§ I come now to Income Tax and Super-tax. I do not propose to make any alteration in the standard rate of Income Tax, which is now 6s. in the £, but very important questions arise as to the remodelling of this tax, the premier tax of the United Kingdom. I do not think that the Committee will consider that I am guilty of any excessive praise if I say that the report of the recent Royal Commission marks an epoch in the history of the Income Tax in this country. Everyone who has read it will appreciate the great debt which we all owe to Lord Colwyn and his colleagues for the very careful inquiry which they have carried 92 out and the valuable recommendations which they have made. It is my intention to submit to Parliament as early as possible a Bill to give effect to the recommendations of this Committee, but all the recommendations are not of equal importance, and not all of them carry the same measure of authority. On one of these, that relating to the taxation of co-operative societies, opinion was fairly evenly divided, though it is not the least remarkable achievement of Lord Colwyn and the Commission that every Commissioner signed the report, and that the reservations are few and comparatively unimportant. On this point, and on some others, I hope the Committee will allow me to reserve my judgment, as hon. Members will doubtless wish to reserve theirs, until the proposals are actually before us.
It is quite clear that I cannot deal with the whole of this immense and complicated subject in the Finance Bill, which is subject to statutory limitations as to the time allowed for discussing its different stages. Many of the recommendations go to the root of the system of the Income Tax, and for practical reasons, even if I could include them in the Finance Bill, they could not be brought into effective operation in the year in which they are passed into law. Accordingly, subject to important exceptions, to which I will come in a moment, I have decided that the general reform of the Income Tax is a matter which calls for a separate Bill. That Bill will be introduced as soon as possible. The matter is difficult and of a complicated character, and I hope the Committee will bear in mind that both the Inland Revenue Authorities and myself are pretty fully occupied just now, and will be patient if we are not able to bring in the Bill at a very early date. We shall bring it in as early as we possibly can.
In the Finance Bill I will deal only with those recommendations of the Royal Commission which relate to the graduation of the tax and the various allied measures for better adjusting the burdens to the taxpayer's back, and with the recommendation respecting the very important question of Double Income Tax within the Empire. I propose to adopt, with one or two trifling modifications in favour of the taxpayer, all the recommendations of the Commission on the 93 subjects which are being included in the Finance Bill, that is to say in regard to differentiation and graduation of the tax, and I use the term "graduation " to include the various reliefs associated with family responsibility. The details of the system as set out in the White Paper will be in the hands of Members when I have finished, and I hope the Committee will not require me to go further into them at this moment. Broadly, as will be seen from the graphs which accompany the White Paper, the effect of the new system is to eliminate the sudden jumps which have hitherto been an unfortunate element in our Income Tax scheme and to produce an effective rate of taxation which, in the case of the individual taxpayer, progresses uniformly as his income increases. Moreover, it readjusts the burden in such a manner that a certain portion of the charge hitherto borne by the smallest incomes is transferred to the larger and largest incomes.
It will be seen also from the White Paper that under the new system greater regard is had to the taxpayer's marital and family responsibilities. For example, in the case of wholly earned income married couples with no children will pay no tax until their income exceeds £250, and will pay a tax at a smaller rate than now up to nearly £800. Married couples with children fare even better. Even in the higher ranges of income up to £8,000, the rate is for the most part lower than the present rate, though at certain stages there is an increase due to the avoidance of the sudden jumps of which I have spoken. At the same time the case of unmarried persons of more limited means is not overlooked. The exemption limit is raised from £130 to £150 in the case of earned incomes, and these do not become chargeable at an increased rate until they exceed £300. It will also be observed from the White Paper that the severity of the burden on the small investment income has been mitigated.