- (a) Income Tax shall be charged for the year beginning the sixth day of April, nineteen hundred and nineteen, at the rate of six shillings in the pound, and the same Super-tax shall be charged for that year as was charged for the year beginning the sixth day of April, nineteen hundred and eighteen; and
- (b) the like provisions shall hare effect with respect to the annual value of property as had effect with respect thereto during the year beginning the sixth day of April, nineteen hundred and eighteen; and
- (c) it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
§ Resolution read a second time.
§ Mr. SPEAKER
The Amendment standing on the Paper in the name of the hon. Member for East Edinburgh (Mr. Hogge), providing that the tax shall be levied only upon incomes exceeding £250 a year, is out of order, because it would impose an extra and increased charge on the subject.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Mr. ARNOLD
In discussing this Resolution I wish to urge as strongly as I can that the exemption for Income Tax should be increased from £130 to £250 a year. I would argue this mailer on two main grounds—first, on the ground of principle, and, secondly, as a business proposition. On the question of principle official statistics show that in view of the general cost of living £250 a year now represents only about £125 a year in pre-war values. Also the rate of Income Tax is much higher than in pre-war days. Not only that, but other taxation on people with small incomes has been greatly increased. In my view the taxation on the poorer classes is much too heavy to-day. The present limit of £130 a year really represents about £65 a year in pre-war value. Therefore, in effect, this Resolution and the Budget levy Income Tax on incomes of £65 a year in pre-war value. To levy Income Tax on such a low figure is really in direct opposition to the principle of 1168 sound taxation. The Chancellor of the Exchequer asked me yesterday, What are you going to do about taxes on people with small incomes? The reply is very simple and definite. There ought to be no taxation at all, except on pure luxuries—on those with incomes below a decent level of subsistence. But the Income Tax proposed by the Budget on those with small incomes violates this cardinal principle of taxation. We are living in a period of reconstruction. Everybody is talking about it. I urge that we should reconstruct our tax system in accordance with sound principles of taxation. The simple truth is that in a great many cases, unless the proposal I am putting forward be accepted, Income Tax will be taken from money which is required to buy the necessaries of life. This is not only a gross hardship on the poorer classes, but it also is unwise from the point of view of the State. To take incomes from wage earners and others with small incomes who really need the money to buy nourishing food is to reduce the efficiency of the workers, and it does that just at the time when it is most important in the national interest, and in view of the necessity of getting our industries going, that the efficiency of the workers should be maintained as far as possible. During the War every care was taken, and wisely, to raise the physical efficiency of recruits to the highest point and to maintain it at the highest point, and I contend that it would be well that the physical efficiency of the workers should also receive more consideration. It was wise in the interests of the State to develop the physical efficiency of the recruits. It would be equally wise in the interests of the State to do everything possible to develop the physical efficiency of the workers. To take Income Tax from people who need the money for a decent level of living is going counter to what ought to be the right post-war policy of the country, and that is to build up the health and physique of the people who have suffered so much during the last four years. Owing to the strain of the War and all that has occurred during the last few years, the general standard of health of the people was never lower than it is at present. It is always a bad principle to levy Income Tax on those who are below a decent standard of life, and it is particularly unwise at present. It would pay the State well, quite apart from the relief to individuals, to raise the exemption to £250 a year.
1169 In these days very little attention is paid to principles either in taxation or anything else, and I would pass on to discuss the matter as a business proposition. My contention is that it is really not worth while from the point of view of revenue to levy Income Tax on those with less than £250 a year. I want to ask the Chancellor of the Exchequer one or two questions, and I hope he will answer as definitely as he can. What is the estimated net yield of the Income Tax which will be got from incomes of less than £250 a year? When in 1915 the then Chancellor of the Exchequer reduced the exemption limit of Income Tax from £160 to £130, he said that from that change he expected to get, in a full year, £939,000 of revenue gross. It is true that the rate of the tax then was somewhat lower than it is now, but that abatements were few and also smaller I and others pointed out that it was really a trivial revenue to get considering all the trouble and the cost of collection involved. Even the gross sum of £939,000 would be reduced by the cost of collection. No doubt the net revenue to be got from the Income Tax on incomes, below £250 a year under this Resolution will distinctly exceed £939,000, but the net figure really cannot be many millions. I should like the Chancellor of the Exchequer to give the House the estimated net yield of the tax to be got from incomes below £250 a year during this current year, and not last year, because last year unemployment was much less prevalent than it is this year. Unemployment is now rife, and it will in many industries continue irregular and unstable probably for a considerable time. This is most important, and has a distinct bearing on what I am saying, because it means first that the yield of the tax on incomes below £250 a year will be smaller than ever, and consequently that the difficulty and expense of collecting the tax will be enormously increased because many men will be moving about from one job to another. The cost of collecting the Income Tax on these small incomes is really out of proportion to the revenue obtained. In November, 1915, the Prime Minister, who was then Chancellor of the Exchequer, was discussing proposals to get Income Tax from people with very small incomes. He was referring to the cost of collection, and the present Chancellor of the Exchequer interrupted him and said, "There are the small shop- 1170 keepers." What did the Chancellor of the Exchequer of that day say after that interruption? He said:There are some hundreds of thousands, I may say millions, of people who do not belong to the wage-earning people, small shopkeepers and men who do odd jobs of all kinds. How are you going to collect from them? The collection of it alone will cost the Exchequer 70 per cent. of what it; actually gets, which is the conclusion of the Inland Revenue.Surely that is a very practical consideration in considering the matter. I do not argue for a moment that it will cost 70 per cent. in every case, but according to the official statement then made, in a quite important proportion of cases the estimate of the Inland Revenue was that the cost of collection would be 70 per cent. Not only is the cost of collection on the small incomes great, but the whole proceeding causes a great amount of irritation, and it tends, particularly amongst the workers, to increase the unrest which is such a serious feature of our national life. The whole process means an immense amount of irritation and expense. I do not believe human ingenuity could have devised a system which would cause, so far as these small incomes are concerned, more friction, more inconvenience, and more work for a less result. But although the revenue obtained is small to the Exchequer, the tax is a real hardship on those who have to pay it, because their means are so small. I know it will be argued that there are numerous abatements, and that these tend to diminish the burden. My right hon. Friend (Sir T. Whittaker) a few days ago, in trying to bolster up what I thought was a singularly weak case, pointed out that a man with a wife and three children did not pay Income Tax unless his income was £220 a year, and if he had a wife and five children he did not pay Income Tax unless he had an income of £270 a year. That is perfectly true, and I rejoice that it is so, but that is really an argument for what I am urging, because all these abatements—and I think it has been most wise to give them—reduce the yield of the tax, but they enormously increase the cost of collection. In a great many cases forms have to be filled up, and have to be carefully examined by Inland Revenue authorities, and very often in the end, owing to abatements and so forth, there is practically no revenue got at all. The whole process is costly and wasteful in the extreme. I contend that it would be better to put an end once and for all to 1171 this source of irritation and hardship, make a clean cut, and raise the Income Tax exemption level to £200 a year.
It is contended I know, and my right hon. Friend (Sir T. Whittaker) argues this, that although relief is given in the case of married men with children, yet single men with less than £250 ought to pay Income Tax. After all, who are these single men who are getting less than £250 a year? Most of them are young men and the vast number of them have fought in the War. Many of them have just been, and more will shortly be, demobilised. Most of them have lost two or three of the best business years of their lives. Their careers have been gravely prejudiced. Nothing can ever restore to them the same chance that they would have had before the War, but the exemption from Income Tax below £250 will do a little and give them a somewhat better prospect. It will enable them perhaps to save a little money with a view to improving their position and starting in business in a small way on their own account, and with a view to marriage. I have no doubt the Chancellor of the Exchequer will say, "This may be all very well, but I must have money. I have got to get revenue." I contend that you may get revenue too dearly if you get it by reducing the efficiency of the workers, and thus injure industrial production. Moreover, the Chancellor of the Exchequer did not seem to be so much concerned with the necessity of getting revenue when he introduced his Preference duties. In order to introduce Preference, he cheerfully sacrificed some millions of revenue. However, let it be agreed that if the Income Tax limit is raised to £250 a year the small net loss, speaking comparatively, to the Revenue should be made good. But let the Chancellor of the Exchequer get the revenue in a way which is more economically sound and which would be much less costly and will cause much less hardship. He can get it in a way which will not cause any real hardship at all. He will not yet have a capital levy, which would solve all these problems. Let him make good the small loss from raising the Income Tax limit to £250 a year by increasing the tax on bigger incomes at the other end of the scale. All that will be necessary will be to increase the rate of tax on the bigger incomes by a copper or two and to make 1172 some slight changes in the Super-tax scale. If he will do that he will make good the revenue which he might lose by the change which I am urging him to make, and a vast amount of needless work, irritation, and hardship will be avoided. I very much hope the right hon. Gentleman will give a sympathetic reply to what I have said, more particularly as he himself, in November, 1914, commented on the great expense of collecting tax on these small incomes from a large class of people.
§ Mr. CLYNES
Whatever be the view of hon. Members on the appeal which the hon. Member has made, I can assure them that very real feeling exists in working-class quarters on this subject. I had an opportunity, for instance, on Saturday and Monday last of attending working-class meetings where this scheme formed part of the resolutions which were submitted and passed, and I dare say the Chancellor of the Exchequer will by this time have received very many resolutions from different working-class quarters. The feeling is very real and quite genuine, and I think a case can be made out for serious consideration of the appeal which has been made. When the limit of taxation was lowered sometime ago in order to bring in a larger number of taxpayers, it was submitted as a necessary war measure, and certainly was regarded by those affected by it as a temporary step which, in the circumstances, perhaps the Government was justified in taking. The War is over and the working classes in the course of the War were deservedly praised for the part which they took in it, and the workers are now looking for an escape from some of the burdens which, were imposed upon them as necessary War measures. Was this tax put on as a temporary and necessary measure, or was it intended to be a permanent charge upon the wage-earning community? The working class view is that it was intended as a temporary measure, and we have reached a point now where we could well find even the large sums which are required from other sources, and so give this necessary relief to a class which is already heavily burdened. Since the Income Tax level was lowered, other very serious things have happened to the workers which strengthen their appeal for a change. The enormous increase in the cost of living requires only to be mentioned to impress us all at once with the very serious difficulties with which the 1173 workers are faced. Not merely has there been an increase in the cost of food and things which are immediately essential to existence, but everything else has very materially increased, and there is not now amongst the working classes the same opportunity for saving as there was prior to the War. If they save anything at all now, it must be at the cost of making very great sacrifices in regard to forfeiting the things of which they are sorely in need. This increase in the cost of living has been greater than was the case when the Income Tax line was lowered, and that very much strengthens the case which can be made out for the change for which we appeal.
But I base my claim for this alteration mainly on the ground of its being unfair and unreasonable to tax any class which is limited to an income affording only the bare necessities of existence. We have commonly accepted the doctrine that taxation should be in the degree of one's ability to bear the burden. This is a form of indirect taxation which the working classes in question are not able to bear at all. They carry a very heavy weight of taxation in many forms of indirect taxes which are imposed upon various commodities. The greater part of the worker's wage is spent week by week on food, as the means of keeping him alive for the week to go on working the following week. He cannot automatically save, as do those who may be fairly described as the more favoured classes. He pays very heavily in many forms of indirect tax, and he looks upon this additional charge as a deduction from his wages, as a form of tax on the pay which by his hard labour in the week he has earned. I may be told there are very many workers who have done extremely well during the War in the matter of earnings. I do not deny that. There is a comparatively small proportion of workers whose wages have been materially increased. I suppose they gave by their service a certain war value to the country in the form of labour which entitled them to that increased pay. At any rate, there is no denying the fact that they have got it. We are not appealing for that class. The really highly-paid wage earner, who has earned very large wages during the War and maybe earning them now, and may continue to earn them, comes not within our appeal. In these days of the value of money in relation to commodities the limit which has been suggested in the Amendment will not give any undue protection to the higher-paid wage 1174 earners of the country. A man in these days cannot be said to be highly paid if ha is not earning more than £250. I am sure if the House could go back to the time when it was possible for a worker to maintain a family upon, say, 30s. a week it would not have thought of arranging its system of taxation in any way so as to tax a wage on that level. Yet that is virtually what we are doing to-day, taking into account the altered conditions in the purchasing power of money. Apart from the ability of my right hon. Friend to turn to other sources of revenue if he so desires, which course is open to him, it is totally unreasonable to take what is the means of subsistence from a heavily burdened section of the community who earn their money by very arduous toil. There is a very large section of the community who are very heavily taxed and who really do not feel the burden of taxation at all in the sense that heavy taxation deprives them of any of the things they want. That, I submit, is a reasonable standpoint from which to look at these matters. Taxation expressed in very large figures is secured from a class which need not sacrifice to pay and which need not deprive itself of any of the amenities of life or any of its conditions of security. If that is the fortune of one class, at least you want to be fair to the class which cannot pay taxation without forfeiting bread and butter, or at any rate without forfeiting some of the means of existence, such as household necessities, clothing, etc., which are not forfeited at all in the payment of taxation by the more favoured section of the community. There is a very strong feeling prevailing on this matter, and I would ask the generous attention of my right hon. Friend to it. I would ask him not to be unmindful of the main causes which are operating in the country to stimulate and create unrest, and I am certain that the minds of those who earn their wages with very hard labour would be eased very much if they could receive what they consider the barest justice in this matter.
§ The CHANCELLOR Of the EXCHEQUER (Mr. Chamberlain)
The right hon. Gentleman has addressed to me an appeal which he has a right to make. As we all gladly recognise, whilst he has stood well forward in promoting the great objects which he has in view, he has done much to still unrest and to promote good feeling and harmony among the com- 1175 munity, and he may be quite sure that I am only too anxious to respond in as favourable a manner as I can to any appeal in that sense coming from one so qualified to make it. My right hon. Friend asks me a quite definite question. He said the working men regard the imposition of Income Tax on the lower level of wages to-day as a war imposition, and he asks whether it was a war tax or not. The same question is addressed to me in regard to almost every charge which was imposed or increased during the course of the War Of course, they were war charges in the sense that it was the War which gave rise to them and the necessity for them, and the signature of peace does not do away with that necessity. It is not as if the expenses of the War were paid for and done with, as if the taxes raised during the War year after year had met the annual expenditure. A war tax of necessity lasts after the war is ended, because the war purposes which it was imposed to meet lasts after the war ends. That does not mean that as it comes within our power we are not to review these charges and reduce them where we may in the order of urgency as it appears to us. But I do not think that people should object to pay a tax unless there be something in the nature of the tax which makes it too grossly unfair and inexpedient to continue. At the moment after the signature of the Armistice it is not reasonable to expect that the taxes which were imposed to meet war charges should cease, without any respect to the charges which remain after the fighting has finished.
I will answer as well as I can a definite question put to me by the hon. Member for Penistone (Mr. Arnold). He wanted to know what would be the loss of revenue in the current year if no Income Tax was charged on incomes below £250
§ Mr. CHAMBERLAIN
I think the hon. Member first asked me the loss and then the cost of collection and, therefore, the net cost. I am not able to answer as to the net cost without notice. If he likes to put a question on the Paper for next week I will endeavour to procure for him the best answer I can on what must be rather a speculative subject. I do not wish to hazard any percentage of the cost of collection without the opportunity of consulting my expert advisers, but I venture to say that anything like 70 per cent., 1176 which he quoted in connection with a particular class of case, as an answer given some years ago, is quite out of it. I am quite certain that that bears no relation to the facts to-day. I hazard the opinion that he must have exaggerated or overestimated the cost of collection. However, if he will put down a question about this, I will give him the best answer I can. He will not expect me to be able to answer a question of that kind put to me to-day without notice and without an opportunity of consultation.
§ Mr. ARNOLD
In regard to the 70 per cent., I said I did not suggest 70 per cent. in all cases, but in that particular case. The then Chancellor of the Exchequer said there were some millions of people involved and the cost of the collection of revenue for that particular class was 70 per cent.
§ Mr. CHAMBERLAIN
Circumstances change as collection improves and greater facilities are available. I do not think that the figure then would be applicable to to-day. However, I am not in a position to answer the question to-day. Apart from the question of the cost of collection, I am informed that the net loss in the present year would be £8,000,000 on the assumption, and it is a very big assumption, that if you exempt all incomes below £250 from tax you make no alteration in the abatement made above £250. On the principle laid down by the hon. Member and by my right hon. Friend, it is quite clear that you would have to revise the abatements and reliefs above £250 if you exempt all incomes below £250 from taxation. In that case the loss would be not £8,000,000, but double that amount—perhaps £20,000,000. Anything from £16,000,000 to £20,000,000. I cannot give the exact figure.
Turning from the specific questions put to me, let me deal with the larger issues. No doubt there is great impatience amongst the working men at this form of taxation, bat what form of taxation do the party opposite consider that it is proper, and in what form would they think it proper, for working men to contribute to the expenses of the country in which they live, and a large part of whose expenditure is devoted to purposes mainly accruing for the benefit of the working classes? There must be some form in which they can contribute. If you say that this method of direct assessment of wages and recovery afterwards, when some of the 1177 wages have been spent, is an inconvenient method, and that we should fix the tax in some other way, that is a proposition I can understand if it stood by itself. But it is well known, and the hon. Member for Penistone expressly said, that hon. Members on those benches desire that there should be no indirect taxation. If there is to be no indirect taxation and no direct taxation, how is any contribution to be raised. Is it your contention that there should be no contribution? If so, then frankly I join issue with my right hon. Friend opposite. Comparisons are made between the situation now and the circumstances before the War. The cost of living is dwelt upon as one factor. That is, I think, very much over-estimated. The right hon. Gentleman the other day spoke of it as being 130 per cent. That is the cost given by the "Labour Gazette" in February this year as the increase in the retail price of certain articles of food. It is not the estimated increase in the cost of living of any particular individual or family. The estimate given by Lord Sumner's Committee of the rise between June, 1914, and September, 1918, was not 130 per cent. but 80 per cent. That 80 per cent. or 130 per cent., whatever the figure may be, includes all the increases in indirect taxation, and you must not plead that increase in indirect taxation twice over.
§ Mr. CHAMBERLAIN
Well, but it is 7 per cent., and 7 per cent. off 80 per cent. leaves 73 per cent. and not 80 per cent. An hon. Gentleman who prides himself on his accuracy should not count 7 per cent. twice over, or defend doing so when it is pointed out.
§ Mr. ARNOLD
Is it not the case that the Board of Trade "Labour Gazette" for the present month states that the rise in the price of certain articles to which the right hon. Gentleman referred is 110 per cent., of which 7 per cent. is taxation, reducing it to 103 per cent., if you care to do that. Nevertheless, that 7 per cent. is still there, and it has to be borne. A further calculation as to the whole cost of living, making certain calculations which the Board of Trade has done, points to the conclusion, when every possible allowance has been made, that the rise in the general cost of living cannot be put at less than 95 per cent.
§ Mr. CHAMBERLAIN
That is one of my difficulties. I am trying to argue the question as well as I can, and when I answer the arguments of one hon. or right hon. Member some other hon. Member gets up and says his argument was different. The hon. Member may desire to disclaim and I accept his disclaimer of responsibility for the accuracy of the figures given by my right hon. Friend opposite yesterday. Let him do that but why blame me? The right hon. Gentleman was led into error yesterday in counting increased taxation on food twice over. I observe that this increase in the cost of living is accompanied by a co-relative comparative decrease in the value of money. If the working man's £2 to-day is only worth £1 as it stood before the War, the rich man's £10,000 is in the same position. You must not assume that when the £1 is in the hands of the working man it is only worth 10s., but that when it passes to that objectionable creature the capitalist it suddenly recovers its value and is worth a full 20s. After all what is sauce for one is sauce for the other. I want the House to take the comparison with what existed before the War. You must not consider only the change in the level of the Income Tax. You must consider the other changes that have been made in the Income Tax. At the present time there are allowances made against the assessment of £25 for each child or adopted child, £25 for a wife, £25 for a housekeeper relative who looks after the infant children of a widower, and £25 for a disabled or incapacitated relative. Before January, 1914, with which we are asked to make the comparison, the allowance for a child was £10 instead of £25, and none of the other allowances were in existence.
In addition a workman may claim an allowance for insurance on his own life or that of his wife, for so much of his contribution to a trade union as is allocated to superannuation or death benefits, and for similar contributions to other friendly societies, for payment on account of tools or other expenses incurred on account of through his employment, and for the cost of clothes used exclusively or practically exclusively for the purposes of his work. Take the allowance for wife and children, including, say, £10 for the other allowances, and let us see what is the lax which 1179 falls at certain stages of income? My light hon. Friend said that you would not have taxed before the War a man with a weekly income of 30s. Doubling this weekly income, following my right hon. Friend's argument, we get 60s. a week as the post-war equivalent of the workman's pre-war 30s. A single man with no dependants and an income of £3 per week pays a tax of 1s. 1d. a week out of his £3. A married man with no children pays 1d. per week. A married man with one child or more than one child, nothing. Take the unmarried man with £3 10s. a week who has no claim for dependants of any kind. He pays 2s. 3d. out of his £3 10s. Is that a monstrous or unjust charge, for a bachelor who has nobody but himself to provide for? If he is married And has a wife to provide for, with no children, he pays 1s. 2d. per week. If he is married and with one child he pays Id. per week out of his £3 10s. Beyond that he pays nothing. A bachelor with £4 10s. a week, and nobody dependent on him, pays at present 4s. 6d. a week out of his £4 10s. A married man without children, with the same, income, pays 3s. 5d. per week. If he has as many as three children the tax falls to 2d. per week, or if he has more than three children, or, in addition to the children, has a dependant relative, it is wiped out altogether. The bachelor with £5 per week pays 5s. 7d. a week. If he is a married man with no children, he pays 4s 7d. If he is a married man with one child, he pays 3s. 6d. If he has three children, he pays 1s. 4d. If he has four children or three children and a dependant relative, his tax sinks to 3d. Beyond that it is nothing.
My right hon. Friend was very persuasive, but I do not think that anybody listening to him could have conceived that that was the magnitude of the grievance which he was describing, and I do not believe that he could have known it himself, or that he would say that that taxation of the unmarried man in the present state of our national finances, and with the burdens which we are casting on wealthy people at the present time, is an unfair contribution to make. I do not want to pre-judge in any way the findings of the Commission now looking into the Income Tax. I would much sooner not have been obliged to argue the Income Tax question pending their Report, because I may be forced to-day to argue against something that they will 1180 recommend in their Report, and which for reasons they give, I may become convinced is the proper thing to do, or which, without thinking them proper, I may, if I am in the same position next year, feel bound to do in deference to their Report, though I do not share their view. Therefore I do not want any argument which I may use now to be thought to pre-judge the consideration of the Report, which the Income Tax Commission will make. But what I submit is that this grievance, when actually tested, whatever it may be, is not of such dimensions as to call for an immediate remedy in advance of that Report, and before we know what that Report has in store.
§ Sir E. CARSON
I think it a great mistake for hon. and right hon. Gentlemen opposite to imagine that this is merely a question which affects what they always call the wage-earning classes. I can assure them that it is a very important question, for many members of the professional classes, bank clerks, all kinds of clerks, clergymen, and young barristers, and that we make a great mistake in this House when we try to draw this rigid distinction between what you call the labouring classes, as if the man, because he has been brought up to be a clergyman or a barrister, has not only equal but far greater difficulties to contend with in this position which, whether willingly or unwillingly, is thrown upon him. I have a great deal of sympathy with the argument that has been put forward, because I think that what the right hon. Gentleman who spoke before the Chancellor of the Exchequer said is perfectly true, that those who have merely the margin of living find even a very small tax which not only in itself is difficult, but essentially annoying. I think they exaggerate even the importance of it to them, and its difficulty, and I think that that aggravates them beyond what the lax is worth, and if the national finances allowed it and if my right hon. Friend had been able to say that he recognised that this was a matter which ought to be conceded nobody would have rejoiced more than I at the confession. But the Chancellor of the Exchequer has thrown out that these are all matters which must be considered.
I desire, if I may, to say to the authorities who consider these questions, that there is a large number of other classes beyond the rate of £250, who want to be considered very seriously, and whose 1181 cases are never put in the House of Commons. I refer to those who are no longer able to work, who, after a life of loyal service, very often to the State or to their employers, whoever they may be, have looked forward to pensions of £300 to £600 a year and now have to face this enormous Income Tax, which they have to pay in addition to the increased cost of living, or, in other words, in addition to the depreciation to the value of the sovereign. The condition of some of these people is lamentable, and for this reason. They have lived at a certain standard, and they have accommodated themselves and brought up their children to a certain standard. I am not now advocating whether there ought to be this difference at all, but it is a fact that they have undertaken obligations, which they feel bound to the very last to try to fulfil, and now, after a long life of service, they are unable to earn—whether you call it a salary or a wage—I do not think it makes much difference—and they find themselves in a position of distraction every hour of the day and night, in a position of grave anxiety as to what is to become of them.
You cannot stop at the consideration of these cases of £250 a year, and in some way or other I believe that the State, in a broad-minded fashion, will have to find some way of relieving the constant anxieties of these people, and trying to restore them to somewhat of the position they held before the War. Take one class—demobilised officers. I have known two or three cases connected with my own business of young clerks who had very little before the War, and who got commissions because they were good men in the Army. I had a servant in my own employment, a footman, who, I am glad to say, got a commission. He was a thoroughly good fellow. He was a volunteer early in the War. All these people give their services to the country, and they are put into these positions, from which they will have, as regards their present status, to be degraded in existing circumstances. How can you go on asking these people to diminish the pittance they have got by asking them to pay this kind of impost? To those who are considering the finances of the future I put in a plea for these people, who are just as worthy as the wage-earner, and whose case has as much right to be put in this House. I care nothing for distinctions between classes, but I believe 1182 that, as long as society exists on its present basis, the people for whom I have been saying a word are suffering far more than any other class of the community.
§ Mr. J. C. SWAN
A better argument could not be advanced in favour of raising the limit to £250 than has been presented by the right hon. and learned Gentleman the Member for Belfast. We on these benches may not be in a position to realise the hardship upon those classes who have pensions of £500 a year, but we do realise that a great hardship is imposed to-day upon the working man whose income is £130. The grievance that we have, as far as this tax is concerned, is not the amount that it takes, but the amount that is left for the working man, and we submit that the amount left for the working man today is not sufficient to enable him to obtain the necessaries of life. Wages certainly have been increased during the period of the War, but they have not been increased in proportion to the rise in the cost of living, and we think it is only reasonable that the amount suggested in this Motion, namely, £250 a year, should be the limit upon which the tax on the Income of the wage-earner is charged. We have never experienced a time when the difficulties of life, as far as working people are concerned, are so great as they are to-day. Working men and their families have never been so badly clothed or shod as they are to-day, because their wages will not permit them to get the necessaries of life. We think it is grossly unfair to impose any tax upon their income which encroaches upon their standard of living. Undoubtedly that is being done to-day, and we hope the Chancellor of the Exchequer will see his way to raise the limit to the amount suggested. Moreover, there are those among the working people who are seeking to send their children over sixteen years of age to secondary schools, and there is no allowance made in such a case. That acts as a deterrent of education and prevents working people having their children properly educated. We think this Motion ought to be carried, and that the Chancellor of the Exchequer ought to extend his sympathies towards the working people for that purpose.
§ Sir GODFREY COLLINS
The hon. Member who initiated this Debate advanced two propositions in favour of raising the Income Tax limit from £130 to £250. His first argument was that the limit of £130 violated a cardinal principle 1183 of taxation in that it tended to lower the physical efficiency of the workers, or, in other words, that an individual drawing, say, £240 a year had insufficient to maintain him in physical health. Last Session this House was informed that the cost of maintaining a soldier in good bodily health, making an average addition for separation allowance for his wife and children, amounted to £120 a year. If, therefore, it costs the State £120, excluding rent, to maintain a soldier and his family—it may be with insufficient separation allowance—I submit that the hon. Member's argument that it is necessary for a man to make at least £250 a year, and that he should not be taxed directly on an income which does not exced that, falls to the ground. His second argument was that it was a business proposition, and he reminded the House that when the Income Tax limit was lowered the then Chancellor of the Txchequer estimated that the Revenue would gain £1,000,000. We now know, from the information given to us this afternoon by the Chancellor of the Exchequer, that the actual increase would reach a figure of some £16,000,000 to £20,000,000.
§ Mr. CHAMBERLAIN
My figures are not comparable with the figures given by the Chancellor of the Exchequer at the time the limit was lowered. He spoke of the difference in yield at that time between an Income Tax beginning at £160 and one beginning at £130. My figures refer to the difference between a tax beginning at £130 and one beginning at £250, so that my £8,000,000 or £16,000,000 is not comparable with the earlier figures.
§ Sir G. COLLINS
I understand that if the limit were raised from £130 to £250, and the present abatements were continued, the loss to the Revenue would amount to some £15,000,000 or £16,000,000. In the present state of the financial situation of the country this is a large sum, and the Chancellor of the Exchequer is unable to raise the limit. I think this subject raises a question of the first importance. It involves taxation on some 1,000,000 workers, but incidentally it affects a very large number of Income Tax payers, and if, on the one hand, you raise the limit to £250 and give this advantage to those particular persons, you at the same time create a sense of injustice in the minds of a very large number of other 1184 people who are at present bearing their full share of the burden of taxation. Therefore I think the Chancellor of the Exchequer has not only to look at this matter in the interests of those, who are at present being taxed on, the limit of £130, but also to consider the very large number of Income Tax payers who are many of them feeling the burden referred to by the right hon. Gentleman the Member for Belfast. If the limit were raised to £250, it would be in striking contrast to the policy of Mr. McKenna when he introduced that change in our finances in 1915. I am quite unable to know what his views would be to-day on such a subject, but I may be permitted here to offer him my congratulations on his bold step at that time and also on having put on the Statute Book two important measures which brought in during the War large, sums to the revenue. If this Amendment should be carried, we should atone stroke divorce some 1,000,000 people from direct taxation who are at present paying the sums mentioned by the Chancellor of the Exchequer The result would be that a bachelor, if he neither smoked or drank, drawing £240 a year, would pay an infinitesimal sum into the coffers of the State, and I venture to assert that if this question were put to any body of workmen as to whether they would be prepared to relieve themselves of all direct taxation, in view of the sacrifices made by one and all during the War, they would resent that, and would willingly pay their share of the burden caused by the War.
I readily admit that there are anomalies in our Income Tax laws, and I hope that the Committee appointed by the Chancellor of the Exchequer may remove some of those anomalies. The War having been supported by all classes, and having been, won by sacrifice, the necessary corollary, I am afraid, is heavy taxation in the future. Our Income Tax is really the sheet-anchor of our finances. It is not perhaps so readily realised that the rate of the Income Tax has been raised some 400 per cent. during the War. It showed great elasticity, and provided a bountiful revenue without a single dissentient voice being raised either in this House or outside, and I think we can look back with pride on Britain's finance during the War, especially when we remember that Britain alone among the European belligerent nations was not forced, as most Continental countries were, to discard her pre-war methods. We have raised these large 1185 sums of money because, speaking broadly, our taxation was fair between class and class, and the Government of the day did not hesitate to raise, and raise heavily, direct taxation on large incomes and on those who were well able to bear it. That is the bright side of the sheet. But there is another side. We are to-day raising some £350,000,000 a year by the Income Tax, but I am very much afraid that in the future we shall not raise those large sums of money. The yield of our Income Tax this year, or rather this year and the last two years, has been inflated owing to three causes. There was, first, the inflation of prices, and, secondly, this nation was borrowing from abroad and at the same time we were calling in capital which we had lent to other nations before the War. In addition to that, the Chancellor of the Exchequer this year has the very good fortune to have at his disposal the average of three good Income Tax years. That makes the yield from the Income Tax this year larger than it would otherwise have been, but with the signature of peace the process which has increased the yield of the Income Tax during the War must be reversed. Instead of inflating prices, the Government must take every step to deflate prices Instead of borrowing from abroad, we must lend to other countries; and instead of calling in capital, as we have done to the extent of some £1,300,000,000 during the War, we must lend other nations our surplus capital. Therefore the three factors which have increased the yield of the Income Tax during the War will disappear, and I am afraid that the Chancellor of the Exchequer in future years will have to face a dwindling of the amount realised under the present rate. Therefore, in view of these factors, this is not the time, in my judgment, to raise the Income Tax limit to £250. I know it is argued by some of my hon. Friends on the Labour Benches that there are great untapped sources of wealth in this country, and they point out, and may be with a certain amount of reason, that during the War the Government have taken steps to tap these sources of wealth. I submit, on the other hand, that there have been artificial causes at work during the last four years which have increased the yield of Income Tax, and instead of these factors being at work after the War there will be other factors at work in future which will tend to lower the yield of the 1186 Income Tax. In view of this very general view that there are vast sources of wealth in the country not being fairly taxed, may I remind my hon. Friends of the very striking figures recently published by that careful statistician, Professor Powney, who has made a very careful study of the annual income of the nation before the War, and reading in his book the other day I saw that he estimates that the gross average income per family of five persons before the War, were the total income of the nation divided amongst the families of the nation, amounted to only £230 gross, or £170 net. If you take into consideration the income received from abroad, you add another £10 to these figures. Therefore I submit that, taking the best evidence which is available, there are not these vast untapped sources of wealth open to the Chancellor of the Exchequer, and unless the Government are very careful in husbanding the resources of the nation we may find great difficulty indeed in financing this country in future years. If the Income Tax does not yield sufficient revenue year by year the Chancellor of the Exchequer may be driven, against his will and against his wish, to unsound methods of taxation to which he is opposed to-day. Therefore, I appeal to him to maintain his present position on this Amendment and at the same time to take every available step to reduce our expenditure. If our present expenditure continues, the credit and financial position of this country will receive a blow which may be we shall never recover from, and the financial and industrial supremacy which Britain has gained in byegone days and which has stood us in such good stead during the War may pass from us to America in the days to come. While this expenditure continues, if at the same time we divorce from the ultimate responsibility for this expenditure the million or two million Income Tax payers who are presently paying Income Tax when the Income Tax limit is only £130, we shall remove the one and may be the only check which will curb the spending habit of this Government, yea, and of all Governments. I appeal, therefore, to the Chancellor of the Exchequer to adjust our commitments in the future to our ability to pay. During that War our effort was dependent on one factor only, on our material resources. I plead that in future our effort should be determined by our ability to pay, and I would that the Government gave the same 1187 energy and the same force to reducing expenditure as they gave in the prosecution of the War. I agree with the Chancellor of the Exchequer that this House cannot single out one item of taxation and take exception to it. They have to look at the new taxation proposals as a whole, and, excepting his Preference duties, I venture to assert that this Budget is a Radical Budget. It conforms in many ways to the 1909–10 Budget, which created great controversy in those days. I readily agree that wealth must pay the major portion of the cost of this war. The broad back must bear the main burden, but at the same time let us take every available step to secure that our taxation proposals, which are severe to-day, are based on equity and justice as between the classes, and if this Amendment was carried I venture to assert without fear of contradiction that there would be created throughout the country a grave sense of injustice.
§ Mr. ADAMSON
As to whether this is a Radical Budget or a Conservative Budget I am not going to express an opinion. I will leave that to be adjusted by the right hon. Gentleman who has just addressed the House and the Chancellor of the Exchequer.
§ Mr. ADAMSON
The Chancellor of the Exchequer, in the course of his speech, stated that the lowering of the Income Tax from £160 to £130 was a war measure, that the War in his view was not over, and that unless there was something grossly unfair in the tax it must continue. He then went on to ask from the benches opposite on what principle they proposed that working people should pay their share of the taxation of the country. I think we have several times attempted to make our position clear so far as that question is concerned. We think that the principle of taxation that ought to be applied should be a graduated system of direct taxation over a reasonable Income Tax standard, and that any indirect taxation under that ought only to apply to luxuries. Several times in the course of these Debates we have pointed out that in our opinion the reasonable figure for the fixing of the Income Tax standard was £250, and in reply to the right hon. Gentleman who represents one of the Belfast Divisions (Sir E. Carson) may I remark that we do not ask 1188 that this Income Tax standard of £250 should apply only to those who are known as the labouring classes. We know that the classes which he mentioned—bank clerks, and many engaged in the legal and other professions, who are forced to exist on small incomes—have quite as great difficulties as those who are commonly known as the labouring classes. We take up the position that this Income Tax standard should apply to all, and should be fixed at £250 per year. If we were making an attempt to get back to pre-war conditions, we would have required to move for a much higher Income Tax standard than £250, because whether the figures quoted by the Chancellor of the Exchequer, or by the hon. Member who spoke first on this question, or by myself in the course of the discussion last evening, are correct, I think there is common agreement that the cost of living is, roughly, double what it was in August, 1914, and if we were attempting to get back to the pre-war standard we would have required to propose that the Income Tax standard should be fixed at £50. It would have taken that to put the poorer classes of this country in the same position as they were in 1914. In that connection, may I say to the Chancellor of the Exchequer that while he was speaking he made no attempt to meet the point that was made by my right hon. Friend who spoke a little time ago, that no taxation ought to be applied until you have reached a reasonable subsistence level? He made no attempt to answer that, which, to my mind, and to the mind of many others, is a vital point. There ought to be no taxation of any kind applied until your people have at least assured to them a reasonable subsistence level.
The Chancellor of the Exchequer went on to say that if the working man's £2, in consequence of the increased cost of living, was only valued at £1 to-day, the rich man's £10,000 is only worth £5,000 to-day. To my mind that is a fallacious argument, if he means to use that argument as a reason why this Income Tax standard of £250 should not be applied. In the case of those for whom we are making this appeal, their wages, as has been pointed out, are required to provide the bare necessities of life, and anything that eats into that is eating into the source from which they are to provide the necessities for keeping them in a position to render their share in producing the national essentials; whereas in the case 1189 of the rich man who is earning £10,000 a year, the inroad that may have been made on his earnings does not curtail the necessaries of life. All that occurs there is that it puts him into the position of being able to save less money than when his income of £10,000 a year was worth that sum, as against the£5,000 purchasing power to-day. But it does not touch his ability to provide the necessities of life for himself and those dependent upon him; whereas, in the case of those with small incomes, any little taxation that may be applied, no matter how small it is, is entrenching on his ability to provide the necessities of life, and keep himself and those dependent upon him in a fit condition to perform their particular services to the State. The right hon. Gentleman endeavoured to show from a fairly elaborate set of figures really how little this Income Tax cost those whose incomes are under £250 a year. I think in producing that elaborate statement he was really strengthening our claim to have the Income Tax standard fixed at £250, because if the amount is really so small, it will impose very little loss on the revenue of the country.
§ Mr. CHAMBERLAIN
The right hon. Member is making a mistake in assuming that if the burden on the individual is small, therefore the return to the revenue is small. The returns to the revenue are made up of small burdens on a very large number of individuals, and therefore the gain to the individual is no measure of the loss to the revenue.
§ Mr. ADAMSON
I was trying to gather the result of the arguments of the Chancellor, and I am putting it to him just as it appealed to me, and I was pointing out that I thought he was rather making a case because of the small amount that was taken by the Income Tax from those whose incomes were under £250, and that his task would not be a very difficult one if he applied his mind seriously to the question of finding some source of revenue which would bear less heavily on those. Whatever were Mr. McKenna's ideas, or whatever may be the ideas of the hon. Member for Greenock (Sir G. Collins), regarding the question of the lowering of the income tax from £160 to £130 three years ago, I can assure the House and the Chancellor that this is a matter that has been the cause of a very large amount of dissatisfaction so far as the working classes in this country are concerned. 1190 You can scarcely see a trade union meeting of any description, or a meeting of the labour movement of any kind without the question of the Income Tax standard being discussed, and the demand being put forward for it to be raised from its present level to a much higher level. That is not to be wondered at. To those of us who have the practical experience of finding the wherewithal to maintain a household on a very small amount, it is not to be wondered at that there is a very urgent demand put forward again and again for the raising of the Income Tax standard. We have a far keener appreciation of the matter than those whose incomes during the greater part of their lives has been measured by £1,000, or £5,000, or £10,000, or many more thousands of pounds. We know the difficulty. That is the reason why we are so urgent for this reform, and I hope that, before we part with the Budget in its various forms, this is one of the things to which the Chancellor will give his serious attention. I can assure him that, although the discussion ends to-night, and possibly without any Division being taken on the particular proposition before us—because I understand that the Motion that was down has been ruled out of order, and we are simply discussing a general proposition—but whatever happens regarding it, he need not come to the conclusion that this question is being put off at least for another year. He will find that as the days go by the working classes of the country will become more insistent—[An HON. MEMBER: "They will not pay it!"]—on having the Income Tax fixed at a reasonable standard. They will become more insistent in the demand that there shall be no taxation until a reasonable subsistence level has been reached, and in making that claim they are making a reasonable and just claim, and one that ought to command the serious attention both of the Chancellor, of the Exchequer and of the House. The Chancellor asked us what share we think the working classes ought to pay to the upkeep of the country that they are living in. I have endeavoured to point out the basis on which I think they ought to pay. Does he think that the working classes, whose wages have not reached a reasonable Income Tax level, are not giving sufficient to the country when they are putting every ounce of energy of which they are possessed into the production of the things that are essential for keeping this country going, without having their incomes encroached 1191 on by taxation, until at least their income has reached a sum that will guarantee to them a real and reasonable subsistence level?
Sir J. D. REES
The chief difference between the two right hon. Gentlemen on either side of the Mace is, I think, that the one has to carry on and the other has not at present; but I think my right hon. Friend opposite, in his interesting speech, would have been more effective if he had indicated how his Chancellor of the Exchequer, when he sits here, is going to meet the cost of carrying on the business of the country. My right hon. Friend very fairly and reasonably said he had personal experience of how a family had to carry on, and how it must have an irreducible minimum before it could provide itself with the absolute necessities of existence. Everybody must sympathise with that view; but, after all, the State is an aggregate of families, and the Chancellor of the Exchequer has to provide for the aggregate of families called the State, and how he is to do it if no taxation is to be levied on anyone who comes below a certain abitrary limit, I confess I do not see. The limit must vary with circumstances, and may, of course, be justly placed at one time at £250 and at another at £130.
It is quite true that if those for whom he more particularly speaks increase production to such an extent that they increase the value of the currency of the country represented by intrinsically worthless pieces of paper, then I think it would be probably perfectly reasonable for the Chancellor of the Exchequer to do that which my right hon. Friend asked him to do. At present I should imagine there is a very considerable difficulty, when these currency notes are mere drafts upon the production of the country, and when it is not certain that is going to be increased to the extent we hope and anticipate. There is considerable difficulty in fixing taxation upon the basis of present figures, which are notoriously inflated, and do not represent a permanent basis. He said himself that the country has not nearly got back to pre-war conditions. How difficult, then, would it be to establish a permanent principle such as he advocates under existing circumstances.
I believe it would be everybody's desire that the Income Tax should be fixed at the limit for which he pleads, but, on the other hand, I think he might very fairly 1192 consider that there is great difficulty at the present moment in doing what he asks, and he might indicate how the money which the Chancellor of the Exchequer is asked to give up should be recovered, Is it his intention that what is to be relinquished upon what he calls small incomes is to be put upon the Income Tax of what he calls "the rich," and, if so, to what extent is that to be carried? Already the larger incomes, he will readily admit, are taxed in the most extremely severe way I ask him, would he add to that Income Tax levy on larger incomes all that he now asks the Chancellor of the Exchequer to relinquish, and, if so, at what point would he stop? He has got very near half of these large incomes now. Is he really advocating the use of the Income Tax in order to bring all incomes to something like uniformity. If so, I could not congratulate him on the statesmanlike character of his attitude. If he really had that at the back of his speech, it would be somewhat convenient to have it plainly stated.
I confess that after what the hon. Member has said I find it exceedingly difficult to put in my little plea for a class of taxpayer who, as I understand it, some hon. Members are prepared to tax out of existence. I was going to ask the Chancellor of the Exchequer—I do not complain, for I believe the Chancellor of the Exchequer acted very wisely in not interfering at all with the Income Tax under existing circumstances, in view of the appointment of the Commission, and until they have made their Report—but there are two classes, I thought, for which possibly he might have done something. There is the terribly hard case of the taxpayer whose income comes from Australia, and who therefore pays the State Tax and the Federal Tax in Australia and the Income Tax and Super-tax in the United Kingdom, and so keeps exactly 4s. out of his 20s. I see the difficulty of my right hon. Friend. It is hard to deal with this matter now, but the case is a pressing and a very hard case, and I should have been glad if something could have been done without waiting for the Report of the Commission, and it is on behalf of these payers of double, or one might say quadruple Income Tax payers that I speak.
There is another very hard case. I am not shying at mentioning it—although it seems to require considerable courage in view of the speech of the right hon. Gentleman opposite that his policy would be to 1193 pile on absolutely what is wanted in national income on what he calls the richer classes. The point is this: I am aware, of course, that the Super-tax is additional to the Income Tax. Therefore one sees the argument that it should be collected upon the gross amount. Nevertheless I would urge that there does seem to be something exceedingly unfair, some superfluity of naughtiness, in that it is a man's actual receipts upon which this tax is paid, and it should not be paid, therefore, on income which he has never received, and which has been paid away to the extent, perhaps, of half his income! It does not seem to me to be a fair thing. If a taxpayer acts like an honest man, and in order to pay the uttermost farthing for carrying on the War, for social reform, or for other causes, he puts his accounts into someone else's hands and says, "I do not want myself to make these calculations, I might be inclined to favour myself a little—human nature being what it is even amongst the wealthier folk." That account is produced as his total receipts, and then before he pays the Super-tax upon it there is the Income Tax, which may amount to half, or very nearly, of what he receives to be added to it. It really is an exceedingly hard case. I am sure hon. Members opposite would admit that even people who get these larger incomes are God's creatures, and should be entitled to justice in regard to the payment of Income Tax. I submit to the Chancellor of the Exchequer that if he could only arrange that Super-tax should be paid upon actual receipts, and not upon such receipts, plus the Income Tax, it would be well. It did not matter very much when the Income Tax was 1s. or 2s. in the £, but when it amounts to 30 per cent. or 40 per cent., or even 50 per cent., of a man's receipts, it becomes a cruel injustice. I am quite well aware of what the hon. Gentleman may reply. But I put it to him, in spite of that, that it would be a fair thing of him to consider the exceeding hardship of the case which I venture to represent to him on behalf of such an unpopular class as those who are commonly described as the rich—if, indeed, there are any rich people left at all except those who have made their money during the War.
§ Mr. SPENCER
I want to support the arguments put forward on this side of the House favouring an increase of the relief to be derived from the Income Tax. In the 1194 first place, it can be stated by hon. Members on this side of the House that the taxation levied upon small incomes trenches very much upon the prime necessaries of life. No one, I think, can deny or contradict that statement. It has been laid down as a very sound canon of taxation that people should be taxed proportionately to their income and proportionately to the security they derive from the State. If that is so, it cannot, I think, be argued that the taxing of incomes of persons with £129 19s. a year, or £130 a year, £10 of which is taxable, is a fair method of taxing those who have to earn their living. May I take the case which has been received more than once with enormous plaudits by hon. Members on the other side? I mean persons with small fixed incomes. There is, for instance, the person whose pre-war income was £200 per year. The taxation upon that was about 30s., leaving a balance of £198 10s. The present-time taxation upon £200 is £9. This, however, is not the worst feature of the case. Owing to the depreciation of money, and the lower purchasing power of money, that income to-day, compared with pre-war values, is not worth much more than £95. So far, therefore, as people with small fixed incomes are concerned, the taxation is a very serious thing indeed. It undoubtedly does trench on the subsistence level, and affects the income needed for sustaining such people at a proper standard of physical efficiency.
This applies to people not only with small incomes, who may be said to be independent people in the sense that they do not work for their living, but it applies with equal force to those who have to toil for their subsistence. You have brought within the purview of taxation in many cases to-day the lowest labouring class in industrial life—people who never thought at one time that they would be brought within the purview of taxation. I want to say to the right hon. Gentleman that no Chancellor would ever have dreamed of putting a tax on incomes of about £60 before the War, and £60 is the value of the amount that is free from taxation at the present time—that is to say, if you take the £120 at its present time value, which is about £60. I do not know whether, when the right hon. Gentleman was Chancellor of the Exchequer before, he would ever have thought of imposing taxation upon incomes of about £60. That, however, actually exists. As I say, it trenches upon the physical necessaries of 1195 life, and I along with my hon. Friends on this side appeal to the right hon. Gentleman to give some relief in that direction.
I want also to point out to him what I think is a very serious matter and one worthy of the consideration of every man in this House. That is a tax which in a measure hinders proper and efficient training of the child of the working man. I say that not only on behalf of hon. Members on this side of the House, but for all Members. To-day there was a question in the House, the purport of which was to discover as to whether the Treasury was prepared to allow a higher allowance, or an increased age, in regard to the children or young people attending school. You may, on the one hand, have a man who has very little pride or interest in his children, and who, at fourteen years of age, sends them to work. He has certain relief in the way of taxation for those children until they are sixteen. Another man, whose income may be equally slender, has great pride in his children, and does all he possibly can to educate them. Consequently he keeps them at school, probably, till they are eighteen or nineteen. As soon as they turn sixteen he is no further relieved so far as the £25 yearly allowance is concerned. That, I think, is a question worthy of the very serious attention of the Chancellor. Every person who endeavours to educate his children on a limited income ought certainly to be encouraged to do so.
My third point is concerning the very serious irritation among the working classes at the present time. The House may dismiss the question as being of little importance or value, but there is no trade union meeting held at the present time in this country but resolution after resolution is passed, not only demanding that the amount shall be raised, but resolutions have been passed asking members not to pay. The Chancellor and the House may dismiss these as being of very little consequence. I want, however, to warn this House that the irritation is growing, and that the determination on the part of the workers not to be affected in a manner in which they are affected is growing to such volume that it will culminate undoubtedly in the unions joining in one great effective demand in connection with this question. It is far better to give attention to the thing before that volume of opinion grows to that extent than to wait 1196 until it does grow, and you get protests from men refusing any longer to work, or arriving at the conclusion that none of them will pay it, let the consequence be what they may. Then you will have to send the tax collectors in or put the bailiffs in. That can be avoided if attention is given at the present time to the plea which is being put forward, an honest plea, by Members of this House. The right hon. Gentleman in dealing with this question yesterday said we ought not to fix our attention merely upon one particular aspect of taxation. He said it was not fair to fix attention upon the aspect of indirect taxation only. He said we ought to take into account the whole of the taxes levied. I cannot see any real effective argument there.
What use or service will it be to poor people to be reminded of the fact that the rich people are levied up to £10,000, or pay largely the indirect taxation of the country, if it leaves an impost upon the poor man which deprives him of even the little subsistence that he has already? He can derive no benefit or pleasure from that aspect of the case. So far as we are concerned in respect of this burden. I want to say here and now that I sincerely believe that every working man has a right to pay this tax when you have left him sufficient to provide himself and his family with their ordinary requirements of life. I do not plead for working men to be absolutely free from any burden whatever, but what we are pleading for is such a measure of freedom as will secure for him a proper subsistence with the money he earns. You must also take, into consideration the fact that working people pay by indirect methods.
The right hon. Gentleman challenged the idea of the excess profits being indirect taxation, but during the proceedings of the Coal Commission it was found out that 2s. 6d.per ton had been levied on the community by the late Government. I would like to ask the Chancellor of the Exchequer whether that was not all indirect taxation, and whether the community that purchased and burned the coal were not actually paying that indirect tax? In considering indirect taxation the right hon. Gentleman ought to consider these facts. Here and now, irrespective of what this side of the House may do, I want to congratulate the right hon. Gentleman upon the fact that he has taken 40 per cent. off the Excess Profits Tax, but when 1197 he did so I think he ought to have had the courage to impose it upon the greater incomes by methods of direct taxation.
§ Mr. PERRING
The hon. Member in his opening remark said that taxation should be levied upon every man's income. A method of taxation which is far more equitable and just is that it should be levied according to a man's capacity to pay. We have heard it stated this afternoon that a man with a family and earning £5 a week pays a mere trifle, while a man who is a bachelor is called upon to pay a much larger sum. I see no reason why a single man who is earning this amount of money and able to pay should not do so, and I think that is just and fair. At the present time, whenever a man reaches the Income Tax scale, he generally asks for a rise in salary so as to pass the taxation on to somebody else, and as a result of this policy there is a continual demand for higher wages, with the object of passing the tax on to somebody else, with the result that it increases the cost of production. The cost of these higher wages is passed on again to the consumer, and the working man cannot see that all these agitations and steps he takes are bringing the tax indirectly back upon his own shoulders.
We have heard of resolutions being passed not to pay the tax or as to the undesirability of paying it, and there has been a sort of half-throat held out that the time will come when they will refuse to pay it. [An Hon. Member: "So it will!"] I think that is a very dishonest suggestion, because the one desire in the case seems to be to pass the tax on to somebody else. The tendency of the time is to get a higher wage and not to pay anything in taxation. It has been urged that a man should not pay this tax until he has reached above the standard of bare necessities. To suggest that a single man should not pay taxation until he has reached £5 a week is an absurd suggestion. As an employer of labour, I know what a man can fairly well live upon and bring up a family, and the fact that these men have done this for ten, fifteen, and twenty years is the best evidence that they are satisfied and are living happily and comfortably, and are strong enough to discharge their duties.
The one difficulty is understanding what are food values. If the working classes were to realise and appreciate the value of food—I mean the economic value—we 1198 should get better results. It is the enormous waste in the expenditure of their incomes on the most unprofitable forms of food that leads to undesirable results, agitation, and dissatisfaction of which we hear so much. The hon. Member who opened this discussion, speaking last week on the Budget proposals, referred to the fact that there was a tendency for food values to improve, and the cost of living to improve thereby; but, although that is so, we know as a fact that the tendency of the time is to still further ask for an increase of wages, notwithstanding the tendency of food values to fall. I have evidence myself daily of that tendency to demand higher wages.
The hon. Member who opened the discussion said that while there was a tendency for food values to fall, he suggested that we should not get any more Income Tax in the future because of the advantage which would accrue, and he further suggested that all future increase of profits were mortgaged to the workers for increased wages and shorter hours. That indicates that in future, although food values still decline, the workers are determined to secure all the benefits that accrue from the reduction in the price of raw materials or food, which they intend to place on their wages, with the result that, although raw materials are falling to-day, you cannot purchase or sell anything cheaper because of the increased demand for higher wages. Is it honest, if wages are going to increase as the raw materials decrease, or is it fair to suggest that in the future the workers should not pay Income Tax until they earn more than £250 a year? In estimating the capacity to pay why should you not take the total income that comes into a home. I think it will be admitted that in the last two or three years, and even to-day, except for the abnormal unemployment arising out of demobilisation, the total income coming into the house of a working man through his wife and children is, in the aggregate, much higher to-day and therefore the conditions in the home are thereby relatively better, and when comparisons are made between the conditions to-day and pre-war conditions the fact should always be taken into account that the wages of boys and girls and young people are so much higher than the parents used to have to contribute towards their keep in pre-war times, and the earnings of the children now cover the cost of living and their clothes.
1199 In addition to this, the married man receives an allowance for his children on the Income Tax and there is also the subsidy on bread, and if this policy is going to continue of demanding higher wages, if this is going to be the set policy of the workers then they must realise this very important fact that if they are going to pursue that policy naturally they must increase the cost of production, and in that case how are you going to compete with your foreign competitors either in the home market or in foreign markets. Whatever may be said about international labour and the adjustment of these matters internationally, I do not think you are going to adjust them so nicely or so well that you will not have to compete with foreign countries. Therefore I submit if that is the policy which the workers are going to pursue, which will increase the cost of production, then the natural effect will be in the end that there will be no employment at all, and then, of course, you will have no Income Tax to pay.
§ Mr. NEAL
I did not intend to address the House when I came here to-day, but several reasons now impel me to do so. In the first place, it will be a lamentable thing if ever it becomes the belief of the great mass of the population of this country that the only persons in this House who are prepared to give them practical sympathy and attend to their reasonable complaints are the Gentlemen who sit on the benches across the Gangway. I claim to sit in this House as a representative of Labour as much as any of those who adopt that title, but, having said that, I think I should be false, as the representative of a large industrial constitutncy, if I did not support and reinforce the Amendment which would have been moved by my hon. Friend if there had not, unfortunately, been a ruling given by Mr. Speaker which prevented this matter being put to the vote. No one in this House has envied the Chancellor of the Exchequer during the last few weeks. Everybody here has admired him during the last few days, but the task which he has had to perform seems to me to be elementary and simple under the advice which he gets, compared with the task which the women in the working homes of this country have been trying to perform with the weekly budget with which they have been face to face. They 1200 have no means of imposing super-taxation or even ordinary taxation. They have had to struggle to make their husbands contented, to keep their children well fed and decently clad, and they are the persons in this land who do more to create contentment and to prevent unrest than any other class.
I wonder if my right hon. Friend the Chancellor of the Exchequer has ever tried to experiment with the assistance of any of his lady friends in formulating the budget of a working-class home. Years ago it was not an uncommon thing for me to say to my wife, "Sit down, will you, dear, and tell me if you had 30s. per week regularly, and no bad weeks"—and the bad weeks mean such a lot in the poor man's home—"how you would spend it? How much would go to the butcher, how much to the grocer, how much you would spend on this, that, and the other?" We nearly always came to the conclusion that somebody would have to go without clothes, because there was nothing left. This country is not so poor after the War, and it is not living as if it were so poor, that we cannot afford to meet the request—I do not like the word demand—by the workers that they may have consideration and that they may not be taxed so as to deplete their small store. Those of us who are connected with local authorities know that the School Medical Department's work reveals that the health of the children is according to the means of the parents, and, if ever there were a time when it was imperative that the health of the children should be maintained, it is the present time. The hon. Member who has just sat down (Mr. Perring) spoke from the employers' point of view. It is a very narrow view. It is not the interest of the employer to oppose the reasonable request of the workmen. It is not the interest of the employer to reduce the standard of efficiency of the workman. It is not the interest of anybody to say that for £8,000,000 we cannot make some concession to the working classes. Yesterday the right hon. Gentleman gave £3,000,000 to the Colonies. I do not know whether he was right or whether he was wrong, and I do not care for this purpose, but £3,000,000 is approximately half the Income Tax which would be derived from these people. The other day he gave away, and I think rightly, half the Excess Profit Duty. How many times would that cover this concession for which a request is made?
1201 My hon. Friend who spoke last said that we could not afford it. We cannot afford to foster and create unrest. I would be one of the last men in this House to yield to a threat from the trade unions or anyone else—the King's Government must be supreme—but let our statesmen be wise enough to read the signs of the times before we get to threats. They are eager enough to do it when face to face with the situation. What have we got here? Eight millions, or one, day's cost of the War. When I use it I know that it is a bad argument, because you may go on multiplying it until you never get economies and always get extravagance. I know that the true way to state the argument is to ask: Is the concession worth one day's cost of the War? I submit that this concession is well worth it. The proposition put forward as to money being only about half its value in pre-war times remains sound, and I do not believe that the argument regarding direct and indirect taxation has yet been forced to its legitimate conclusion. Indirect taxation is borne in much greater proportion by the working classes than by those who have larger incomes. What does it matter to those who have the privilege of sitting in this House whether our tea costs us a few pence more or less? What does it matter whether our home budget for food goes up a £1 or £2, or even £5 per week? It matters practically nothing. But to the working-classes, the greater percentage of whose income has to go into these articles, many of which are taxed, it means everything. They are bearing by indirct taxation a much greater share of the cost of the management of this country than those who are better off. As a Member who has come into this House with the firmest determination to support His Majesty's Government in their difficult tasks, as long and as much as I can, I do ask, may I plead with the Treasury Bench to Have regard to the reasonable requests of the poor, and not to make taxation a hardship, because, believe me, there is no need for it to become so.
§ Mr. NEIL M'LEAN
I appreciate the speech which has been delivered by the hon. Gentleman below the gangway (Mr. Neal) in defence of the working-classes, but I would like to point out that we are not asking in the aggregate for such a very large gift to the workers of this country. It is true that the imposition of the Income Tax upon the incomes of the working-classes is one of the causes of industrial 1202 unrest, for, as has been pointed out, the tax is now levied upon an income which is only equal to one of £65 per year of pre-war value. We ask that the tax should not be levied on incomes of less than £250. It does not mean a gift of so very many millions, and, as the Chancellor of the Exchequer, when he introduced his Budget, was in a very generous mood, I imagine that he will be quite willing to grant to the workers of this country the donation for which we ask in this revision of the Income Tax. He proposes to reduce the Excess Profits Tax to 40 per cent. in order to give employers an opportunity of enlarging and extending their businesses, and that reduction from 80 per cent. to 40 per cent. means a direct gift to the employing classes of £145,000,000 this year. If we can be generous enough when we have just emerged from the War to make a gift to the employing classes of such a large sum then the few millions for which we ask can be quite easily given by the Chancellor of the Exchequer. I do not say that they have actually said it, but some Members have suggested that the workers are taxed all that they require to be taxed through their incomes.
I suggest that the working classes paid prior to the War, and pay to-day, very much more in proportion to their incomes towards maintaining the Government of this country than ony other section of the community. Take for example, the tax upon tea. I take it that the controlled price of tea will very soon be removed, and that the price will again be according to its quality. If you compare the tax on tea with the prices of the various qualities, you will readily see that proportionately a much larger tax falls upon the workers, than upon the wealthier sections of the community. There is about 1 lb. of tea consumed per week in the average working-class home, and, assuming that the price remains at 2s. 4d. in the £, the worker gets tea to the value of 1s. 6d., and pays 10d. tax. If the price decreases, then the tax becomes more pronounced. When you come to the higher priced tea or the better qualities of tea consumed by the wealthier classes, the difference is very remarkable. If the price of the tea is 5s., then you get tea to the value of 4s. 2d., and still only pay 10d. tax.
§ Mr. M'LEAN
Whether there is very little or a great quantity, the facts remain 1203 as I have stated them. This indirect taxation is a heavier burden upon the workers than upon any other sections of the community. If you take tobacco, you find again a flat rate of taxation. The tobacco tax amounts to something like 8s. per lb., and works out at about something like 6d. per ounce. When the working man gets an ounce of tobacco for 9d. or 9½d., he pays 6d. in taxation and receives tobacco to the value of 3d. or 3½d. The tax remains the same for the higher qualities of tobacco, and, though the wealthier classes pay the same tax, they obtain a better quality of tobacco. It is the same with regard to everything upon which you impose indirect taxation. The family budget is the bane of the working woman's life. She is always trying week after week and fortnight after fortnight to make ends meet on the small income that she gets, and a very large part of it goes in taxation to meet the expenses of the country. It is not accurate to say, as the hon. Gentleman opposite tried to make out, that the working-classes are always trying to shift their burden of taxation and place it upon other people. If it were accurate, there would be no grievance or complaint, but, whether the tax rises or falls, you always find that the wages of the working-classes are kept at a mere subsistence level.
The hon. Gentleman said that the working classes were always trying to shove taxation on to some other people. He instanced his own case as an employer of labour, but I should think it is rather a peculiar one and I should hope a very isolated case. I have found it the other way about, and that the wealthier classes, and particularly those, in trade, put the taxation on to the consumer. If a tax is put on tobacco, or spirits, or tea, the price is immediately increased to the consumer and even for the stock which the traders had on their shelves and which had not paid the increased duty. Consequently, when the hon. Gentleman talks of the workers trying to push taxation upon other sections of the community he is merely telling us that they are doing what they have been taught to do by others. I hope that the Chancellor of the Exchequer will increase the limit to the sum mentioned. There is no justification for keeping this tax upon the workers and reducing the tax upon excess profits. If you want to stop profiteering you will not do it by reducing the tax upon excess profits, but if you increase the tax to 100 1204 per cent. and left them nothing that would soon bring prices back to the pre-war level.
§ Question put, and agreed to.
That it be an Instruction to the Gentlemen appointed to bring in a Bill upon the Resolutions from the Committee of Ways and Means on the 7th day of this instant, May, and then agreed to by the House, that they do make provision therein pursuant to the said Resolution."—[Mr. Chamberlain.]
§ FINANCE BILL,—"to grant certain Duties of Customs and Inland Revenue (including Excise), to alter other duties, and to amend the law relating to Customs and Inland Revenue (including Excise) and the National Debt, and to make further provision in connection with Finance," presented, and read the first time; to be read a second time upon Monlay next, and to be printed. [Bill 74.]