the speech of the Chancellor of the Exchequer. The Leader of the Labour party has suggested that those with over£3,000 a year should bear the extra burden, and the hon. Member who moved this new Clause urged the Chancellor of the Exchequer to adopt this suggestion because this was a time of reconstruction. He is quite right, but society itself is now being reconstructed, and what is happening now happens after every great war. There is the case of the well-paid mechanic earning his£5 a week, and he is rightly taking the position occupied formerly by the lower middle class, and has become the new rich class. The other side of the picture tells us something of the conditions of the new poor, who are the erstwhile middle class who are being driven down by high taxation and the cost of living. They have not the same chance-as the mechanic of making good their position by working longer hours and getting better pay. I know very well how this War, with higher taxation and increased cost of living, has hit the lower middle-class man, such as the clerk and the insurance agent, earning a precarious£150 a year or more, or the case of a woman living by herself with a small fixed income derived from dividends. I am in receipt of correspondence from this class almost every day of my life. I get scores of letters from them, and I have never had a letter from any man or woman with these small incomes asking me to put down an Amendment in this Budget or any other to exempt them from the Income Tax. Of course, they do not like paying the Income Tax even if it is a small amount, but whatever amount it is, it bears very hardly on them, but they are resolute and pay it without grumbling and without any passive resistance, because they want to do their bit to finance the country after the War.
To say, however, that the well-paid mechanic ought to be exempt while the lower middle-class man is not exempted is nonsense. All these things, which, as the Chancellor of the Exchequer has pointed out, the working classes get the middle-class do not get, such as free education, insurance, old age pensions, provision for children, and the hundred and one other things which we have to 435 pay for. The middle-class man with£150 a year does not get any of these things, and he has less cause to be grateful than the well-paid mechanic. For these reasons I wish the right hon. Gentleman could have accepted this Amendment, because I know it would be received very gratefully by those with small fixed incomes and those earning small salaries. However, the right hon. Gentleman says the cannot do it, and I have no more to say on that point. I trust that in the near future something will be done to put on a new footing our present idea as to the Income Tax, something in the nature of a poll tax to be paid equally at the beginning, and graduated upwards in a fair way until it reaches the very highest incomes.
§ Mr. EVELYN CECILI could not help being struck by the very sectional argument used both by the hon. Member for Penistone (Mr. Arnold) and the right hon. Gentleman the Member for West Fife (Mr. Adamson), who seemed to have their eyes fixed on the one question whether one particular section of the community should or should not be exempted. It seems to me that this question ought to be approached from a much wider national standpoint. I rose rather to enforce the argument which was used by the Chancellor of the Exchequer at the end of his speech. I am certain that unless those who exercise political power bear some small part of the expenditure, we shall get into an endless bog of expense, and get a thoroughly bad atmosphere as regards economy. What we are always preaching when it suits us to criticise others is that we want greater national economy, it is all very well to preach it in the abstract, but the only way to bring it about is to create an atmosphere which will cause it, and, in my humble opinion, you will never get that until practically everybody in the Kingdom is subject to one tax, namely, the Income Tax.
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I have heard speeches made years ago by the right hon. Gentleman the Member for Derby (Mr. Thomas), and certainly by the hon. and gallant Gentleman the Member for Stoke-upon-Trent, arguing that every citizen ought in some degree to be subjected to Income Tax. I am disposed to think myself that that is a very sound policy, making the small exception that those at the very bottom of the scale, the very poorest, should be allowed free- 436 dom from it. I would, however, make the exemption very low, and I should never dream of raising it from£130 to£250—in fact I should be rather inclined to go to other way. I am not asking for heavy taxation at the lower end of the scale, far from it. 1 shall be content if the lowest pay only a farthing or a halfpenny, because it would make them feel at a General Election that if they vote for a policy which is admittedly going to cost millions, they themselves will have to contribute something towards it. That surely is a wise and far-seeing national policy. But it is quite opposed to the two speeches with which this Amendment was introduced into this House. The Chancellor of the Exchequer told me quite recently, in answer to a question, that while the total number of electors at the last election exceeded 21,000,000, the total number of Income Taxpayers was 3.400.000, and though, of course, you cannot take these figures as absolutely comparable, yet they show that, roughly speaking, six-sevenths of the electors are not subject to Income Tax, and yet those six-sevenths are predominant in dictating what is to be the policy of the country. If we really believe that national economy is necessary, it is essential that almost every citizen should be subject to the Income Tax, which is the main source of our revenue. And if debates on Finance Bills year after year have that object in view, I think they will be to the national benefit. The right hon. Member for West Fife seemed more particularly anxious to penalise those who are fortunate or unfortunate enough to have very high incomes. I do not myself believe that from the national point of view there is any great objection to rich men, who, after all, are not criminals. They have their value to the nation, more particularly those who are conscientious and try to do their duty. There are many instances which hon. Members of this House can call to mind, where rich men have started a charitable or other institution for the public benefit which otherwise would not have been set up by the State, and although, of course, it is perfectly right that rich men should pay a high rate of taxation, it ought not to be such a rate as must eventually abolish them out of the nation. Those who have watched public life can testify 437 to the usefulness and services rendered by citizens of that class, and while they may be asked to contribute a very high rate of Income Tax, more particularly under present circumstances, yet it is not only upon them that the tax should be put, but it should fall upon practically all incomes so as to create an atmosphere of economy.
§ Lieut.-Commander KENWORTHYI have listened to the greater part of the very interesting speeches on this. Amendment, but not one of the speakers, not even the Chancellor of the Exchequer, has gone to the root of the matter at all. Neither did the Mover or Seconder, although their arguments were extremely interesting and clever. I am the more glad to have this opportunity of going to the root of the question because I have been longing to reply to another speech of the Chancellor of the Exchequer, in which the right lion. Gentleman pointed out that the workman who did not smoke, drink intoxicants, or tea, or eat sugar, would escape taxation altogether if he were exempted from the Income Tax. I am going to deal with that argument, but first I should like to say I am supporting this Amendment not because I like it, but because I should prefer it to go a good deal further, and to exempt entirely incomes up to£400, for where there is a family of children to educate a man on such an income is very badly off indeed. That concession, which I hope the Chancellor of the Exchequer may be induced to make, would cost the State approximately £ 8,000,000, owing to the number of people who would be exempted. The larger concession which my hon. Friend the Member for Peniston (Mr. Arnold) proposed would cost£20,000,000, and I quite agree with the hon. Member that even that is not a very great sum as things go at present. We are spending£60,000,000 on the bread subsidy. I do not know what the coal subsidies will amount to. Our Navy costs us£112,000,000, and our Army£440,000,000, and to say that this exemption, which I consider is just, and which would allay the unrest that now exists and is coming to the surface, an exemption which would increase the general welfare of the mass of the population—to say that this£ 20,000,000 cannot be afforded in face of the way we are pouring out money, often in very questionable directions, is to put a very poor argument into the mouth of the Chancellor of the Exchequer.
438 It is not merely the working man I am thinking of—the term "working man" used in the narrow sense. I am thinking also of the small professional man, the struggling little shopkeeper, the people who are being ground between the millstone of the big co-operative societies and the big trust companies. I want these people, for instance, to be free to live a separate business life. I speak, too, for the clerks, for the black-coated coterie, the people who are hit tremendously by the rise in the cost of the necessaries of life. It is the bachelors who will largely pay this tax, because married men with children are exempt. But many of these bachelors are returned soldiers, to whom we owe everything. They are trying to save money, it may be, to get married and to set up house for themselves. They have been spoken of by one hon. Member as not being respectable, but I cannot agree with that. They are trying to set themselves up in business, and I think all Members of the Committee will agree that they ought not to be specially penalised because they are bachelors.
Let me come now to the case of the working man who is exempted from Income Tax, who does not smoke tobacco, who does not drink intoxicants or tea, who docs not eat sugar, who does not write cheques, and who, therefore, as my right hon. Friend suggests, docs not pay taxes. I should like to advance one or two reasons why these men should not be taxed. The money that is now required is wanted largely to meet the interest on loans. It is not to pay for the War, because the War has been paid for. Take the case of the Napoleonic Wars. They were paid for at the time, but we are still paying interest on the debt we piled up then. It is an unsound suggestion, therefore, to say that the money is wanted to pay for the War—as unsound as it would be to suggest that it is wanted to pay for the Peninsular Wars. My point appears a little complicated, yet, when I explain it, it will be found to be extremely simple. Suppose the right hon. Gentleman the Member for West Fife fitted out a yacht and invited the Chancellor of the Exchequer and the members of this Committee to accompany him on a cruise in the East Indies. Suppose the party were wrecked on a desert island and compelled to fend for themselves They set to work, they lived a Robinson 439 Crusoe existence, and, after a time, built a ship with wood in the absence of the owner of the island —
§ The CHAIRMANThe East India islands are a long way away from the Clause.
§ Lieut.-Commander KENWORTHYI was trying to show exactly what has happened during the last five years, and why it is not fair now to make men with small incomes of £250 a year, or less, pay In come Tax. We built our ship, we sailed about, we were rescued, and we were cine-matographed as the people who had been shipwrecked—
§ Mr. HOHLERIs this really in order?
§ The CHAIRMANI think the hon. Member is contesting my ruling. I gave him the most courteous hint I could that he was going too far.
§ Lieut.-Commander KENWORTHYI will drop the argument at once, and go straight away to the larger case, and show why we are not now, in raising this money for taxation, paying for the War at all, but are merely paying interest on the debt. The War was waged with munitions, by soldiers clothed with uniforms, and by stores that were sent out, tanks, guns, etc., all of which were produced by labour in this country and paid for by labour. Here comes in the simile I was going to use, and it is this, that the owner of the island might just as well have said to the shipwrecked party I described, "You ought to pay me now for the things which you used on my island." That is exactly the position we are faced with now. The people actually paid for the War by producing the things with which the War was waged. The great majority of those who did that are working people in the broad sense of the word. They are people who did work of national importance. The well-to-do members of the community are owed money by the State, and, although you are going to heavily tax them, it is not fair to heavily tax small wage earners at the present moment, seeing that they have already paid for the War with their labour; yet you are asking them to pay the interest by further taxation. I am afraid that that is at the bottom of the unrest which is coming to a head throughout, in the mining districts especially, where the people who earn good wages, and, by the way, work very hard, 440 are objecting to paying this Income Tax. I say that they are perfectly justified in so doing, and good statesmanship would at once drop this proposal to tax low incomes. The Budget came as a great relief to the well-to-do classes. Although I am not a pauper I was disappointed in it. I thought it was going to heavily tax the well-to-do classes. I hoped a Budget would come which would give such a shock to the country that all this riotous extravagance and luxury trades would be stopped.
§ The CHAIRMANClearly that is a question for the Second Reading of the Bill. The hon. and gallant Gentleman will see that if we had these general speeches on every Amendment we should not get along at all.
§ Lieut.-Commander KENWORTHYMy arguments may not be clear, but I think they will be accepted shortly, that this taxation of the small wage earners with£250 income is unjust and should be dropped, and it will not pay us in the short run or in the long run. I make a last appeal that this course will be adopted and this further concession made to the people on the poverty line.
§ Mr. HAYDAYI think it will be agreed that the only basis upon which taxation can be imposed is the ability to pay it. I certainly hoped the Chancellor of the Exchequer would see his way clear to accept the Amendment. He stated all that had been done for people with low incomes and mentioned that the allowance per child had been raised from £10 before the War to£25 at present, and that an additional allowance had been made of£50 for a wife. He omitted to tell the Committee that the limit at which taxation commenced before the War was£160. So that actually during the War period we have had the limit reduced, which has been an increase in the burden upon those with small incomes. Two hundred and fifty pounds to-day docs not represent a point at which a person can afford any taxation beyond the indirect taxes. I agree that every citizen with an income should be made to feel that he will contribute something in the form of taxation for the general carrying on of the State, and the only fair way in which that could be done would be by the abolition of all indirect taxation. The workman and the person with a small income pay out of all proportion in the form of indirect taxa- 441 tion. The Chancellor of the Exchequer always puts his taxes upon commodities that are consumed in greater quantity because they bring in a greater amount of revenue. Those commodities in the main are necessaries for the greater portion of the population. Essential foodstuffs are taxed far and away beyond what is reasonable as compared with the luxury-consuming element of the country in the person of those who have very good incomes and who can afford to indulge in the luxury side of life which is denied to those with slender incomes.
The Chancellor of the Exchequer mentioned all the good things that the State had done for these people in the form of old age pensions and national insurance. Why did the State initiate those reforms'! For no other reason than that they required that every precautionary step should be taken to give opportunities for those whose incomes were low to have provision made for them because it was impossible on their incomes to make provision for themselves, and they gave that direct interest and responsibility by compelling industry to contribute a share, the person who benefits to contribute a share and the nation, which gets the greatest benefits of all out the Insurance Act, to contribute its quota to the sum total that went to make the provision against sickness or unemployment. These reforms were initiated because it was impossible for the people for whom they were intended to pay any direct contribution over and above a given amount. The State has not rendered its full measure due to those with incomes less than£250 per annum. It is said, the more children you are responsible for the freer you are from this form of direct taxation. But surely you are paying more. The father responsible for the rearing of four or five children under the age of sixteen is called upon to spend a greater amount on their annual upkeep than the allowance he receives from the Chancellor of the Exchequer. The responsibility ought not to be wholly on the father or mother; it ought to be on the State; and if you are going to cripple those with small incomes in the proper upbringing of their children the State will be the sufferer just as much as will the children and their parents. I urge that the Chancellor of the Exchequer should give a more sympathetic and real consideration to the matter. An income of£5 per week, with the cost of living as it is and with the threat that it is 442 going to increase, will, to my mind, act very arbitrarily upon those with small incomes. It does not represent the proper standard of life that we should desire to see. I am not certain, the Chancellor of the Exchequer is right when he says that every workman, in addition to his other allowances, has an allowance of 10 per annum for clothes and food. I think he will find that that applies only to special cases and special industries, such as ironstone mining, blast furnaces, steel workers, and acid workers, where the clothes are destroyed very rapidly by the very nature of the industry.
§ Mr. STEWARTI think the hon. Member (Mr. Hayday) rather contradicted himself. He wished to have everything by direct taxation, and yet he proposes that people with incomes of£250 should not pay any direct taxation.
§ Mr. HAYDAYI said they should pay direct taxation but abolish the indirect form.
§ Mr. STEWARTUnder the old scale of taxation we used to pay about half direct and half indirect. Now it is 80 per cent-direct and 20 per cent. indirect, and if you were to take off all the taxes from tobacco-and beer, of course the Income Tax would have to be very largely increased. I rise to back up the proposal of my right hon. Friend (Mr. E. Cecil). I think everyone should pay Income Tax, because it is well to cultivate a sense of responsibility in the citizens of the country. So far from considering it with regret that more people are brought within the tax-gatherer's net, I think it is one of the few benefits the War has given us, that it has been the greatest redistribute or of wealth that it is possible to imagine. The hon. and gallant Gentleman (Lieut-Commander Kenworthy) said the workmen had paid for the War with their labour, and therefore they now resented being called upon to pay anything towards the taxation of the country. But the increase in wages has been very great, and I do not believe if it was fairly put to the working people they would at all object to bearing their share. The taxation of the country is like an inverted pyramid. It is in the hands of a very few, and the broader we can make the basis of taxation the better for the country. I listened with profound regret to a remark by the hon. Member (Mr. Arnold), whom we acknowledge to be an authority on matters of economics from 443 his own point of view, but he showed that he has lost all sense of proportion when he said a matter of£20,000,000 in the revenues of the country was a small matter. It shows the lengths to which economists in search of votes are prepared to go. I think, when he reads in the papers what he has said, and thinks it over, he will not look back upon it with any great satisfaction.
I should like to say a word about the lower middle class—people who are not under the Insurance Act and who like to send their children to school. There are tens of thousands of middle-class households in which, when they have paid their rates and taxes and school bills, and what charities they can afford to subscribe to, there is less money left for food than there is in the houses of many people who pay no Income Tax at all. It should be borne in mind that these are people whose incomes have not been added to during the War, and we are doing what is quite fair in asking people with good wages To bear a certain proportion of the taxation of the country, and very liberal allowances which the Chancellor of the Exchequer has given, which produce the effect that a man with£270 a year and four children pays no Income Tax at all. It is an encouragement to people to have children, and in that, I think, the Income Tax is a wise and statesmanlike measure.
§ Colonel PENRY WILLIAMSI want to urge upon the Chancellor of the Exchequer one point in connection with this tax. I am not going to vote against the Government on this Amendment. I do not think it is right for hon. Members to allow demands for special privileges to influence their votes. Hon. Members in this House and candidates outside will do a great injury to the authority of this House if they put themselves up to auction. During the last election we were asked about pensions and allowances, and I told my discharged soldiers and sailors quite frankly that if there was to be any bidding for votes on pensions and allowances, I was not a bidder. I am not a bidder on this occasion, but I should be very glad if the Chancellor of the Exchequer would give this matter and the increase in the limit of In-come Tax his sympathetic consideration as soon as money is available for the purpose. I do not like reducing the Excess Profits Duty by 40 per cent. one day and next day refusing consideration to a man 444 whose income does not exceed£250 a year. During the War many companies were asked to increase their output largely, and they were accorded special privileges to increase their output. They were given grants out of the money which was due to the Treasury from their Excess Profits Duty. I believe, also, that special consideration is given to businesses with respect to the increased cost of repairs. No privilege has been given to the workman. He has been asked to increase production, and during the next few years he will be pressed still further to increase production. The workman says, "My hours are seven or eight per day, and if I work seven or eight hours per day I am not liable to Income Tax, but if I work overtime four or five hours that brings me within the Income Tax rule, and I have to pay Income Tax." The man who works overtime is exhausting his bodily capital, because he is consuming his power to work in future years, and he should have special consideration for that. If the right hon. Gentleman would base the man's contribution to Income Tax on the regular trade union hours of work and the trade union rate of wages, and say, "If you earn more, if you work harder, we will not charge you Income Tax upon it," I think that would be a very great incentive to the man to put his back into his job and turn out all the work he can.
I believe that if the Chancellor of the Exchequer could alter he system of collection it would do a great deal to get rid of friction. A man has to make a return and he has to pay his Income Tax after he has spent the money. Could not he invent some sort of process by which the income Tax could be deducted from the man's wages before the wages are paid to him? If that were done, the man would not escape his taxation. Probably he would not like to pay Income Tax any more than he likes to do it now, but it would enable him to pass the impost on to the consumer, as is done in other ranks of life. All taxation eventually is passed on to the consumer. A large company which pays dividends free of Income Tax makes provision in its cost account for the amount of taxation which it has to pay. That amount appears in the cost account as an item, exactly the same as a ton of coal or a bit of ironstone, or whatever stores are used in the manufacture of the article produced. It is, consequently, passed on to the consumer. If the working man had to 445 pay his Income Tax through the office before he received his wages he would say, Very well, I am nominally paid a wage of£2 2s. 6d. a week, but when it is handed to me it is only£2 1s. 6d., because Is. is deducted for Income Tax. That£2 1s. 6d. does not meet my needs, and the cost of living." Consequently he applies for an increase of wages, and thereby the impost which is put upon him by the Government is passed on to the proper person to bear it, namely, the consumer of the article he produces. That, I believe, will get rid of a great deal of irritation among the working people with regard to the payment of Income Tax.
I do not quite follow the Chancellor of the Exchequer's figures. He said that a man with a wife and three children did not pay Income Tax if they had£240 a year. The abatement is£130, the allowance for the wife£50, and for each child£25, which amounts to£75, so that he does not pay Income Tax unless his income exceeds£255. I hope the Chancellor of the Exchequer's promise to increase the allowance on account of a wife will also mean an increased allowance of£25 in respect of a housekeeper. I should also like to draw attention to the question of allowances for clothing. In my Constituency we have a large import business in oil, especially creosote oil. The men tell me that their clothes are worn out and rotten very quickly by the action of the fumes, and that proper allowances are not granted to them for their clothes. The surveyors of Income Tax cut down the allowance. One man assured me that the. cost of clothes to him in one year was£9 or£10, and his allowance had been cut down to£4. I hope the Chancellor of the Exchequer will instruct his surveyors to he a little more generous in allowances for clothes, especially considering the high price of clothes to-day. This is rather a sore point among a good many of my Constituents.
§ Mr. CHAMBERLAINIf the hon. Member has quoted me correctly then I must have been in error. A married man with three children and a wife living would not pay Income Tax until his income exceeded£4 10s. a week. At£5 a week he would pay 3d. a week Income Tax. A married man with four children would not pay Income Tax until his income exceeded£5 a. week. At£5 10s. a week he would pay 446 3d. a week Income Tax. Either I made a mistake or the hon. Member must have misunderstood me.
§ Colonel WILLIAMSI thank the right hon. Gentleman for his explanation.
§ Sir A. STEEL-MAITLANDI am sure that we appreciate the difficulties of the Chancellor of the Exchequer. As an old official of the Treasury I do so sincerely. We always treat him as if the public revenue came down like manna from Heaven, and we are all asking him for re-mission, while at the same time he has to get fresh taxation, which means a burden on the rest of the community. We agree with the general principle he has laid down that taxation and representation ought to go together, and that as far as possible those who are causing added cost and imposing taxation on the country ought to feel responsibility for the proposals that they make. On the other hand, there is one other principle to which I am quite sure the right hon. Gentleman would assent in theory, and, as far as he is able, in practice, which was mentioned by the right hon. Member for the Aston Division (Mr. Evelyn Cecil), and that is that there is a certain minimum level of income at which level the recipient ought not to be taxed for Income Tax. Given that he or she only possesses that income, he or she ought to go free, but as soon as the income passes the lower level, as soon as he is in a proper position to expend money on beer, tobacco, and the other amenities of life, then he ought to be in a position to pay Income Tax also. The question arises what is that level? I ask the Chancellor of the Exchequer, appreciating the position from the point of view of national income, to say whether it is not possible, while conserving the income of the nation as far as possible, to meet the hardest cases that come up, which is the object of this Amendment, and which I understand he may be willing to meet by some other Clause destined for the same purpose, if not to the full degree?
If we take a minimum income of£130 a year, what does that really mean? It is equivalent in purchasing power now to an income of about£65 a year, or about 25s. a week pre-war. If we were debating this question in Committee before the War, I do not think there is anyone who would want to charge such an income with Income Tax. If I add to that income the allowance of£25 a year for a wife, which 447 is equivalent before the War to an allowance of about half that amount, £12 10s. a year, which is about 5s. a week, and if we were debating the question before the War, no one would propose to tax a man and his wife for Income Tax the moment their income exceeded 30s. a week. Therefore, we come to this position: Although it is imperative to raise income, and although it is imperative—with all deference to the hon. and gallant Member for Hull (Lieut.-Commander Kenworthy)—to pay taxation to pay for the War, we must ask what is to be the minimum liable to Income Tax? I suggest to the Chancellor of the Exchequer that he might take two different points into consideration. Take the minimum level as it applies to a single individual, an unmarried young man or an unmarried young woman, and then differentiate that case from the case of a married person. If the Committee will only look at the pre-war conditions and at the pre-war prices, they would agree that a 25s. limit before the War was really too low a level to be the minimum level out of which Income Tax should be taken, and that even for the single man or single woman it ought to be raised somewhat, if not to the whole level of £250 per annum. I do not know a case which I think ought to appeal to the Chancellor of the Exchequer more than the case of the man and his wife. An addition of £25 is not nearly enough in present conditions to be added to the minimum of£130 per year. When his first dependant comes upon him in the shape of his wife, a young man is no longer able to live as a lodger. He has to acquire a home of his own and incur great additional expenditure, and if the right hon. Gentleman cannot extend the minimum to the whole figure he might at any rate extend it somewhat, if only a little, in the case of the single man and the single women, yet considerably larger in the case of the wife, as it is in that case that there is the greatest hardship.
§ Mr. CHAMBERLAINI have already done what the hon. Member asks. I have doubled the wife's allowance.
§ Sir A. STEEL-MAITLANDI apologise, but I was called out for five minutes and did not hear that.
§ Mr. CHAMBERLAINIt was done last night.
§ Sir A. STEEL-MAITLANDThe only other point which I wish to raise is the first dependant. The allowance for the first dependant ought to be increased, not a great deal more in present circumstances, but it is the first dependant which causes the greatest strain to a man. I apologise to the right hon. Gentleman in reference to the increase for the allowance for wives of£50, but I have written to him on the subject before, and I would urge that to that extent there should be somewhat of an increase, and that that should be supplemented by somewhat larger addition for the first dependant afterward.
§ Mr. W. R. SMITHSome of the discussion that has taken place on this Motion has been from a false standpoint. It seems to be assumed that this is a special piece of pleading for the working man, and for him in particular. As I understand, it is a special piece of pleading for all those who unfortunately happen to have small incomes, and only in so far as the workman is in that position is anything asked for him in this respect. The Chancellor of the Exchequer in the speech which he made on this matter—and in the discussions on this Bill one has to recognise the general conciliatory tone adopted by the Chancellor on the various Amendments that have been suggested—referred to the principle that there should not be representation without taxation, and one hon. Member quoted some figures to show that the present position is rather anomalous in that respect, that there were 21,000,000 electors at the last election and that only 3,500,000 paid Income Tax. But the Debate yesterday showed that a large number of those 21,000,000 electors are married women, and that they pay Income Tax through their husbands, because that is the only form in which they are allowed to make contribution so far as direct Income Tax is concerned. Another point which the Chancellor mentioned was that people with low incomes, especially those of the working classes, got other advantages from the State which ought to be seriously considered. One of them which has been mentioned is health insurance. That is rather an unfortunate illustration to give in regard to this matter, because the level of incomes below which a person was entitled to the advantages of the Health Insurance Act was£160 per annum, the figure at 449 which the payment of Income Tax began. The Government recently have proposed an Amendment to the Health Insurance Act raising the income level at which a person is entitled to insurance to the figure mentioned in this Amendment. Therefore it is reasonable to argue that if the person whose income is below£250 is considered to have an income sufficiently low to warrant his getting the benefit of health insurance, it is not unreasonable to assume that the Income Tax should not be imposed on incomes below that figure, more especially as it appears that the previous Income Tax limit was taken as the point at which health insurance should cease to operate. In that respect the Government are hardly consistent in the various proposals, so far as this question is concerned.
What is now sought is by no means a new principle, as might be imagined from some of the speeches. The right hon. Gentleman who spoke last touched the exact point in this respect. The whole point is—what figure should a person's income reach before he should be called on to pay Income Tax 1 Having regard to the fact that previous to the War a person must have an income of£160 before being called on to pay Income Tax, and that now the figure is£130, and having regard to the difference in value, I think that it can be shown that there is warrant for the Amendment now before the Committee. But there is another aspect of the case following on the point referred to by my hon. Friend the Member for Nottingham in its special relationship to wage earners in various industries. On the different Conciliation Boards and under other procedure adopted for fixing wages the practice has been to fix what are known as minimum wages, wages below which no person can reasonably be expected to meet his obligations in life. What we have to complain of is that the income fixed for Income Tax purposes is actually lower than the minimum wages fixed for some of the lowest grades of labour in the country. That is a position that is hardly logical or consistent. But if 56s. a week is considered to be the lowest wage at which a workman should engage his labour, having regard to his responsibilities, how can it be argued that 50s. a week is a reasonable point to fix for the purposes of Income Tax 1 It is because we feel that the present arrangement bears so hardly on persons with small incomes that we are seeking some adjustment in this respect. 450 We recognise as fully as any hon. Member in this House that the difficulty is one affecting not merely those known as the working classes. We are just as much concerned for those people who are living in retirement on pensions and incomes that are very low which they have not been able to adjust as other sections of the community. What we feel is that the point at which Income Tax is levied is far too low, having regard to the responsibilities of these people, and that some alteration should be made in a system which presses so severely on persons with very small incomes.
§ Mr. NEALI want the right hon. Gentleman to consider whether he cannot somewhat further meet the hon. Members of all classes and sections who feel that some concession is needed in this matter. We have heard from various speakers, including the right hon. Gentleman the Member for the Aston Division of Birmingham (Mr. E. Cecil), the doctrine that taxation and representation are inseparable. I do not know that it is necessary to discuss that abstract proposition, but I do not wish it to be taken that it is universally accepted, because I am rather disposed to feel that in these days, when it is desired to extend the basis of the suffrage to everyone of adult age, it does not necessarily follow that representation and taxation arc alike, particularly in the case of those who have got the female suffrage. But assuming, for the purposes of my argument, that that doctrine is admitted, I would like to point out that the Income Tax is not the only tax, and that it is a form of direct taxation which most of us would welcome if it took the form of a single tax. But is it conceivable that there is any substantial body of persons in this country who do not contribute to Imperial taxation through indirect taxation? Income Tax is graduated. That is intended to put the smallest burden upon those who are least able to bear a burden. When you come to indirect taxation precisely the opposite happens. The taxes on food, one of which we were discussing last night, bear as heavily, if not more heavily, upon the poor than they do upon those of large means. That is easily demonstrated. Just in proportion to the amount by which the necessaries of life are consumed, so in proportion is the excess burden put upon the poor by indirect taxation. Last night we had a discussion upon 451 sugar. I have worked out some figures, and though they are not to be taken as arithmetically correct, I believe them to be substantially correct. The Sugar Tax imposed to-day comes to 3d. per head per week of the whole population. If that be anything like accurate, and I think it is, if you take the average family of five, the Sugar Tax is an impost of Is. 3d. per week on the workman's family, which is a very substantial sum per year. If you add to that the taxes on tea, tobacco, and beer, it will be seen that the workman is paying in indirect taxation already, as I conceive it, far too great a proportion of the taxation of this country, and I hope that the Royal Commission that is now sitting will be able to come to something like a clear and definite conclusion as to what is the incidence of taxation of the indirect taxpayer as compared with the direct taxpayer.
6.0 p.m.
It is no use trying to found an argument upon the fact that everyone ought to contribute to taxation, or, while you have in existence indirect taxation, to use that argument in support of the view that they should also pay direct taxation. There is another view that I should like to press, and that is this, that this direct taxation of the working man is somewhat new, and that it is telling adversely upon productivity. Anyone familiar with working men will know, whether it be right or not that it should be so, that there is a great volume of opinion amongst working men that they will not earn such a sum as will bring them within the Income Tax paying limit, I can say at once that, logically, it is unsound, that it is uneconomical, and that they ought to be taught better; but the feeling is there, and the fact is that in these days, when it is desired to increase effort and productivity, this tax is telling in exactly the opposite direction and retarding the reconstruction of the nation. Some of my lion. Friends spoke on behalf of persons, not of the manual-labour class, who have fixed incomes which has not increased, and one of them presumed to say that they were all perfectly willing to pay Income Tax. My credulity is large, but not large enough to accept that. If there is a class of persons in this country who are asking for a relief from taxation at this moment it is the class of person whose income is fixed, with an income 452 which is incapable of being raised, and who are finding themselves reduced to one-half the spending power that they had before the War.
I would like also to point out, once again, to the Chancellor of the Exchequer that, logically or illogically, the removal of the Excess Profits Duty to the extent by which it is removed in this Budget, at the same time that this Income Tax is being maintained, is causing difficulties and unrest, and is tending to reduce production. I shall be very glad indeed if the right hon. Gentleman could see his way to make some further concession upon this matter. I do not know whether it is possible to hope for that. I do not suppose that anyone who supports this Amendment is wedded to the precise figure of£250. I believe there is a great volume of opinion in this House in favour of some concession, and if the right hon. Gentleman, who has displayed such courtesy and such sympathy throughout these discussions, could see his way to-meet this proposal by some intermediate figure, I do not think the Exchequer in the long run would be the loser, because it would tend to get the people back hard at work and would tell them what it is most important they should be told, namely, that the Government of the country is not out to help the rich as against the poor. I do not believe for one moment that it is; I do not believe that the Chancellor of the Exchequer would desire to put the smallest burden upon the poor. But this tax does impose that burden. To tax people upon an income which is equal only to something like 25s. or 3s. of pre-war value is putting a hardship upon them. The hardship is not on the man; it is on the wife. [Some dissent.] I will make good what I am saying, for myself at any rate. What it does mean is a reduced power of saving, and a reduced power of spending. It does not mean any reduction anywhere else; but when you get down to the homes of the poor, it is not a question of what the balance-sheet is at the end of the year, or the banking account, but whether the children shall have an extra pair of boots, or whether there is a possibility of a new hat at the proper time. When you come to the purchases by the wives in their homes—the wife who gets the same money from her husband week by week—I venture to say it is a question of hardship, and if I understand anything of the 453 elements of taxation it should not involve hardship. It should be so arranged that it is a call upon, the excesses, upon the power to expend in luxury. When you are touching, as you do, the actual necessaries of life, I make bold to say that there is the greatest difference between the taxation which we, the ordinary Members, face, and the taxation which the poor have to pay directly and indirectly. I should be delighted if the right hon. Gentleman could sec his way to make a little further concession. The right hon. Gentleman has been explaining that the concession he has already made, for which I thank him, will remove some hardship. It will also take away some of his taxation. This form of taxation is an expensive form of taxation, and relatively costs more to collect. If he can see his way to meet this proposal at, say, the sum of£200, I believe it would create a magnificent feeling throughout the country, and would do a good deal to show the ordinary person that the cause of the poor man is not neglected in this House.
§ Mr. CHAMBERLAINWe have to finish this Debate to-night, and the time available to us before eleven o'clock is shortened by the Motion of which notice was given earlier in the day. I hope, therefore, that the Committee will help us to get on with the discussion, and I am going to try to do something in that direction. My hon. Friend the Member for East Birmingham, speaking in ignorance of what I had already promised in respect of the wife, said lie thought, first, that from the point of view of marriage there ought to be an increased allowance for the wife—that I have already agreed to—and, secondly, that relief given at a flat rate per child should be of greater value than it is for the first child. Illustrate the same point in another way. When we fixed the separation allowance payable in respect of soldiers' children, the rate was fixed at 10s. 6d. for the first child, 8s. for the second, and so on in a descending scale. I have had the opportunity of some conversation with the right hon. Member for West Fife, who raised the same question, and I am prepared—I hope the Committee will accept this as a final concession for this year, and not press mo further at the present time—I am prepared to increase the allowance for the first child from£25 to£40. The allowance for subsequent children is to be £25, as it now stands. I have some reason to hope that the Member 454 for West Fife will think I have met him fairly. I think my hon. Friend the Member for East Birmingham will think so too. I hope the hon. Member and others, who have spoken very kindly of the way in which I have been conducting the Bill under difficult circumstances, will also feel that I have met them in a reasonable spirit.
§ Mr. ADAMSONAs the Chancellor of the Exchequer knows, I was anxious that he should raise the abatement for the child to£50, as well as the abatement for the wife. He has explained to me that it is impossible for him to agree to that, but he has promised that he will make a substantial increase in the abatement for the first child to£10. That concession is fairly substantial; it would have been more substantial if the limit had been£50. We will have to be satisfied with the concession we have got.
§ Mr. CHAMBERLAINI hope the right hon. Gentleman (Mr. Adamson) will take my offer and wait for the Report of the Royal Commission for anything further.
§ Mr. ADAMSONWe have pressed the Chancellor of the Exchequer as far as we can on the present occasion, and it would perhaps be well to get on with the other new Clauses still to be discussed.
§ Mr. ARNOLDThe Chancellor of the Exchequer has made the. concession oil doubling the abatement in regard to the wife, and now this concession in regard to the first child. I am still of the opinion that these two changes really strengthen the argument for this now Clause. At the same time I do not wish to detain the Committee, and, with permission, I am prepared to withdraw my Amendment.
§ Motion and Clause, by leave, withdrawn.
§ The CHAIRMANThe hon. Member for Penistone has a further Amendment on the Paper that has been debated several times, but he should have a chance of moving it to see whether it is accepted at the present stage.