HC Deb 06 July 1920 vol 131 cc1378-81

For the purpose of ascertaining the amount of the assessable income of an individual for the purpose of Income Tax, there shall be allowed in the case of earned income a deduction from the amount of that income as estimated in accordance with the pro- visions of the Income Tax Acts of a sum equal, to one-tenth of the amount of that income, but not exceeding in the case of any individual two hundred pounds.

The following Amendment stood on the Order Paper in the name of Colonel Newman: After the word "earned," to insert the words "as distinct from invested."


This Amendment should come on Clause 30.

Motion made, and Question proposed, "That the Clause stand part of the Bill."


I think this is a most important Clause. About a fortnight or three weeks ago I asked my right hon. Friend if he could give me the number of taxpayers in the preceding year, 1919, and what the number would be if his proposals were carried into effect. This is what he said: The number of individuals liable to Income Tax for the year 1919–20 is estimated at 3,700,000. The number of individuals that will pay tax for the year under the present Budget proposals is estimated at 2,450,000. Under this Clause and the next Clause we are going to reduce the number of Income Tax payers from 3,700,000 to 2,450,000. It is going to be brought about by exempting a large portion of the working classes from paying Income Tax. That is the rich man's Budget, about which an hon. Member earlier in the evening talked! We are going to make what is, in my opinion, a most fatal error. We are going still further to reduce the number of people who pay Income Tax and Super-tax, and we are going to increase the Super-tax and put that burden upon a smaller number of people than bore it last year. I do not care what the Income Tax Commission recommended. A Royal Commission is not always infallible, and I think the very first thing we ought to do, in view of the enormous expenditure and the enormous taxation which this country has to bear, is to endeavour to equalise it over all the voters. The old Liberal principle was that taxation and representation should go together. At the present moment representation goes, and taxation does not go. The representation enjoys subsidies from the State in the shape of free education, subsidy for bread, subsidy for health, subsidy for housing, and the payment is made, not by the people who are enjoying the subsidy, but by a small class, not exceeding at the present moment 2,450,000 out of a total population of 44,000,000, or whatever the number may be. What the Chancellor of the Exchequer ought to have done was to have continued the alteration which was made, so far as I remember, some four or five years ago, when the limit of exemption, which originally stood at £160, was reduced to £130. To my astonishment the Chancellor of the Exchequer has gone right away from the principle, has reversed it, and has exempted a large number of people who are in receipt of much higher incomes, who have double or treble the wages they had before the War, while people who pay Super-tax in many cases have no larger incomes, while half of it is taken away from them. They are, therefore, far and away poorer than before the War. They, too, have the increased cost of living to contend against. Then there are various exemptions even to the present payment. It all tends in the wrong direction. It may be right that we should have extended the franchise in the way we have. Grant, for the sake of argument, it was right. But the privilege of voting and the privilege of imposing burdens necessitates that the persons who impose them should also bear them. That is what this Amendment prevents. What the Chancellor of the Exchequer ought to have done was to reduce the limit of exemption. Instead of making it £130 it should have been £100. It is quite possible what I have said may not be popular in the country. But it is not always things that are popular that are right. If hon. Members will study history, they will find that the economists said that the time would come when the many would impose taxation upon the few. That is, unfortunately, where we are getting to at the present time.


May I point out to the Committee that the question of the various allowances can be more conveniently raised on Clause 17 and the immediately following Clauses? The effect of the whole of the Clauses put together is to follow the recommendations of the Royal Commission. I would make a very earnest appeal to the House that they should take the present Clause and Clause 16 before we adjourn. The only Amendment of substance that is down on Clause 16 is that relating to contributions to hospitals, which, I understand, you, Mr. Whitley, think should come up as a new Clause. Then we shall get the question of these allowances first thing to-morrow on Clause 17.


I am surprised that so able a politician and a financier as the right hon. Gentleman the Member for the City of London (Sir F. Banbury) should have missed the substance of this proposal. Surely the right hon. Gentleman realises the reason for this proposition. The present Government is dependent upon the democratic vote and realises that once the democratic voters are called upon to contribute to the Government's extravagance, once it is brought home to the working man what the present administration is costing, and how he has to contribute to it out of his wages, they would collapse at the next General Election. The whole trouble is that the working man does pay the tax, but he does not realise it. I want to see a Budget introduced which will bring home to the humblest worker what the present administration is costing. Once the democracy realises what this bureaucratic machine is costing, that will be the end of bureaucracy.